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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934 (FEE REQUIRED)
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
COMMISSION FILE NUMBER: 1-11314
LTC PROPERTIES, INC.
(Exact name of Registrant as specified in its charter)
MARYLAND 71-0720518
(State or other jurisdiction of (I.R.S Employer
incorporation or organization) Identification No.)
300 Esplanade Drive, Suite 1860
Oxnard, California 93030
(Address of principal executive offices)
Registrant's telephone number, including area code: (805) 981-8655
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
Title of Stock Name of each exchange on which registered
- ---------------------------------------------------- -------------------------------------------
<S> <C>
Common stock, $.01 Par Value New York Stock Exchange
9.75% Convertible Subordinated Debentures due 2004 New York Stock Exchange
8.50% Convertible Subordinated Debentures due 2000 New York Stock Exchange
8.50% Convertible Subordinated Debentures due 2001 New York Stock Exchange
7.75% Convertible Subordinated Debentures due 2002 New York Stock Exchange
8.25% Convertible Subordinated Debentures due 2001 New York Stock Exchange
</TABLE>
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the Company (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 Company was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No ___
---
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 10-K or any amendment to this Form
10-K. [X]
The aggregate market value of voting stock held by nonaffiliates of the
Company is approximately $400,532,793 as of January 31, 1997.
22,098,361
(Number of shares of common stock outstanding as of January 31, 1997)
Part III is incorporated by reference from the Company's definitive proxy
statement for the Annual Meeting of Stockholders to be held on May 19, 1997.
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ITEM 1. BUSINESS
GENERAL
LTC Properties, Inc. (the "Company"), a health care real estate investment
trust (a "REIT"), was organized on May 12, 1992 in the State of Maryland and
commenced operations on August 25, 1992. The Company invests in long-term care
and other health care related facilities through mortgage loans, facility lease
transactions and other investments. The primary objective of the Company is to
provide current income for distribution to stockholders through real estate
investments in long-term care facilities and other health care related
facilities managed by experienced operators providing quality care. To meet
this objective, the Company attempts to invest in properties that provide
opportunity for additional returns to its stockholders and diversify its
investment portfolio by geographic location, operator and form of investment.
The Company was organized to qualify, and intends to continue to qualify, as a
REIT. So long as the Company so qualifies, with limited exceptions, the Company
will not be taxed under federal income tax laws at the corporate level on its
taxable income as long as it distributes at least 95 percent of that amount to
its stockholders. The Company has distributed, and intends to continue to make
distributions to its stockholders, in order to eliminate any federal tax
liability.
At December 31, 1996, the Company had investments in 248 skilled nursing
facilities with 28,628 beds and 35 assisted living facilities with 1,456 units
in 32 states operated by 84 healthcare providers.
OWNED PROPERTIES
During 1996, the Company acquired for approximately $113,858,000 22 assisted
living facilities and 20 skilled nursing facilities. Sixteen of the skilled
nursing facilities were acquired by six newly formed limited partnerships of
which the Company, through certain of its subsidiaries, is the general partner
and were purchased subject to mortgage loans of approximately $9,641,000. Under
the partnership agreements, the Company has guaranteed payment of a 10%
preferred return to the holders of $8,932,000 in limited partnership interests.
Under certain circumstances, the limited partnership interests can be exchanged,
at the option of the holders, into 628,511 shares of the Company's common stock
at exercise prices ranging from $13.00 to $15.00 beginning in 1997. Also during
1996, the Company sold four assisted living facilities for their approximate net
book value of $7,589,000. The Company's long-term facilities are leased to
operators pursuant to long-term "triple net" leases and provide for increases in
the rent based upon specified rent increases or, to a lesser extent, upon
participation in revenue increases over defined base periods or increases based
on consumer price indices.
MORTGAGE LOANS
As part of the Company's strategy of making long-term investments in
properties used in the provision of long-term health care services, the Company
provides mortgage financing on such properties based on the investment
underwriting criteria established by the Company. (See "Investment and Other
Policies" in this Section.)
The Company maintains a long-term investment interest in its mortgages
either through the direct retention of mortgages or through the retention of
REMIC certificates originated in the Company's securitizations. The Company may,
from time-to-time, securitize a portion of its mortgage loan portfolio when a
securitization provides the Company with the best available form of raising
capital to make additional long-term investments. In addition, the Company
believes that the certificates retained by the Company in its securitizations
provide its shareholders with a more diverse real estate investment while
maintaining the returns desired by the Company. As of December 31, 1996, the
Company had securitized $354,000,000 of mortgage loans that were originated by
the Company. Because the Company anticipates securitizing
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additional portions of its mortgage loan portfolio in the future, its mortgage
loan investments are carried at the lower of cost-or-market.
REMIC CERTIFICATES
On March 29, 1996, the Company securitized mortgage loans with an aggregate
outstanding principal balance of approximately $112,487,000 by creating a Real
Estate Mortgage Investment Conduit ("REMIC") which, in turn, issued mortgage
pass-through certificates ("REMIC Certificates") aggregating approximately the
same amount. A total of approximately $90,552,000 of REMIC Certificates were
subsequently sold to third parties by the Company. The Company retained the
remaining $21,935,000 face amount of the REMIC Certificates, which are
effectively subordinated in right of payment to the Certificates sold to third
parties. A portion of the other REMIC Certificates the Company retained, which
have no principal amount, are interest-only certificates and entitle the Company
to receive cash flows designated as interest. The proceeds from the sale were
used to pay down outstanding borrowings under the Company's lines of credit. At
December 31, 1996, the Company had investments in REMIC Certificates with an
estimated fair value of $98,934,000 approximately ($92,545,000 at amortized
cost) secured by 148 long-term care facilities with a total of 16,064 beds in 24
states. (See "Part 1, Item 2 -- Properties -- REMIC Certificates.")
FINANCING AND OTHER TRANSACTIONS
In February 1996, the Company sold, through a public offering, $30,000,000
aggregate principal amount of 7.75% Convertible Subordinated Debentures due
2002. The debentures are convertible at any time prior to maturity into shares
of the Company's common stock at a conversion price of $16.50 per share. The
net proceeds were used to repay borrowings under the Company's lines of credit.
In March 1996, the Company filed a shelf-registration statement with the
Securities and Exchange Commission covering up to $125,000,000 of debt and
equity securities to be sold from time to time in the future. The registration
statement was declared effective on April 4, 1996. Pursuant to the shelf
registration, the Company, in August 1996, completed the sale of $30,000,000 of
8.25% Convertible Subordinated Debentures due 2001. The debentures are
convertible into shares of the Company's common stock at a price of $17.25 per
share. Net proceeds from the offering were used to repay short-term borrowings.
Also in 1996, the Company repurchased and retired 120,000 shares of common stock
for an aggregate purchase price of approximately $1,831,000.
INVESTMENT AND OTHER POLICIES
OBJECTIVES AND POLICIES
The Company currently invests in income-producing long-term care
facilities. The Company invests either (1) directly in mortgage loans secured by
long-term care facilities (2) in the fee ownership of long-term care facilities
which are leased to operators (3) or may participate in such investments
indirectly through investments in partnerships, joint ventures or other entities
that themselves make direct investments in such loans or facilities.
In evaluating potential investments, the Company considers such factors as
(i) type of property, (ii) the location, construction quality, condition and
design of the property, (iii) the property's current and anticipated cash flow
and its adequacy to meet operational needs and lease obligations or debt service
obligations, (iv) the quality and reputation of the property's operator, (v) the
growth, tax and regulatory environments of the communities in which the
properties are located, (vi) the occupancy and demand for similar long-term care
facilities in the area surrounding the property and (vii) the Medicaid
reimbursement policies and plans of the state in which the property is located.
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The Company places primary emphasis on investing in long-term care
facilities that have low investment per bed ratios and do not have to rely on a
high percentage of private pay patients or ancillary services to cover debt
service or lease obligations. The Company seeks to invest in facilities that are
located in suburban and rural areas of states with improving reimbursement
climates. Prior to every investment, the Company conducts a facility site review
to assess the general physical condition of the facility, the potential of
additional sub-acute services and the quality of care the operator provides. In
addition, the Company reviews the environmental reports, state survey and
financial statements of the facility before the investment is made. The Company
prefers to invest in facilities that have a significant market presence in its
community and where state licensing procedures limit the entry of competing
facilities. To date, most of the Company's investments have been made in the
form of mortgage loans secured by skilled nursing facilities. Due to
management's belief that assisted living facilities are an increasingly
important sector in the long-term care market, a larger portion of the Company's
future investments will be made in the form of direct ownership of assisted
living facilities. Management believes that assisted living facilities represent
a lower cost of long-term care alternative for senior adults than skilled
nursing facilities. The Company invests in assisted living facilities that
attract the moderate-income private pay patients in smaller communities,
preferably in states that have adopted Medicaid waiver programs or are in the
process of adopting or reviewing their policies and reimbursement program to
provide funding for assisted living residences. The Company believes that
locating residences in a state with a favorable regulatory reimbursement climate
should provide a stable source of residents eligible for Medicaid reimbursement
to the extent private-pay residents are not available, and should provide
alternative sources of income for residents when their private funds are
depleted and they become Medicaid eligible.
There are no limitations on the amount or percentage of the Company's total
assets that may be invested in any one property or joint venture, except for
investments in assisted living facilities ("ALFs"). The Board of Directors
authorized the Company to invest up to 20% of the Company's adjusted gross real
estate investment portfolio (adjusted to include approximately $278,881,000 of
mortgage loans to third parties underlying the December 31, 1996 balance of
investment in REMIC Certificates ) in ALFs, with a 10% limit on investments in
properties operated by Assisted Living Concepts, Inc. ("ALC"). ALC is an owner,
operator and developer of assisted living facilities. Three executive officers
of the Company own approximately 5.5% of ALC's common stock as of December 31,
1996 and two of the Company's executive officers serve as members of the Board
of Directors of ALC. The Company has discussed with its Board of Directors and
anticipates increasing the percentage of its adjusted gross real estate
investment portfolio that can be invested in ALFs and properties operated by ALC
to 30% and 15%, respectively during 1997. Except for ALFs, no other limits have
been set on the number of properties in which the Company will seek to invest,
or of the concentration of investments in any one facility or any one city or
state, or the type or form of investment.
BORROWING POLICIES
The Company may incur additional indebtedness when, in the opinion of the
directors, it is advisable. The Company may incur such indebtedness to make
investments in additional long-term care facilities or to meet the distribution
requirements imposed upon REITs under the Internal Revenue Code of 1986, as
amended (the "Code") (see Taxation of the Company -- Requirements for
Qualifications). For other short-term purposes, the Company may, from time to
time, negotiate lines of credit, or arrange for other short-term borrowings from
banks or otherwise. The Company may also arrange for long-term borrowings
through public offerings or from institutional investors.
In addition, the Company may incur mortgage indebtedness on real estate
which it has acquired through purchase, foreclosure or otherwise. The Company
may also obtain mortgage financing for unleveraged or underleveraged properties
in which it has invested or may refinance properties acquired on a leveraged
basis. There is no limitation on the number or amount of mortgages which may be
placed on any
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one property, and the Company has no policy with respect to limitations on
borrowing, whether secured or unsecured.
PROHIBITED INVESTMENTS AND ACTIVITIES
The policies of the Company, subject to change by the Board of Directors
without stockholder approval, impose certain prohibitions and restrictions on
various investment practices or activities of the Company including prohibition
against:
(i) acquiring any real property unless the consideration paid for such real
property is based on the fair market value of the property;
(ii) investing in any junior mortgage loan unless by appraisal or other method,
the directors determine that (a) the capital invested in any such loan is
adequately secured on the basis of the equity of the borrower in the
property underlying such investment and the ability of the borrower to
repay the mortgage loan or (b) such loan is a financing device entered into
by the Company to establish the priority of its capital investment over the
capital invested by others investing with the Company in a real estate
project;
(iii)investing in commodities or commodity futures contracts (other than
interest rate futures, when used solely for hedging purposes);
(iv) investing more than 1% of the Company's total assets in contracts for sale
of real estate unless such contracts are recordable in the chain of title;
(v) holding equity investments in unimproved, non-income producing real
property, except such properties as are currently undergoing development or
are presently intended to be developed within one year, together with
mortgage loans on such property (other than first mortgage development
loans), aggregating to more than 10% of the Company's assets.
COMPETITION
The Company competes with other REITs, real estate partnerships, health
care providers and other investors, including commercial banks, institutional
banks and insurance companies, many of which will have greater financial
resources and lower cost of funds than the Company, in the acquisition, leasing
and financing of long-term care facilities. The operators compete on a local and
regional basis with operators of facilities that provide comparable services.
Operators compete for patients based on quality of care, reputation, physical
appearance of facilities, services offered, family preferences, physician
referrals, staff and price.
INSURANCE
The Company obtains title insurance with respect to each of its
investments. The Company generally requires: (i) with respect to each owned
property, an American Land Title Association ("ALTA") Extended Coverage Owner's
Policy of Title Insurance with an insured amount equal to the purchase price,
insuring that the Company holds fee simple title to the property subject only to
those liens and encumbrances approved by the Company; and (ii) with respect to
each mortgaged property, an ALTA Extended Coverage Lender's Policy of Title
Insurance with an insured amount equal to the loan amount, insuring the
Company's first-lien security interest in the property subject only to those
liens and encumbrances approved by the Company. However, ALTA Extended Coverage
Policies of Title Insurance are not available in all
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states, in which event the Company requires the broadest form of title coverage
available in the particular jurisdiction.
In addition, the Company requires that its tenants (in the case of owned
properties) and borrowers (in the case of mortgaged properties) maintain
comprehensive liability insurance and casualty insurance with policy
specifications and insured limits customarily carried for similar properties and
cause their insurers to name the Company as an additional insured, loss payee
and/or mortgagee, as appropriate depending on the particular type of policy. In
the case of casualty insurance, the insured limits may not be less than the full
replacement cost of the improvements constructed on the property, and coverage
is typically provided in the form of an "all-risk" policy. However, there are
certain types of losses which may either be uninsurable or not economically
insurable. For example, the Company generally requires its tenants and
borrowers to carry flood insurance if the property is located within a flood
plain area as designated by the applicable governmental authority, and
earthquake insurance if the property is located in a state, such as California,
where the risk of earthquake damage is high. Such flood and earthquake coverage
is not always an insurable risk or may not be obtainable in amounts at least
equal to the full replacement cost of the improvements constructed on the
property. Accordingly, there is no assurance that adequate coverage exists with
respect to each investment should there be serious flooding, seismic activities
or other uninsurable casualty in the areas where the properties constituting the
Company's investments are located. Should an uninsured (or less than fully
insured) loss occur, the Company could lose its investment in, and anticipated
profits and cash flow from, a property.
EMPLOYEES
The Company currently employs 13 persons.
GOVERNMENT FINANCING AND REGULATION OF HEALTH CARE
GENERAL
Medicaid programs or the equivalent are currently in existence in all of
the states in which the Company has nursing facility investments. While these
programs differ in certain respects from state to state, they are all subject to
certain federally imposed requirements, as a substantial portion of the funds
available under these programs is provided by the federal government. Medicaid
programs provide for payments to participating health care facilities on behalf
of the indigent and certain other eligible persons. California and Texas provide
for reimbursement at flat daily rates, as determined by the responsible state
agency and depending on certain levels of care. In all other states, payments
are based upon specific cost reimbursement formulas established by the
applicable state.
Medicare and most state Medicaid programs utilize a cost-based
reimbursement system for nursing facilities which reimburses facilities for the
reasonable direct and indirect allowable costs incurred in providing routine
services (as defined by the programs) plus, in certain states, a return on
equity, subject to certain cost ceilings. These costs normally include
allowances for administrative and general costs as well as the costs of property
and equipment (depreciation and interest, fair rental allowance or rental
expense). In certain states, cost-based reimbursement is typically subject to
retrospective adjustment through cost report settlement, and for certain states,
payments made to a facility on an interim basis that are subsequently determined
to be less than or in excess of allowable costs may be adjusted through future
payments to the affected facility and to other facilities owned by the same
owner. State Medicaid reimbursement programs vary as to the methodology used to
determine the level of allowable costs which are reimbursed to operators.
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The Medicaid and Medicare programs are subject to statutory and regulatory
changes, administrative rulings, interpretations of policy, intermediary
determinations and governmental funding restrictions, all of which may
materially increase or decrease program reimbursement to health care facilities.
No assurance can be given as to whether the future funding of such programs will
remain at levels comparable to the present levels.
Both the Medicaid and Medicare programs contain specific requirements which
must be adhered to at all times by health care facilities in order to qualify
under the programs. Based upon such information as periodically received by the
Company from the operators over the term of the loan, the Company believes that
the nursing facilities in which it has investments are in substantial compliance
with the various regulatory requirements applicable to them, although there can
be no assurance that the operators are in compliance or will be so at any time.
In addition to the requirements to be met by the nursing facilities for
participation in the Medicaid and Medicare programs, the nursing facilities are
subject to regulatory and licensing requirements of federal, state and local
authorities. The operator of each long-term care facility is licensed annually
by the board of health or other applicable agency in each state. In granting
and renewing licenses, regulatory agencies consider, among other things, the
physical buildings and equipment, the qualifications of the administrative
personnel and nursing staff, the quality of care and continuing compliance with
the laws and regulations relating to the operation of the facilities. State
licensing of facilities is a prerequisite to certification under Medicaid and
Medicare programs. In the ordinary course of business, the operators receive
notices of deficiencies for failure to comply with various regulatory
requirements and take appropriate corrective and preventive actions. The
Company believes that the nursing facilities in which it has investments are in
compliance with the applicable licensing or other regulation although there can
be no assurance that the operators are or will be in compliance at any time.
The Company has increased its investments in ALFs during 1996. ALFs are
subject to certain state regulations and licensing requirements. In order to
qualify as a state licensed facility, ALFs must comply with regulations which
address, among other things, staffing, physical design, required services and
resident characteristics. ALFs are also subject to various local building codes
and other ordinances, including fire safety codes. These requirements vary from
state to state and are monitored to varying degrees by state agencies.
Currently, ALFs are not regulated as such by the federal government. State
standards required for ALF providers are less stringent than those required of
other licensed health care operators. There can be no assurance that federal
regulations governing the operation of ALFs will not be implemented in the
future or that existing state regulations will not be expanded. In addition,
only certain states have adopted laws or regulations permitting individuals with
higher acuity levels to remain in assisted living communities who may otherwise
qualify for placement in a nursing facility. While only certain states
presently provide for any Medicaid reimbursement for assisted living residences,
several states are currently reviewing their policies and reimbursement programs
to provide funding for assisted living residences. There can be no assurance
that such states will adopt the Medicaid waiver program.
HEALTH CARE REFORM
The health care industry is facing various challenges, including increased
government and private payor pressure on health care providers to control costs,
the migration of patients from acute care facilities into extended care and home
care settings and the vertical and horizontal consolidation of health care
providers. The pressure to control health care costs intensified during 1993
and 1994 as a result of the national health care
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reform debate and will continue with renewed efforts in 1997 to balance the
federal budget. The need to slow the growth rate in federal health care
expenditures will be a priority. President Clinton's current budget proposal,
for example, seeks $138 billion dollars in reductions in Medicare expenditures
needed to address the short term solvency of the federal program, including
significant limitations on growth in provider reimbursement. It is anticipated
that further debate on overall structural reform of federal health care programs
will affect additional legislative action on cost-containment.
The Company believes that government and private efforts to contain and
reduce health care costs will continue. These trends are likely to lead to
reduced or slower growth in reimbursement for certain services provided by some
of the Company's borrowers and lessees. The Company believes that the vast
nature of the health care industry, the financial strength and operating
flexibility of its operators and the diversity of its portfolio will mitigate
against the impact of any such diminution in reimbursement. However, the Company
cannot predict whether any of the above proposals or any other proposals will be
adopted and, if adopted, no assurance can be given that the implementation of
such reforms will not have a material adverse effect on the Company's financial
condition or results of operations.
TAXATION OF THE COMPANY
GENERAL
The Company has made an election to be taxed as a REIT under Sections 856
through 860 of the Code commencing with its taxable year ended December 31,
1992. The Company believes, that commencing with such taxable year, it has been
organized and has operated in such a manner as to qualify for taxation as a REIT
under the Code, and the Company intends to continue to operate in such a manner.
However, no assurance can be given that the Company has operated or will be able
to continue to operate in a manner to so qualify or remain qualified.
If the Company qualifies for taxation as a REIT, it will generally not be
subject to federal corporate income taxes on its net income that is currently
distributed to stockholders. This treatment substantially eliminates the
"double taxation" (at the corporate and stockholder levels) that generally
results from investment in a regular corporation. However, under certain
circumstances, the Company will continue to be subject to federal income tax.
The following is a general summary of the provisions that govern the
federal income tax treatment of a REIT and its stockholders. This summary is
qualified in its entirety by the applicable Code provisions, rules and
regulations promulgated thereunder, and administrative and judicial
interpretations thereof.
REQUIREMENTS FOR QUALIFICATIONS
The Code defines a REIT as a corporation, trust or association (i) which is
managed by one or more trustees or directors; (ii) the beneficial ownership of
which is evidenced by transferable shares, or by transferable certificates of
beneficial interest; (iii) which would be taxable as a domestic corporation but
for Sections 856 through 859 of the Code; (iv) which is neither a financial
institution nor an insurance company subject to certain provisions of the Code;
(v) the beneficial ownership of which is held by 100 or more persons; (vi)
during the last half of each taxable year not more than 50% in value of the
outstanding stock of which is owned, actually or constructively, by five or
fewer individuals (as defined in the Code to include certain entities); and
(vii) which meets certain other tests, described below. The Code provides that
conditions (i) to (iv), inclusive, must be met during the entire taxable year
and that condition (v) must be met during at least 335 days of a taxable year of
12 months, or during a proportionate part of a taxable year of less than 12
months.
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To qualify as a REIT for a taxable year under the Code, the Company must
elect or previously have elected to be so treated and must meet other
requirements, certain of which are summarized below, including percentage tests
relating to the sources of its gross income, the nature of the Company's assets
and the distribution of its income to stockholders.
INCOME TESTS
In order to maintain its qualification as a REIT, the Company annually must
satisfy three gross income requirements. First, at least 75% of the Company's
gross income (excluding gross income from certain sales of property held
primarily for sale) for each taxable year must be derived directly or indirectly
from investments in real property (other than gains from property held primarily
for sale), mortgages on real property, or certain qualified temporary investment
income. Second, at least 95% of the Company's gross income (excluding gross
income form certain sales of property held primarily for sale) for each taxable
year must be derived from such real property investments described with respect
to the 75% test, dividends, interest and gain from the sale or disposition of
stock or securities (other than gains from certain sales of property held
primarily for sale). Third, short-term gain from the sale or other disposition
of stock or securities, gain from certain sales of property held primarily for
sale, and gain from the sale or other disposition of real property held for less
than four years (apart from involuntary conversions and sales of foreclosure
property) must represent less than 30% of the Company's gross income for each
taxable year.
ASSET TEST
At the close of each quarter of its taxable year, the Company must also
satisfy three tests relating to the nature of its assets. First, at least 75%
of the value of the Company's total assets (including the assets held by its
subsidiaries and its allocable share of the assets held by partnerships in which
it or its subsidiaries is a partner) must be represented by real estate assets
(including interests in a qualifying REMIC and shares in a REIT), cash, cash
items and government securities. Second, no more than 25% of the Company's
total assets (including the assets held by its subsidiaries and its allocable
share of the assets held by partnerships in which it or its subsidiaries is a
partner) may be represented by securities other than those includable in the 75%
asset class. Third, of the investments included in the 25% asset class, the
value of any one issuer's securities owned by the Company may not exceed 5% of
the value of the Company's total assets and the Company may not own more than
10% of any one issuer's outstanding voting securities.
DISTRIBUTION REQUIREMENTS
The Company, in order to qualify as a REIT, is required to distribute
dividends (other than capital gain dividends) to its stockholders in an amount
at least equal to (A) the sum of (i) 95% of the Company's "REIT taxable income"
(computed without regard to the dividends paid deduction and by excluding the
Company's net capital gain) and (ii) 95% of the net income (after tax), if any,
from foreclosure property, minus (B) the excess of the sum of certain items of
non-cash income over 5% of "REIT taxable income" as described in clause (A)(i)
above. Such distributions must be paid in the taxable year to which they
relate, or in the following taxable year if declared before the Company timely
files its tax return for such year, if paid on or before the first regular
dividend payment date after such declaration and if the Company so elects and
specifies the dollar amount in its tax return. To the extent that the Company
does not distribute all of its net capital gain or distributes at least 95%, but
less than 100%, of its "REIT taxable income", as adjusted, it will be subject to
tax thereon at regular corporate tax rates. Furthermore, if the Company should
fail to distribute during each calendar year at least the sum of (i) 85% of its
REIT ordinary income for such year, (ii) 95% of its REIT capital gain income for
such year, and (iii) any undistributed taxable income from prior periods, the
Company would
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be generally subject to a 4% excise tax on the excess of such required
distribution over the amounts actually distributed.
FAILURE TO QUALIFY
If the Company should fail to satisfy one or both of the 75% or 95% gross
income tests for any taxable year, it may nevertheless qualify as a REIT for
such year if it is entitled to relief under certain provisions of the Code.
However, it is not possible to state whether in all circumstances the Company
would be entitled to such statutory relief. If the relief provisions do not
apply, the Company would be subject to tax (including any applicable alternative
minimum tax) on its taxable income at regular corporate rates. Distributions to
stockholders in any year in which the Company fails to qualify will not be
deductible by the Company nor will they be required to be made. Unless entitled
to relief under specific statutory provisions, the Company would also be
disqualified from taxation as a REIT for the four taxable years following the
year during which qualification is lost. Failure to qualify for even one year
could result in the Company's incurring substantial indebtedness (to the extent
borrowings are feasible) or liquidating substantial investments in order to pay
the resulting taxes.
TAXATION OF STOCKHOLDERS - GENERAL
As long as the Company qualifies as a REIT, distributions made to the
Company's stockholders out of current or accumulated earnings and profits (and
not designated as capital gain dividends) will be taken into account by them as
ordinary income (which will not be eligible for the dividends received deduction
for corporations). Distributions that are designated as capital gain dividends
will be taxed as long-term capital gains to the extent they do not exceed the
Company's actual net capital gain for the taxable year, although corporate
stockholders may be required to treat up to 20% of any such capital gain
dividend as ordinary income. Distributions in excess of current or accumulated
earnings and profits will not be taxable to a stockholder to the extent that
they do not exceed the adjusted basis of the stockholder's common stock, but
rather will reduce the adjusted basis of such shares. To the extent such
distributions exceed the adjusted basis of a stockholder's common stock, they
will be included in income as long-term capital gain (or short-term capital gain
if the shares have been held for one year or less) assuming the shares are held
as a capital asset in the hands of the stockholder. Under special tax rules for
REITs, dividends declared in the last quarter of the calendar year and paid by
January 31 of the following year are treated as paid on December 31 of the year
declared. Stockholders may not include in their individual income tax returns
any net operating losses or capital losses of the Company.
The Company and its stockholders may be subject to state or local taxation
in various state or local jurisdictions, including those in which it or they
transact business or reside. Other federal, state and local tax considerations
may apply depending on the Company's and its stockholders' circumstances.
FACTORS THAT MAY AFFECT FUTURE RESULTS
Many of the statements herein are forward-looking in nature, and,
accordingly, whether they prove to be accurate is subject to many risks and
uncertainties. The actual results that the Company achieves may differ
materially from many forward-looking statements herein. Factors that could cause
or contribute to such differences include, but are not limited to, those
discussed below and those contained in "Management's Discussion and Analysis of
Financial Condition and Results of Operations" as well as those discussed
elsewhere herein.
10
<PAGE>
GOVERNMENT REGULATION
Health Care Reform. The health care industry is facing various challenges,
including increased government and private payor pressure on health care
providers to control costs, the migration of patients from acute care facilities
into extended care and home care settings and the vertical and horizontal
consolidation of health care providers. The pressure to control health care
costs intensified during 1993 and 1994 as a result of the national health care
reform debate and will continue with renewed efforts in 1997 to balance the
federal budget. The need to slow the growth rate in federal health care
expenditures will be a priority. President Clinton's current budget proposal,
for example, seeks $138 billion in reductions in Medicare expenditures needed to
address the short term solvency of the federal program, including significant
limitations on growth in provider reimbursement. It is anticipated that further
debate on overall structural reform of federal health care programs will affect
additional legislative action on cost-containment.
The Company believes that government and private efforts to contain and
reduce health care costs will continue. These trends are likely to lead to
reduced or slower growth in reimbursement for certain services provided by some
of the Company's borrowers and lessees. The Company believes that the vast
nature of the health care industry, the financial strength and operating
flexibility of its operators and the diversity of its portfolio will mitigate
against the impact of any such diminution in reimbursement. However, the Company
cannot predict whether any of the above proposals or any other proposals will be
adopted, and if adopted, no assurance can be given that the implementation of
such reforms will not have a material adverse effect on the Company's financial
condition or results of operations.
Potential Operator Loss of Licensure or Certification. The health care
industry is highly regulated by federal, state and local law, and is directly
affected by state and local licensure, fines, and loss of certification to
participate in the Medicare and Medicaid programs, as well as potential criminal
penalties. The failure of any borrower or lessee to comply with such laws,
requirements and regulations could affect its ability to operate the facility or
facilities and could adversely affect such borrower's or lessee's ability to
make debt or lease payments to the Company.
In the past several years, due to rising health care costs, there has been
an increased emphasis on detecting and eliminating fraud and abuse in the
Medicare and Medicaid programs. Payment of any consideration in exchange for
referral of Medicare and Medicaid patients is generally prohibited by federal
statute, which subjects violators to severe penalties, including exclusion from
the Medicare and Medicaid programs, fines, and even prison sentences. In recent
years, both federal and state governments have significantly increased
investigation and enforcement activity to detect and punish wrongdoers. In
addition, legislation has been adopted at both state and federal levels that
severely restricts the ability of physicians to refer patients to entities in
which they have a financial interest.
It is anticipated that the trend toward increased investigation and
informant activity in the area of fraud and abuse, as well as self-referral,
will continue in future years. In the event that any borrower or lessee were to
be found in violation of laws regarding fraud, abuse or self-referral, that
borrower's or lessee's ability to operate a health care facility could be
jeopardized, which could adversely affect the borrower's or lessee's ability to
make debt or lease payments to the Company and, thereby, adversely affect the
Company.
Reliance on Government Reimbursement. A significant portion of the revenue
of the Company's borrowers and lessees is derived from governmentally-funded
reimbursement programs, such as Medicare and Medicaid. These programs are highly
regulated and subject to frequent and substantial changes resulting from
legislation, adoption of rules and regulations, and administrative and judicial
interpretations
11
<PAGE>
of existing law. In recent years, there have been fundamental changes in the
Medicare program which have resulted in reduced levels of payment for a
substantial portion of health care services. Moreover, health care facilities
have experienced increasing pressures from private payers attempting to control
health care costs, and reimbursement from private payers has in many cases
effectively been reduced to levels approaching those of government payers.
In many instances, revenues from Medicaid programs are already insufficient
to cover the actual costs incurred in providing care to those patients.
Governmental and popular concern regarding health care costs may result in
significant reductions in payment to health care facilities, and there can be no
assurance that future payment rates for either governmental or private health
care plans will be sufficient to cover cost increases in providing services to
patients. Any changes in reimbursement policies which reduce reimbursement to
levels that are insufficient to cover the cost of providing patient care could
adversely affect revenues of the Company's borrowers and lessees and thereby
adversely affect those borrowers' and lessees' abilities to make their debt or
lease payments to the Company. Failure of the borrowers or lessees to make their
debt or lease payments would have a direct and material adverse impact on the
Company.
COMPETITION
The Company competes with other REITs, real estate partnerships, health
care providers and other investors, including but not limited to banks and
insurance companies, many of which will have greater financial resources than
the Company, in the acquisition, leasing and financing of health care
facilities. There can be no assurance that suitable investments will be
identified or that investments can be consummated on commercially reasonable
terms.
ENVIRONMENTAL MATTERS
Under various federal, state and local environmental laws, ordinances and
regulations, an owner of real property or a secured lender (such as the Company)
may be liable in certain circumstances for the costs of removal or remediation
of certain hazardous or toxic substances at, under or disposed of in connection
with such property, as well as certain other potential costs relating to
hazardous or toxic substances (including government fines and damages for
injuries to persons and adjacent property). Such laws often impose such
liability without regard to whether the owner knew of, or was responsible for,
the presence or disposal of such substances and may be imposed on the owner in
connection with the activities of an operator of the property. The cost of any
required remediation, removal, fines or personal or property damages and the
owner's liability therefore could exceed the value of the property, and/or the
assets of the owner. In addition, the presence of such substances, or the
failure to properly dispose of or remediate such substances, may adversely
affect the owner's ability to sell or rent such property or to borrow using such
property as collateral which, in turn, would reduce the Company's revenues.
Although the Company's mortgage loans and leases require the borrower and
the lessee to indemnify the Company for certain environmental liabilities, the
scope of such obligations may be limited and there can be no assurance that any
such borrower or lessee would be able to fulfill its indemnification
obligations.
HEALTH CARE REAL ESTATE INVESTMENT RISKS
Volatility of Value of Real Estate. Real property investments in the health
care industry are subject to varying degrees of risk. The economic performance
and values of health care real estate can be affected by many factors including
governmental regulation, economic conditions, and demand for health care
services. There can be no assurance that the value of any property acquired by
the Company will appreciate
12
<PAGE>
or that the value of property securing any of the Company's mortgage loans or
any property acquired by the Company will not depreciate.
Volatility of Income and Returns. The possibility that the health care
facilities will not generate income sufficient to meet operating expenses, will
generate income and capital appreciation, if any, at rates lower than those
anticipated or will yield returns lower than those available through investments
in comparable real estate or other investments are additional risks of investing
in health care related real estate. Income from properties and yields from
investments in such properties may be affected by many factors, including
changes in governmental regulation (such as zoning laws), general or local
economic conditions (such as fluctuations in interest rates and employment
conditions), the available local supply of and demand for improved real estate,
a reduction in rental income as the result of an inability to maintain occupancy
levels, natural disasters (such as earthquakes and floods) or similar factors.
Illiquidity of Real Estate Investments. Real estate investments are
relatively illiquid and, therefore, tend to limit the ability of the Company to
vary its portfolio promptly in response to changes in economic or other
conditions. All of the Company's properties are "special purpose" properties
that could not be readily converted to general residential, retail or office
use. Transfers of operations of nursing homes and other health care-related
facilities are subject to regulatory approvals not required for transfers of
other types of commercial operations and other types of real estate. Thus, if
the operation of any of the Company's properties becomes unprofitable due to
competition, age of improvements or other factors such that the borrower or
lessee becomes unable to meet its obligations on the debt or lease, the
liquidation value of the property may be substantially less -- relative to the
amount owing on the mortgage loan -- than would be the case if the property were
readily adaptable to other uses. The receipt of liquidation proceeds could be
delayed by the approval process of any state agency necessary for the transfer
of the property. In addition, certain significant expenditures associated with
real estate investment (such as real estate taxes and maintenance costs) are
generally not reduced when circumstances cause a reduction in income from the
investment. Should such events occur, the Company's income and funds available
for distribution would be adversely affected.
Uninsured Loss. The Company currently requires, and it is the intention of
the Company to continue to require, all borrowers and lessees to secure adequate
comprehensive property and liability insurance that covers the Company as well
as the borrower and/or lessee. Certain risks may, however, be uninsurable or
not economically insurable and there can be no assurance the Company or a lessee
will have adequate funds to cover all contingencies itself. Should such an
uninsured loss occur, the Company could lose its invested capital.
Dependence on Lease Income and Mortgage Payments from Real Property. Since
a substantial portion of the Company's income is derived from mortgage payments
and lease income from real property, the Company's income would be adversely
affected if a significant number of the Company's borrowers were unable to meet
their obligations to the Company or if the Company were unable to lease its
properties or make mortgage loans on economically favorable terms. There can be
no assurance that any lessee will exercise its option to renew its lease upon
the expiration of the initial term or that if such failure to renew were to
occur, the Company could lease the property to others on favorable terms.
13
<PAGE>
Item 2. PROPERTIES
PORTFOLIO
As of December 31, 1996, the Company`s real estate investment portfolio
consisted of investments in skilled nursing and assisted living facilities
(described below) in 32 states. The Company had approximately $223,578,000
(before accumulated depreciation of $11,640,000) invested in long-term care
facilities owned by the Company and leased to operators, approximately
$178,262,000 invested in mortgage loans (before allowance for doubtful accounts
of $1,000,000), and approximately $98,934,000, at estimated fair value,
($92,545,000 at amortized cost) invested in REMIC Certificates.
Skilled nursing facilities (SNFs). At December 31, 1996, the Company had
investments in 248 skilled nursing facilities with a total of 28,628 beds, in
the form of direct ownership or mortgage loan interests, including interests in
mortgages underlying the Company's investment in REMIC certificates. Skilled
nursing facilities provide restorative, rehabilitative and nursing care for
people not requiring the more extensive and sophisticated treatment available at
acute care hospitals. Many of the skilled nursing facilities provide ancillary
services which include occupational, speech, physical, respiratory and IV
therapies, as well as provide sub-acute care services. Such services are paid
either by the patient or the patient's family, or through the federal Medicare
or state Medicaid programs.
Assisted living facilities (ALFs). At December 31, 1996, the Company had
investments in 35 assisted living facilities with 1,456 units. Assisted living
facilities serve elderly persons who require assistance with activities of daily
living, but who do not require the constant supervision skilled nursing
facilities provide. Services are generally available 24-hours a day and include
personal supervision and assistance with eating, bathing, grooming and
administering medication. The facilities provide a combination of housing,
supportive services, personalized assistance and health care designed to respond
to individual needs.
OWNED PROPERTIES
At December 31, 1996, the Company owned and leased to health care operators
49 skilled nursing facilities with a total of 6,520 beds and 24 assisted living
facilities with a total of 868 units in 17 states, representing a net investment
of approximately $211,938,000. These long-term care facilities are leased
pursuant to non-cancelable leases generally with an initial term of ten to
twelve years. Many of the leases contain renewal options and some contain
options that permit the operators to purchase the facilities.
The following table sets forth certain information regarding the Company's
owned properties as of December 31, 1996:
<TABLE>
<CAPTION>
Average
No. of Remaining
No. of No. of Beds Lease Term Purchase Current Annual
Location SNFs ALFs /Units Encumbrances (in Months) Price Rent Payments
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Alabama 8 1 912 $14,608,044 95 $ 29,287,996 $ 3,274,779
Arizona 3 587 18,909,717 44 18,486,509 2,335,600
California 3 473 52 7,378,468 896,172
Florida 9 1,116 102 39,064,291 4,061,847
Georgia 1 100 137 2,500,000 248,750
Idaho 1 39 144 2,550,000 266,220
Illinois 1 148 96 6,627,159 746,640
Iowa 6 448 8,748,149 36 9,401,943 1,073,564
Kansas 4 134 5,739,360 108 6,700,000 633,820
Montana 1 278 4,335,297 72 3,830,608 420,365
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
Average
Remaining
No. of No. of Beds No. of Lease Term Purchase Current Annual
Location SNFs ALFs /Units Encumbrances (in Months) Price Rent Payments
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
New Mexico 2 236 72 6,898,696 785,951
Oklahoma 1 37 120 1,750,000 168,525
Oregon 2 71 144 4,550,000 463,410
Tennessee 2 224 137 5,550,000 552,225
Texas 8 8 1,685 4,974,739 93 45,630,908 4,980,779
Virginia 3 443 105 11,012,655 1,211,748
Washington 2 7 457 10,928,853 198 22,358,630 2,185,380
- -----------------------------------------------------------------------------------------------------------------
TOTAL 49 24 7,388 $68,244,159 (1) $223,577,863 (2) $24,305,775
=================================================================================================================
</TABLE>
(1) The amounts comprising the $68,244,159 of encumbrances include 1)
$54,205,000 of non-recourse mortgages payable by the Company secured by 22
skilled nursing facilities containing a total of 2,634 beds, 2) $8,300,000
of tax-exempt bonds secured by 5 assisted living facilities in Washington
with 184 units, and 3) $5,739,159 of capital lease obligations on 4
assisted living facilities in Kansas with 134 units.
(2) Of the total purchase price, $175,969,598 relates to investments in 49 SNFs
with 6,520 beds and $47,608,265 relates to investments in 24 ALFs with 868
units.
The leases provide for a fixed minimum base rent during the initial and
renewal periods. Most of the leases provide for annual fixed rent increases or
increases based on consumer price indices over the term of the lease. In
addition, certain of the Company's leases provide for additional rent through
revenue participation (as defined in the lease agreement) in incremental
revenues generated by the facilities, over a defined base period, effective at
various times during the term of the lease. Each lease is a triple net lease
which requires the lessee to pay additional charges including all taxes,
insurance, assessments, maintenance and repair (capital and non-capital
expenditures), and other costs necessary in the operation of the facility.
MORTGAGE LOANS
At December 31, 1996, the Company had 67 mortgage loans secured by first
mortgages on 73 skilled nursing facilities with a total of 8,672 beds and 11
assisted living residences with 588 units located in 23 states. The mortgage
loans, which individually range from $302,500 to $11,240,000 in principal
amount, have current interest rates ranging from 9.16% to 13.2% generally have
25-year amortization schedules, have balloon payments due from 1997 to 2017 and
provide for certain facility fees. Almost all of the mortgage loans provide for
annual increases in the interest rate based upon a specified increase of 10 to
12.5 basis points. Approximately $9,825,000 of the loans due in 1997 will be
paid off once the Company completes a sale leaseback transaction for the same
amount on assisted living facilities that are being constructed.
The following table sets forth certain information regarding the Company's
mortgage loans as of December 31, 1996:
<TABLE>
<CAPTION>
Average
No. of Number of
No. of No. of Beds Interest Months to Face Amount of Current Amount of Current Annual
Location SNFs ALFs /Units Rate % Maturity Mortgage Loans Mortgage Loans Debt Service (1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Alabama 1 142 11.18% 100 $ 4,100,000 $ 4,060,562 $ 489,706
Arizona 2 1 479 10.58-11.70% 87 10,650,000 10,599,851 1,238,740
Arkansas 2 274 10.00-10.20% 171 3,400,000 3,361,692 396,918
California 11 1,587 10.00-13.20% 107 22,805,000 23,501,020 2,888,344
Colorado 4 373 10.00-11.92% 108 6,330,000 5,284,620 615,460
Florida 8 1 1,106 9.16-11.85% 96 30,944,862 31,726,985 3,644,254
Georgia 1 2 287 9.75% 116 8,050,000 8,030,186 929,512
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
Average
No. of Number of
No. of No. of Beds Interest Months to Face Amount of Current Amount of Current Annual
Location SNFs ALFs /Units Rate % Maturity Mortgage Loans Mortgage Loans Debt Service (1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Illinois 2 322 9.76-11.10% 107 6,200,000 6,185,008 643,244
Iowa 3 214 11.62-11.70% 95 4,000,000 3,940,365 493,338
Kansas 4 233 9.90-11.87% 108 4,320,000 3,995,045 474,810
Louisiana 1 127 10.89% 239 1,600,000 1,600,000 196,745
Mississippi 3 400 10.32% 117 11,250,000 11,240,003 1,216,767
Missouri 1 174 10.75% 45 2,801,000 2,872,520 375,658
Nebraska 1 4 266 9.00-14.32% 59 5,348,980 5,434,382 601,749
Nevada 1 100 10.38% 163 1,200,000 1,173,996 142,523
North
Carolina 2 201 10.70-11.85% 66 3,770,000 3,728,490 449,556
Ohio 1 150 10.19% 111 5,200,000 5,173,773 575,408
Oklahoma 1 161 10.90% 174 1,300,000 1,292,252 159,961
Oregon 1 3 261 9.76-9.90% 33 8,160,000 8,157,238 810,999
South
Carolina 5 509 11.70% 73 11,250,000 11,229,957 1,357,532
Tennessee 3 201 10.73% 105 5,861,000 4,826,639 561,609
Texas 11 1,383 10.00-11.60% 115 16,650,000 16,364,741 1,998,690
Washington 4 310 11.00-11.70% 168 4,500,000 4,482,365 551,282
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL 73 11 9,260 $179,690,842 $178,261,690 (2) $20,812,805
==================================================================================================================================
</TABLE>
(1) Includes principal and interest payments.
(2) Of the total current principal balance, $159,698,336 relates to investments
in 73 SNFs with 8,672 beds and $18,563,354 relates to investments in 11
ALFs with 588 units.
In general, the Company's mortgage loans may not be prepaid except in the
event of the sale of the facility to a third party that is not affiliated with
the borrower. The Company's mortgage loans impose a penalty upon prepayment of
the loans depending upon the period in which the prepayment occurs, whether such
prepayment was permitted or required, and certain other conditions such as upon
the sale of the facility under pre-existing purchase option, destruction or
condemnation, or other circumstances as approved by the Company. Such
prepayment amount is based upon a percentage of the then outstanding balance
declining ratably each year. In addition to a lien on the mortgaged property,
the loans are generally secured by certain non-real estate assets of the
facilities and contain certain other security provisions in the form of letters
of credit, pledged collateral accounts, security deposits, cross-default and
cross-collateralization features and certain guarantees. During 1996, the
Company received a $941,000 payment with respect to the prepayment of one loan.
16
<PAGE>
REMIC CERTIFICATES
At December 31, 1996, the estimated fair value of the Company's REMIC
Certificate investments was $98,934,000 ($92,545,000, at amortized cost). The
REMIC Certificates retained by the Company are subordinate in rank and right of
payment to the Certificates sold to third-party investors and as such would bear
the first risk of loss in the event of an impairment to any of the underlying
mortgages. Management believes it employs conservative underwriting policies
and to date there have been no credit losses on any of the mortgages underlying
the Certificates nor are any credit losses currently anticipated. The REMIC
Certificates are collateralized by three pools consisting of 85 first mortgage
loans secured by 148 skilled nursing facilities with a total of 16,064 beds in
24 states. Each mortgage loan, all of which were originated by the Company, is
evidenced by a promissory note and secured by a mortgage, deed of trust, or
other similar instrument that creates a first mortgage lien on a fee simple
estate in real property (a "Mortgaged Property"). The $278,881,000 current
principal amount of mortgage loans represented by the REMIC Certificates have
individual principal balances ranging from approximately $297,000 to
$13,760,000, have a weighted average interest rate of approximately 11.21%, and
have remaining terms to scheduled maturities ranging from 28 months to 220
months.
The following table sets forth certain information regarding the three
pools of mortgage loans securing the REMIC Certificates as of December 31, 1996:
17
<PAGE>
<TABLE>
<CAPTION>
Original Principal Current Principal Amount
Number of Number of Amount of Remaining of Remaining Mortgage Current Annual
Location Facilities Beds Mortgage Loans Loans (1) Debt Service
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Alabama 8 1,069 $ 18,425,800 $ 18,074,641 $ 2,253,561
Arizona 5 955 26,018,000 25,708,985 2,863,918
California 16 1,705 27,404,786 25,753,046 3,588,009
Connecticut 4 499 10,656,000 10,478,251 1,297,858
Florida 3 330 13,160,000 12,875,952 1,533,085
Georgia 10 1,078 20,822,000 20,566,473 2,498,370
Illinois 6 679 12,426,000 12,150,073 1,495,306
Iowa 10 750 13,531,000 13,782,238 1,493,545
Kansas 1 66 1,200,000 1,191,133 140,033
Kentucky 1 67 726,000 711,348 88,862
Michigan 3 444 6,800,000 6,698,413 828,043
Mississippi 1 120 2,800,000 2,773,733 332,810
Missouri 5 545 9,489,000 9,297,497 1,161,454
Montana 5 658 14,278,000 14,073,620 1,536,239
Nebraska 4 378 6,614,000 6,545,787 770,105
New Mexico 5 350 9,007,000 8,757,245 1,127,306
North Carolina 2 256 5,350,000 5,217,532 649,726
Ohio 3 243 7,000,000 6,732,363 815,867
Oklahoma 1 112 1,300,000 1,262,522 167,409
S. Dakota 1 50 585,000 574,982 64,189
Tennessee 4 297 6,952,000 6,884,490 822,951
Texas 45 5,020 64,280,000 62,341,306 7,773,876
Washington 4 289 4,583,000 4,502,040 544,601
Wisconsin 1 104 2,075,000 1,927,543 264,000
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL 148 16,064 $285,482,586 $278,881,213 $34,111,123
================================================================================================================================
</TABLE>
(1) Included in the balances of the mortgages underlying the REMIC Certificates
are $54,205,000 of non-recourse mortgages payable by the Company. These
mortgages were originated by the Company and were transferred to the REMIC.
Subsequently, the properties securing the mortgages were acquired by the
Company in unrelated transactions, subject to the related mortgage debt.
The properties and the mortgage debt are reflected in the Company's balance
sheet.
Such mortgage loans generally have 25-year amortization schedules with
balloon payments due from 1999 to 2015, unless prepaid prior thereto.
Contractual principal and interest distributions with respect to the amortized
cost basis $92,545,000 of Certificates retained by the Company are subordinated
to distributions of interest and principal with respect to the $192,210,000
Certificates held by third parties. Thus, based on the terms of the underlying
mortgages and assuming no unscheduled prepayments occur, contractual principal
reductions on the REMIC Certificates retained by the Company will commence in
August 2004 with final maturity in April 2015. Distributions on any of the REMIC
Certificates will depend, in large part, on the amount and timing of payments,
collections, delinquencies and defaults with respect to the mortgage loans
represented by the REMIC Certificates, including the exercise of certain
purchase options under existing facility leases or the sale of the Mortgaged
Properties. Each of the mortgage loans securing the REMIC Certificates contain
similar prepayment and certain security provisions with respect to the Company's
mortgage loans.
18
<PAGE>
As part of the REMIC transactions discussed above, the Company serves as
the sub-servicer and, in such capacity, is responsible for performing
substantially all of the servicing duties relating to the mortgage loans
represented by the REMIC Certificates. The Company receives monthly fees equal
to a fixed percentage of the then outstanding mortgage loans in the REMIC which,
in management's opinion, represent currently prevailing terms for similar
transactions. Because the fees received for such servicing result in only
adequate compensation after considering the costs to service the loans, the
Company does not recognize a separate asset for servicing rights. In addition,
the Company will act as the special servicer to restructure any mortgage loans
in the REMIC that become in default.
At December 31, 1996, the REMIC Certificates held by the Company have an
effective interest rate of approximately 15.84% based on the expected future
cash flows with no unscheduled prepayments.
MAJOR OPERATORS
As of December 31, 1996, Retirement Care Associates ("RCA"), Horizon
Healthcare Corporation ("HHC"), Sun Healthcare Group, Inc. ("Sun") and Assisted
Living Concepts, Inc. ("ALC") operated, on a combined basis, 115 facilities
representing 43.6% ($273.2 million) of the Company's adjusted gross real estate
investment portfolio (adjusted to include the mortgage loans to third parties
underlying the $92.5 million--amortized cost basis--investment in REMIC
Certificates). At December 31, 1996, RCA, HHC, Sun and ALC operated 34, 36, 26
and 19, facilities, respectively, representing approximately 14.3% ($89.8
million), 13.8% ($86.2 million), 9.0% ($56.6 million) and 6.5% ($40.6 million),
respectively, of the Company's adjusted gross portfolio. RCA, HHC, Sun and ALC
are publicly traded companies, and other information regarding these operators
is on file with the Securities and Exchange Commission. The financial position
of the Company and its ability to make distributions may be adversely affected
by financial difficulties experienced by any of such operators, or any other
major operator of the Company, including bankruptcy, insolvency or general
downturn in business of any such operator, or in the event any such operator
does not renew and/or extend its relationship with the Company or its borrowers
as it expires.
19
<PAGE>
Item 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 4a. EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
NAME Age Position
- ----------------------- ------- -----------------------------------------------------
<S> <C> <C>
Andre C. Dimitriadis 56 Chairman, Chief Executive Officer and Director
William McBride III 36 President, Chief Operating Officer and Director
James J. Pieczynski 33 Senior Vice President and Chief Financial Officer
</TABLE>
Mr. Dimitriadis co-founded the Company in 1992 and was employed by Beverly
Enterprises, Inc., an owner/operator of long-term care facilities, retirement
living facilities and pharmacies, from October 1989 to May 1992, where he served
as Executive Vice President and Chief Financial Officer. Prior to that, he was
employed by American Medical International, Inc., an owner/operator of
hospitals, from 1985 to 1989, where he served as Executive Vice President -
Finance, Chief Financial Officer and Director. Mr. Dimitriadis serves as
Chairman of the board of directors of Health Management, Inc. and a member of
the board of directors of Assisted Living Concepts, Inc. and Magellan Health
Services.
Mr. McBride co-founded the Company in 1992 and was employed by Beverly
Enterprises, Inc., an owner/operator of long-term care facilities, retirement
living facilities and pharmacies, from April 1988 to July 1992, where he served
as Vice President, Controller and Chief Accounting Officer from April 1988.
Prior to that, he was employed by Ernst & Young LLP, an international accounting
firm, from 1982 to 1988. Mr. McBride serves as Chairman of the board of
directors of Assisted Living Concepts, Inc. and a member of the board of
directors of Malan Realty Investors, Inc.
Mr. Pieczynski has served as Senior Vice President and Chief Financial
Officer of the Company since May 1994. He joined the Company in December 1993 as
Vice President and Treasurer. Prior to that, he was employed by American Medical
International, Inc., an owner/operator of hospitals, from May 1990 to December
1993, where he served as Assistant Controller and Director of Development. From
1984 to 1990, he was employed by Arthur Andersen & Co. LLP, an international
accounting firm.
20
<PAGE>
ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
(a) The Company's common stock is listed on the New York Stock Exchange. Set
forth below are the high and low reported sale prices for the Company's
common stock as reported on the New York Stock Exchange.
<TABLE>
<CAPTION>
PRICE PER SHARE
High Low
------------------------ -----------------------
<S> <C> <C>
1995
- ----
First Quarter 13.625 12.500
Second Quarter 13.750 12.625
Third Quarter 15.250 13.125
Fourth Quarter 15.500 14.000
1996
- ----
First Quarter 17.125 14.875
Second Quarter 16.625 15.125
Third Quarter 17.250 15.875
Fourth Quarter 18.875 16.250
1997
- ----
First Quarter 18.250 17.750
(through February 1, 1997)
</TABLE>
(b) As of January 31, 1997, there were approximately 675 stockholders of record
of the Company's common stock. At the date of filing of this Annual Report
on Form 10-K/A, the Company is unable to estimate the number of additional
stockholders whose shares are held for them in street name or nominee
accounts.
(c) The Company has declared total cash distributions for the two years 1995
and 1996 as set forth below:
<TABLE>
<CAPTION>
Distributions Declared Per Share
--------------------------------
1995
- ----
<S> <C>
Quarter ended March 31 $ .29
Quarter ended June 30 .29
Quarter ended September 30 .315
Quarter ended December 31 .315
------
$ 1.21
======
1996
- ----
Quarter ended March 31 $ .315
Quarter ended June 30 .34
Quarter ended September 30 .34
Quarter ended December 31 .34
------
$1.335
======
</TABLE>
The Company intends to distribute to its stockholders a majority of its
funds from operations and, in any event, an amount at least sufficient to
satisfy the distribution requirements of a REIT. Cash flows from operating
activities available for distribution to stockholders will be derived primarily
from interest and rental payments from its real estate investments. All
distributions will be made by the Company subject to approval of the Board of
Directors and will depend on the earnings of the Company, its financial
condition and such other factors as the Board of Directors deem relevant. In
order to qualify for the beneficial tax treatment accorded to REITs by Sections
856 through 860 of the Code, the Company is required to make distributions to
holders of its shares equal to at least 95% of the Company's "REIT taxable
income."
21
<PAGE>
ITEM 6. SELECTED FINANCIAL INFORMATION
The following table of selected financial information for the twelve months
ended December 31, 1996, 1995, 1994 and 1993 and for the period from August 25,
1992 (commencement of operations) to December 31, 1992 should be read in
conjunction with the Company's financial statements and related notes thereto
included elsewhere in this Annual Report on Form 10-K/A.
<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
RESTATED(3)
------------------------------------
1996 1995 1994 1993 1992(1)
--------- ---------- --------- --------- -----------
<S> <C> <C> <C> <C> <C>
OPERATING INFORMATION:
Revenues $ 54,930 $ 35,569 $ 27,641 $ 15,847 $ 4,012
Expenses:
Interest expense 20,604 9,407 6,563 6,400 2,597
Depreciation and amortization 6,298 3,072 1,781 799 41
Amortization of Founders' stock 114 221 372 481 281
Provision for loan losses - - 550 372 75
Minority interest 898 57 - - -
Operating and other expenses 4,479 2,772 3,037 948 255
-------- --------- -------- -------- --------
Total expenses 32,393 15,529 12,303 9,000 3,249
-------- --------- -------- -------- --------
Other income (loss) 6,173 (1,656) 667 - -
-------- --------- -------- -------- --------
Income before cumulative effect of
change in accounting 28,710 18,384 16,005 6,847 763
Cumulative effect of accounting change - - 1,205 - -
-------- --------- -------- -------- --------
Net Income $ 28,710 $ 18,384 $ 17,210 $ 6,847 $ 763
======== ========= ======== ======== ========
Weighted average shares outstanding 19,257 18,257 15,443 9,169 7,962
======== ========= ======== ======== ========
PER SHARE INFORMATION:
Net income before cumulative effect of
accounting change $ 1.49 $ 1.01 $ 1.04 $ 0.75 $ 0.10
Cumulative effect on prior year (year ended
December 31, 1993) of a change in method
of accounting for REMIC Certificates - - 0.07 - -
-------- --------- -------- -------- --------
Net income $ 1.49 $ 1.01 $ 1.11 $ 0.75 $ 0.10
======== ========= ======== ======== ========
Distributions declared (2) $ 1.335 $ 1.21 $ 1.10 $ 1.02 $ 0.35
BALANCE SHEET INFORMATION:
Real estate investments, net $488,134 $ 340,441 $220,025 $147,269 $ 94,802
Total assets 500,538 357,378 239,369 154,303 148,562
Total debt 283,472 174,083 55,835 61,804 73,192
Total liabilities 299,207 185,458 66,148 69,156 78,250
Minority interest 10,528 1,098 - - -
Total stockholders' equity 190,803 170,822 175,093 85,147 70,312
OTHER INFORMATION: 1996 1995 1994 1993 1992
-------- --------- -------- -------- --------
Cash flows from operating activities $ 33,789 $ 24,197 $ 19,242 $ 8,863 $ 3,268
Cash flows used in investing activities (94,210) (111,459) (73,546) (52,706) (94,578)
Cash flows provided by (used) in financing
activities 62,135 74,430 65,465 (2,817) 141,075
Weighted average shares outstanding 19,257 18,257 15,443 9,169 7,962
</TABLE>
(1) From August 25, 1992 (commencement of operations) to December 31, 1992.
(2) Distributions may exceed current or accumulated net income.
(3) As further discussed in Note 1 of Consolidated Financial Statements
included herein, the Company has restated its 1996, 1995 and 1994 results
of operations to effect a change in the method used to account for its
REMIC Certificates.
In March 1995, NAREIT adopted the following definition of Funds From
Operations ("FFO"): net income (computed in accordance with GAAP) excluding
gains (or losses) from debt restructuring and sales of property, plus
depreciation of real property and after adjustments for unconsolidated entities
in which a REIT holds an interest. In addition, the Company excludes any
unrealized gains or losses resulting from temporary
22
<PAGE>
changes in the estimated fair value of its REMIC Certificates in the computation
of FFO. The Company implemented this new definition of FFO effective as of the
NAREIT-suggested adoption date of January 1, 1996. For the year ended December
31, 1996, the Company's FFO was $28,793,000 representing net income of
$28,710,000 plus depreciation on real estate investments of $6,256,000, less
unrealized gains on its REMIC Certificate investments of $6,173,000
The Company believes that FFO is an important supplemental measure of
operating performance. FFO should not be considered as an alternative to net
income or any other GAAP measurement of performance as an indicator of operating
performance or as an alternative to cash flows from operations, investing, and
financing activities as a measure of liquidity. The Company believes that FFO
is helpful in evaluating a real estate investment portfolio's overall
performance considering the fact that historical cost accounting implicitly
assumes that the value of real estate assets diminishes predictably over time.
The term FFO was designed by the REIT industry to provide useful supplemental
information. FFO provides an alternative measurement criteria, exclusive of
certain non-cash charges included in GAAP income, by which to evaluate the
performance of such investments. FFO, used by the Company in accordance with
the NAREIT definition may not be comparable to similarly entitled items reported
by other REITs that have not adopted the NAREIT definition.
23
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OPERATING RESULTS
Year ended December 31, 1996 compared to the year ended December 31, 1995
Total revenues for the twelve months ended December 31, 1996 increased by
$19,361,000 or 54% to $54,930,000 from $35,569,000. The increase was primarily
due to increased rental income of $10,594,000, increased mortgage interest
income of $4,382,000 and increased interest income from REMIC Certificates of
$3,480,000. Rental income increased $7,375,000 as a result of $113,858,000 of
property acquisitions made in 1996 and by $3,011,000 as a result of a full
year's effect on rental revenue of facilities acquired during 1995. Rental
revenue also increased by $109,000 due to contingent rents received from certain
facilities based on increases in the facilities' incremental operating revenues
(as defined in the respective leases). "Same-store" rentals (rents from
facilities owned for all of 1995 and 1996) increased by $99,000 as a result of
additional rents received in 1996 on facilities that are subject to rental
increases tied to increases in Consumer Price Indices (CPI). The increase in
mortgage interest income resulted from the higher overall mortgage investment
base in 1996 as compared to the 1995 investment base. Interest from REMIC
Certificates increased as a result of the third securitization transaction which
closed in March 1996. The remaining increase in income of $905,000 was
primarily due to penalties the Company received in 1996 from prepayments of one
mortgage loan and eight loans underlying the REMIC Certificates held by the
Company.
Total expenses for the twelve months ended December 31, 1996 increased by
$16,864,000 or 109% to $32,393,000 from $15,529,000 a year ago. The increase
resulted primarily from increases in interest expense of $11,197,000,
depreciation and amortization expense of $3,119,000, and from operating and
other expense of $1,707,000. Interest expense increased primarily due to a
higher borrowing base in 1996 that resulted from convertible debt issuances
totaling $60,000,000 offset by $18,813,000 of conversions, increases in net bank
borrowings of $30,930,000 and increases in net mortgage financing of
$37,498,000. During 1996, the Company acquired 22 assisted living facilities
and 20 skilled nursing facilities resulting in an increase in depreciation and
amortization expense. Operating and other expenses increased by $1,707,000 or
62% due to approximately $1,445,000 in additional salaries and bonuses.
Approximately $1,299,000 of the increase in salaries and bonuses were
attributable to higher wages and bonuses paid to existing personnel and
approximately $146,000 was due to additional staffing. The remaining portion of
the increase in operating expense was due to higher administrative costs.
Minority interest expense increased $841,000 due to the addition of six new
partnership transactions in 1996.
Total expenses for the twelve months ended December 31, 1996, as a
percentage of revenues, increased 35% as compared to the prior period. The
relatively higher increase in expenses when compared to revenues was primarily
due to financing activities in the latter part of 1995 and 1996 which utilized
more debt than equity. As a result, interest expense, as a percentage of
revenues, increased by approximately 42%. In addition, the investments funded
with these borrowings generally resulted in lower spreads as a result of market
interest rate pressures, when compared to prior investments which utilized more
equity financing. Depreciation and amortization expense increased by 33% as a
percentage of revenues due to the increase in the Company's owned properties
asset base in 1996 by approximately $113,858,000. Minority expense also
increased 920% as a percentage of revenues as a result of the six additional
partnership transactions completed in 1996 and the full year impact of the
partnership transaction completed in 1995. Operating and other expenses
increased by 5% as a percentage of revenues primarily due to higher salaries and
bonuses paid to existing staff during 1996.
24
<PAGE>
Other income (loss) increased in 1996 over 1995 due to the higher estimated
fair value of the Company's REMIC Certificate investments when compared to prior
year's. The higher estimated fair value was attributable to the Company's third
securitization which was completed in March 1996. On an overall basis, the
Certificates' estimated fair value was $6,389,000 greater than book value as of
December 31, 1996.
As a result of the foregoing, net income for the twelve months ended
December 31, 1996 increased $10,326,000 over the same period a year earlier.
Year ended December 31, 1995 compared to the year ended December 31, 1994
Total revenues increased $7,928,000 primarily as a result of increased
rental income of $4,292,000, increased interest income on REMIC Certificates of
$2,980,000 and increased interest income on mortgage loans of $280,000. The
increase in rental income of $4,292,000 was due primarily to additional rents of
$1,748,000 resulting from property acquisitions made in 1995 and by $2,362,000
as a result of a full year's effect on rental revenue of facilities acquired
during 1994. "Same-store" rentals (rents from facilities owned for all of 1995
and 1994) increased by $116,000 primarily as a result of an additional $107,000
of rent associated with the expansion of one skilled nursing facility on which
60 new beds were constructed and by $9,000 resulting from increased rent on one
facility due to a rent adjustment tied to increases in CPI. Rental revenue also
increased by increased by $66,000 due to contingent rents received based on
increases in the facilities' incremental operating revenues (as defined in the
respective leases). Interest income on REMIC Certificates increased $2,980,000
primarily due to the full year impact of the securitization transaction
completed in 1994. Interest income on mortgage loans increased $6,443,000 due to
the investments completed in 1995 and $3,996,000 due to the full year impact of
mortgage loan investments completed in 1994. The increases were offset by
reductions in interest income of $9,506,000 relating to the sale of mortgages to
the REMIC and $653,000 resulting from the prepayment of certain mortgages in
1994. The remaining increase in total revenues of $376,000 was primarily due to
an increase of $158,000 in prepayment penalties received by the Company in 1995
and increases in facility fees and other income of $218,000.
Total expenses for the twelve months ended December 31, 1995 increased
$3,226,000 primarily due to increases in interest expense of $2,844,000 and
depreciation and amortization of $1,140,000. Interest expense increased by
approximately $3,581,000 due to the issuance of $30,000,000 of convertible
debentures in September 1994 and $61,500,000 of convertible debentures in
September 1995. Interest expense also increased by approximately $899,000 due
to increased levels of bank borrowings and by approximately $954,000 due to the
assumption of non-recourse mortgages. These increases were offset by a decrease
of $2,590,000 in interest expense in connection with the conversion of a portion
of the Company's 9.75% convertible debentures in 1995. Increased expenses were
also attributable to increased depreciation and amortization totaling $1,140,000
as a result of acquisitions in 1995 and 1994. During 1995, the Company acquired
11 skilled nursing facilities and six assisted living residences. The above
increases were offset by decreases in operating and other expenses of $265,000.
Reduction in operating and other expenses resulted primarily from a decrease in
compensation expense of $764,000 offset by increased staffing and administrative
costs. Minority interest increased by $57,000 due to a partnership formed by
the Company in 1995.
Total expenses for the twelve months ended December 31, 1995, as a
percentage of revenues, decreased by approximately 2% as compared to the prior
period. Although on an overall basis revenues compared to expenses were stable
between the periods, there were some changes with respect to certain expense
categories. Interest expense, as a percentage of revenues, increased 11% as a
result of a greater proportion of debt being used to finance the 1995
investments as compared to 1994, which utilized debt and
25
<PAGE>
equity more proportionately. Depreciation and amortization expense increased by
34% as a percentage of revenues due to the additional investments in 1995 and
the full impact of 1994 owned property investments which primarily occurred
during the second half of 1994. These increases were offset by decreases in the
provision for loan or lease losses of 100%. Operating and other expenses
decreased by approximately 29% as a percentage of revenues primarily due to
comparatively lower compensation expense recorded in 1995.
The decrease in other income (loss) for the year ended December 31, 1995
was due the lower estimated fair value of the Company's REMIC Certificate
investments as of December 31, 1995 when compared to estimated fair value at
December 31, 1994. On an overall basis, the Certificates' estimated fair value
was $216,000 greater than book value as of December 31, 1995.
As more fully described in Note 1 of the Consolidated Financial statements
included herein, the Company restated its earnings to adopt the fair value
accounting provisions of Statement of Financial Accounting Standards No. 115. As
a result, the cumulative effect on earnings of $1,205,000 on the date of
adoption (January 1, 1994) has been reflected as a separate component in the
Consolidated Statement of Income for the year ended December 31, 1994.
As a result of the foregoing, net income for the twelve months ended
December 31, 1995 increased $1,174,000 over the same period a year earlier.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1996, the Company had investments in 248 skilled nursing
facilities with a total of 28,628 beds and 35 assisted living facilities with a
total of 1,456 units in 32 states. The Company's real estate investment
portfolio consisted of approximately $178,262,000 invested in mortgage loans
(before allowance for doubtful accounts of $1,000,000), approximately
$98,934,000 of REMIC Certificates at estimated fair value ($92,545,000 cost
basis), and approximately $223,578,000 (before accumulated depreciation of
$11,640,000) invested in long-term care facilities owned by the Company and
leased to operators.
During 1996, the Company completed investments totaling over $205,000,000
which consisted of purchases of 42 long-term care facilities for approximately
$113,858,000 and mortgage loans of $99,440,000 net of the sale of four
properties in Texas for $7,589,000. The Company financed its investments
through the sale of $60,000,000 aggregate principal amount of convertible
debentures in February and August 1996, the sale of $90,552,000 of REMIC
Certificates in March 1996, the assumption of non-recourse mortgage loans
totaling $9,641,000, the issuance of $8,932,000 in limited partnership
interests, short-term borrowings and cash on hand. During 1996, the Company
repurchased and retired 120,000 shares of common stock for an aggregate price of
approximately $1,831,000. The Company also paid off one of its outstanding
mortgage loans totaling $3,331,000.
Under the Credit Agreement, the Company has an unsecured line of credit in
the amount of $45,000,000 which expires on May 31, 1998. Borrowings under the
credit line bear interest at LIBOR plus 1.5% and are subject to standard
affirmative and negative covenants. As of February 1, 1997, the Company had
$38,700,000 in borrowings outstanding under the Credit Agreement bearing a
weighted average interest rate of approximately 7.2%. In addition, the Company
has entered into the Repurchase Agreement with a financial institution under
which it can borrow up to $84,000,000. The scheduled maturity of the Repurchase
Agreement is November 15, 1997; however, the Company has historically been able
to renew the Repurchase Agreement. Borrowings under the Repurchase Agreement
bear interest at LIBOR plus 2% and are secured by a pledge of certain mortgage
loans. At February 1, 1997, $50,000,000 was outstanding under the Company's
Repurchase Agreement bearing an average interest rate of approximately 7.7%.
The credit and repurchase agreements (collectively "lines of credit") limit
the amount of borrowings available to between 50% and 60% of the Company's
borrowing base. Under the Credit Agreement, the Company's borrowing base is
comprised of certain owned properties and mortgage loans. At December 31, 1996,
the borrowing base under the Credit Agreement is limited to 50% of the cost of
the total applicable value of the properties and 60% of the total applicable
value of eligible mortgage loans in the borrowing base or
26
<PAGE>
approximately $45,000,000. Under the Repurchase Agreement, the borrowing base
consists of various loans which have been assigned to the financial institution.
The Company can borrow up to 60% of the loans which have been assigned. Based on
the current level of collateral and borrowings at February 1, 1997, there was
approximately $28,451,000 available under the Company's Repurchase Agreement
which the Company anticipates will be increased to $34,000,000 when additional
collateral is accepted. In addition, the Company had registered in a shelf
registration but had not issued up to $77,250,000 of additional securities for
future issuance from time to time.
In July 1996, in connection with obtaining a $50,180,000 commitment to
enter into a sale leaseback transaction with Assisted Living Concepts, Inc.
("ALC"), the Company agreed to sell four assisted living facilities ("ALFs") it
acquired during 1996 in Texas to ALC for approximately $7,589,000. There was no
gain or loss recognized on the sale; however, the Company received an
administration fee of approximately $214,000 in conjunction with the sale of the
four ALFs. In connection with the commitment, the Company entered into a one-
year forward ten-year interest rate swap agreement (the "November 1996
Agreement"). The terms of the commitment provide for an initial lease term of
twelve years and an lease rate of 9.90% on each facility acquired. The Company
will finance this commitment with fixed rate financing, and as such, has
utilized an interest rate swap to "lock-in" the rate at which such financing
will be obtained. Interest rate swaps are contractual agreements between the
Company and third parties to exchange fixed and floating interest payments
periodically without the exchange of the underlying principal amounts (notional
amounts). Under the November 1996 Agreement, the Company will be credited with
interest at the three-month LIBOR and will incur interest at a fixed rate of
6.835% on a $40,000,000 notional amount beginning on November 7, 1997. The
November 1996 Agreement will be terminated on or before November 7, 1998 which
is the latest date on which the Company expects to fully fund the commitment and
have long-term financing in place. At December 31, 1996, the Company had an
unrealized gain of $251,000 under the November 1996 Agreement.
The Company also anticipates completing a securitization transaction within
the next year, the proceeds of which will be used to repay borrowings
outstanding under its Repurchase Agreement and its Credit Agreement. In
connection with such securitization, the Company, in September 1995, entered
into a seven-year forward interest rate swap agreement (the "September 1995
Agreement"). Under the September 1995 Agreement, beginning on March 31, 1997 and
continuing semi-annually thereafter, the Company is to be credited interest at
the six month LIBOR and incur interest at a fixed rate of 6.64% on a notional
amount of $60,000,000 which is being accounted for as a hedge. This effectively
"locked-in" the net interest margin on $60,000,000 principal amount of senior
certificates the Company anticipates will be sold in the securitization
transaction. Concurrent with the closing of the hedged transaction, any gains
and losses associated with the interest rate swap will be included as a
component of the proceeds of the transaction. The September 1995 Agreement will
be terminated at the earlier of (i) an anticipated securitization transaction to
be completed during the second half of 1997 or (ii) November 17, 1997. At
December 31, 1996, the Company had an unrealized loss of $253,000 under the
September 1995 Agreement.
The Company has the option to redeem, without penalty, its currently
outstanding $843,000 aggregate principal amount of 9.75% Convertible
Subordinated Debentures at any time. Since such debentures are convertible into
common stock of the Company at a conversion price of $10.00 per share, the
Company anticipates that substantially all of such debentures will be converted
if it elects to redeem the debentures.
During January 1997, the Company provided mortgage loans totaling
approximately $18,530,000 and acquired one skilled nursing facility for
$2,556,000. Included in the mortgage loans are approximately $17,330,000 of
mortgage loans on assisted living facilities which will be paid off once the
Company
27
<PAGE>
completes a sale leaseback transaction for the same amount on assisted living
facilities that are being constructed. As of February 1, 1997, the Company had
outstanding investment commitments totaling $82,790,000, consisting of
approximately $22,650,000 in commitments to make mortgage loans and commitments
for the acquisition of one nursing and 25 assisted living facilities for an
aggregate purchase price of approximately $60,140,000, including the remaining
$35,330,000 commitment to Assisted Living Concepts, Inc. discussed previously.
The Company expects to fund substantially all of these commitments by the end of
1997. In addition, in January 1997, the Company sold 1,000,000 shares of common
stock at $17.75 per share through a public offering. Of the net proceeds,
$17,300,000 was used to pay borrowings under the unsecured line of credit.
The Company expects its future income and ability to make distributions
from cash flows from operations to depend on the collectibility of its mortgage
loans receivable, REMIC Certificates and rents. The collection of these loans,
certificates and rents will be dependent, in large part, upon the successful
operation by the operators of the skilled nursing and assisted living facilities
owned by or pledged to the Company. The operating results of the facilities
will depend on various factors over which the operators/owners may have no
control. Those factors include, without limitation, the status of the economy,
changes in supply of or demand for competing long-term care facilities, ability
to control rising operating costs, and the potential for significant reforms in
the long-term care industry. In addition, the Company's future growth in net
income and cash flow may be adversely impacted by various proposals for changes
in the governmental regulations and financing of the long-term care industry.
The Company cannot presently predict what impact these proposals may have, if
any. The Company believes that an adequate provision has been made for the
possibility of loans proving uncollectible but will continually evaluate the
status of the operations of the skilled nursing and assisted living facilities,
the Company's borrowers and the underlying collateral for mortgage loans and
make future revisions to the provision, if considered necessary.
The Company's investments, principally its investments in mortgage loans,
REMIC Certificates, and owned properties, are subject to the possibility of loss
of their carrying values as a result of changes in market prices, interest rates
and inflationary expectations. The effects on interest rates may affect the
Company's costs of financing its operations and the fair market value of its
financial assets. The Company generally makes loans which have predetermined
increases in interest rates and leases which have agreed upon annual increases.
Inasmuch as the Company initially funds its investments with its revolving bank
line and repurchase agreement, the Company is at risk of net interest margin
deterioration if medium and long-term rates were to increase between the time
the Company originates the investment and the time it securitizes the loans or
replaces the short-term variable rate borrowings with a fixed rate financing.
To help reduce the negative impact of changes in interest rates, the Company
partially hedges, or locks in, its net interest rate spread on its investments
with interest rate swaps, as previously described.
The REMIC Certificates retained by the Company are subordinate in rank and
right of payment to the certificates sold to third-party investors and as such
would bear the first risk of loss in the event of an impairment to any of the
underlying mortgages. The returns on the Company's investment in REMIC
Certificates are subject to certain uncertainties and contingencies including,
without limitation, the level of prepayments, estimated future credit losses,
prevailing interest rates, and the timing and magnitude of credit losses on the
underlying mortgages collateralizing the securities that are a result of the
general condition of the real estate market or long-term care industry. As
these uncertainties and contingencies are difficult to predict and are subject
to future events that may alter management's estimations and assumptions, no
assurance can be given that current yields will not vary significantly in future
periods. To minimize the impact of prepayments, the mortgage loans underlying
the REMIC Certificates generally prohibit prepayment unless the property is sold
to an unaffiliated third party (with respect to the borrower). Additionally,
management believes it employs conservative underwriting policies and to date
there have
28
<PAGE>
been no credit losses on any of the mortgages underlying the certificates nor
are any credit losses currently anticipated.
Certain of the Certificates retained by the Company have designated
certificate principal balances and a stated certificate interest "pass-through"
rate. These Certificates are subject to credit risk to the extent that there
are estimated or realized credit losses on the underlying mortgages, and as such
their effective yield would be negatively impacted by such losses. The Company
also retains the interest-only (I/O) Certificates, which provide cash flow
(interest-only) payments that result from the difference between the interest
collected from the underlying mortgages and interest paid on all the outstanding
pass-through rate certificates. In addition to the risk from credit losses, the
I/O Certificates are also subject to prepayment risk, in that prepayments of the
underlying mortgages reduce future interest payments of which a portion flows to
the I/O Certificates, thus, reducing their effective yield. The Certificates'
fair values are estimated, in part, based on a spread over the applicable U.S
Treasury rate, and consequently, are inversely affected by increases or
decreases in such interest rates. There is no active market in these securities
from which to readily determine their value. The estimated fair values of both
classes of Certificates are subject to change based on the estimate of future
prepayments and credit losses, as well as fluctuations in interest rates and
market risk. Although the Company is required to report its REMIC Certificate
investments at fair value, many of the factors considered in estimating their
fair value are difficult to predict and are beyond the control of the Company's
management, consequently, changes in the reported fair values may vary widely
and may not be indicative of amounts immediately realizable if the Company was
forced to liquidate any of the Certificates.
The Company believes that its current cash flow from operations available
for distribution or reinvestment, its remaining borrowing capacity under its
lines of credit and anticipated securitization transaction are sufficient to
provide for payment of its operating costs, fund investments and provide funds
for distribution to its stockholders. In addition to its borrowing capacity, the
Company is considering various other proposals for additional long-term
financing to meet the needs of the Company.
29
<PAGE>
Item 8. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Auditors.................................................................25
Consolidated Balance Sheets as of December 31, 1996 and 1995...................................26
Consolidated Statements of Income for the years ended
December 31, 1996, 1995 and 1994...............................................................27
Consolidated Statements of Stockholders' Equity for the years
ended December 31, 1996, 1995 and 1994.........................................................28
Consolidated Statements of Cash Flows for the years ended
December 31, 1996, 1995 and 1994...............................................................29
Notes to Consolidated Financial Statements.....................................................30
</TABLE>
30
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
LTC Properties, Inc.
We have audited the accompanying consolidated balance sheets of LTC
Properties, Inc. as of December 31, 1996 and 1995 and the related consolidated
statements of income, stockholders' equity, and cash flows for each of the three
years in the period ended December 31, 1996. Our audits also included the
financial statement schedules listed in the index at Item 14(a). These
financial statements and financial statement schedules are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements and financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards 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. 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 audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of LTC Properties,
Inc. at December 31, 1996 and 1995, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1996 in conformity with generally accepted accounting principles.
Also, in our opinion, the related financial statement schedules, when considered
in relation to the basic financial statements taken as a whole, present fairly
in all material respects the information set forth therein.
As discussed in Note 1, the Company has restated its financial statements,
after discussions with the Staff of the Securities and Exchange Commission, to
adopt the fair value accounting provisions of SFAS 115, "Accounting for Certain
Investments in Debt and Equity Securities", for its investment in REMIC
certificates, as opposed to the previously reported amortized cost accounting.
As a result of this change in accounting, the Company earnings increased in 1996
by $6,173,000 ($0.32 per share), decreased in 1995 by $1,656,000 ($0.09 per
share), and increased in 1994 by $1,872,000 ($0.12 per share).
/s/ ERNST & YOUNG LLP
Los Angeles, California
January 13, 1997, except Note 10, as to
which the date is February 1, 1997
31
<PAGE>
LTC PROPERTIES, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(RESTATED)
--------------------------------------------
DECEMBER 31, December 31,
1996 1995
------------------- ------------------
ASSETS (In thousands)
<S> <C> <C>
Real Estate Investments:
Buildings and improvements, net of accumulated depreciation and
amortization: 1996 - $11,640; 1995 - $5,487 $199,591 $104,546
Land 12,347 7,236
Mortgage loans receivable, held for sale, net of allowance for
doubtful accounts: 1996 - $1,000; 1995 - $997 177,262 161,059
REMIC Certificates, at estimated fair value 98,934 67,600
------------------- ------------------
Real estate investments, net 488,134 340,441
Other Assets:
Cash and cash equivalents 3,148 1,434
Restricted cash - 8,300
Debt issue costs, net 4,150 3,331
Interest receivable 2,817 2,093
Prepaid expenses and other assets 2,289 1,779
------------------- ------------------
12,404 16,937
------------------- ------------------
Total assets $500,538 $357,378
=================== ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
Convertible subordinated debentures due 1999 - 2004 $135,828 $ 94,641
Bank borrowings 79,400 48,470
Mortgage loans payable 54,205 16,707
Bonds payable and capital lease obligations 14,039 14,265
Accrued interest 6,015 3,196
Accrued expenses and other liabilities 3,041 2,415
Distributions payable 6,679 5,764
------------------- ------------------
Total liabilities 299,207 185,458
Minority interest 10,528 1,098
Commitments - -
Stockholders' equity:
Preferred stock $0.01 par value: 10,000,000 shares - -
authorized; none issued and outstanding
Common stock $0.01 par value; 40,000,000 shares authorized; shares issued
and outstanding: 1996 - 19,484,208; 1995 - 18,297,254 195 183
Capital in excess of par value 195,297 178,453
Cumulative net income 71,914 43,204
Cumulative distributions (76,603) (51,018)
------------------- ------------------
Total stockholders' equity 190,803 170,822
------------------- ------------------
Total liabilities and stockholders' equity $500,538 $357,378
=================== ==================
</TABLE>
See accompanying notes
32
<PAGE>
LTC PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands except per share amount)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------
(RESTATED)
-----------------------------------------------
1996 1995 1994
-------------- ------------ ------------
Revenues:
<S> <C> <C> <C>
Rental income $20,529 $ 9,935 $ 5,643
Interest income from mortgage loans 17,498 13,116 12,836
Interest income from REMIC Certificates 14,383 10,903 7,923
Interest and other income 2,520 1,615 1,239
-------------- ------------ ------------
Total revenues 54,930 35,569 27,641
Expenses:
Interest expense 20,604 9,407 6,563
Depreciation and amortization 6,298 3,072 1,781
Amortization of Founders' stock 114 221 372
Provision for loan losses - - 550
Minority interest 898 57 -
Operating and other expenses 4,479 2,772 3,037
-------------- ------------ ------------
Total expenses 32,393 15,529 12,303
-------------- ------------ ------------
Other income/(loss):
Unrealized holding gain/(loss) on changes
in estimated fair value of REMIC
Certificates 6,173 (1,656) 667
-------------- ------------ ------------
Income before cumulative effect of
accounting change 28,710 18,384 16,005
Cumulative effect of accounting change - - 1,205
-------------- ------------ ------------
Net income $28,710 $18,384 $17,210
============== ============ ============
Per share amounts:
Income before cumulative effect of
accounting charge $ 1.49 $ 1.01 $ 1.04
Cumulative effect on prior year (year ended
December 31, 1993) of a change in method
of accounting for REMIC Certificates - - 0.07
-------------- ------------ ------------
Net income $ 1.49 $ 1.01 $ 1.11
============== ============ ============
Weighted average shares outstanding 19,257 18,257 15,443
============== ============ ============
</TABLE>
See accompanying notes
33
<PAGE>
LTC PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Restated)
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Capital in Total
Common Stock excess of Cumulative Cumulative Stockholders'
Shares Amount par value Net Income Distributions Equity
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1993 9,737 $ 97 $ 89,698 $ 7,610 $(12,258) $ 85,147
Amortization of Founders' stock - - 372 - - 372
Issuance of common stock, net 4,800 48 59,570 - - 59,618
Conversions of debentures, net of
unamortized issue costs of 3,330 34 32,261 - - 32,295
$1,237
Repurchase of common stock (209) (2) (2,666) - - (2,668)
Net income - - - 17,210 - 17,210
Distributions ($1.10 per share) - - - - (16,881) (16,881)
----------------------------------------------------------------------------------------------
Balances at December 31, 1994 17,658 177 179,235 24,820 (29,139) 175,093
----------------------------------------------------------------------------------------------
Amortization of Founders' stock - - 221 - - 221
Exercise of stock options 2 - 24 - - 24
Conversions of debentures, net of -
unamortized issue costs of 1,936 19 18,924 - 18,943
$651
Repurchase of common stock (1,299) (13) (18,076) - - (18,089)
Repurchase of warrants - - (1,875) - - (1,875)
Net income - - - 18,384 - 18,384
Distributions ($1.21 per share) - - - - (21,879) (21,879)
----------------------------------------------------------------------------------------------
Balances at December 31, 1995 18,297 183 178,453 43,204 (51,018) 170,822
----------------------------------------------------------------------------------------------
Amortization of Founders' stock - - 114 - - 114
Exercise of options 3 - 39 - - 39
Conversions of debentures, net of -
unamortized issue costs of 1,304 13 18,521 - 18,534
$576
Repurchase of common stock (120) (1) (1,830) - - (1,831)
Net income - - - 28,710 - 28,710
Distributions ($1.335 per share) - - - - (25,585) (25,585)
----------------------------------------------------------------------------------------------
Balances at December 31, 1996 $19,484 $195 $195,297 $71,914 $(76,603) $190,803
==============================================================================================
</TABLE>
See accompanying notes
34
<PAGE>
LTC PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Year ended December 31,
----------------------------------------------------------
(Restated)
----------------------------------------------------------
1996 1995 1994
---------------- ----------------- -----------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income $ 28,710 $ 18,384 $ 17,210
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 7,999 4,998 2,956
Unrealized holding gain/(loss) on changes in
estimated fair value of REMIC Certificates (6,173) 1,656 (667)
Cumulative effect of accounting change - - (1,205)
Noncash charges 296 237 226
Net change in other assets and liabilities 2,957 (1,078) 722
--------- --------- ---------
Net cash provided by operating activities 33,789 24,197 19,242
INVESTING ACTIVITIES:
Investment in real estate mortgages (99,440) (101,908) (120,472)
Acquisitions of real estate properties, net (95,285) (23,403) (41,136)
Sale of real estate properties, net 7,589 - -
Deferred facility fees, net 233 251 558
Proceeds from sale of REMIC Certificates, net 86,674 19,216 80,203
Principal payments on real estate mortgages 2,272 2,634 8,550
Restricted cash 8,300 (8,300) -
Principal payments on mortgage loans payable (3,893) (37) -
Other (660) 88 (1,249)
--------- --------- ---------
Net cash used in investing activities (94,210) (111,459) (73,546)
FINANCING ACTIVITIES:
Proceeds from issuance of convertible debenture offerings 60,000 61,500 30,000
Proceeds from issuance of common stock, net 39 - 59,618
Proceeds from issuance of bonds - 8,300 -
Debt issue costs (2,167) (2,409) (1,101)
Repurchase of warrants - (1,875) -
Distributions paid (24,670) (21,237) (14,388)
Borrowings under the lines of credit 219,000 133,220 109,800
Repayment of bank borrowings (188,070) (84,750) (115,800)
Repurchase of common stock (1,831) (18,089) (2,668)
Other (166) (230) 4
--------- --------- ---------
Net cash provided by (used in) financing activities 62,135 74,430 65,465
--------- --------- ---------
(Decrease) increase in cash and cash equivalents 1,714 (12,832) 11,161
Cash and cash equivalents, beginning of year 1,434 14,266 3,105
--------- --------- ---------
Cash and cash equivalents, end of year $ 3,148 $ 1,434 $ 14,266
========= ========= =========
Supplemental disclosure of cash flow information:
Interest paid during the year $ 16,631 $ 7,428 $ 6,909
========= ========= =========
</TABLE>
See accompanying notes
35
<PAGE>
LTC PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. THE COMPANY
Organization and Investments
LTC Properties, Inc. (the "Company") was incorporated on May 12, 1992 in
the State of Maryland and commenced operations on August 25, 1992. The Company,
which is organized as a real estate investment trust, invests in long-term care
facilities through mortgage loans, facility lease transactions and other
investments. As of December 31, 1996, the Company had investments in 248
properties ("the Properties") located in 32 states and operated by 84 health
care providers. The Properties include 248 skilled nursing facilities with a
total of 28,628 beds and 35 assisted living residences with a total of 1,456
units. At December 31, 1996, the Company's real estate investment portfolio
consisted of approximately $223,578,000 (before accumulated depreciation of
$11,640,000) invested in 73 long-term care facilities owned by the Company and
leased to operators, approximately $178,262,000 (before allowance for doubtful
accounts of $1,000,000) invested in 67 mortgage loans secured by 73 skilled
nursing facilities and 11 assisted living facilities ("ALFs") and approximately
$92,545,000 invested in REMIC Certificates secured by 148 skilled nursing
facilities.
Restatement
As previously disclosed in the current and prior years, the Company has
securitized portions of its mortgage loan portfolio and retained a portion of
the resulting REMIC Certificates to hold as long-term investments.
Historically, the Company has accounted for its REMIC Certificate investments at
amortized cost and provided fair value disclosures because of the highly
specialized nature of the collateral underlying the REMIC Certificates, the lack
of marketability of the Certificates and the Company's intent and investment
posture to hold its real estate investments for long-term purposes. Moreover,
the Company believes that the fair value accounting provisions of SFAS 115,
which require the recognition of unrealized gains or losses resulting from
temporary changes in the fair value of originated mortgage-backed securities
(the REMIC Certificates) that are retained by the Company, may reflect equity
or earnings in the Company's financial statements that may not be ultimately
realized and portray a level of liquidity with respect to its REMIC Certificates
that may not exist. Furthermore, the Company believed that the accounting
literature supported the accounting for the REMIC Certificates at amortized
cost. However, after reconsideration following discussions with the Staff of
the Securities and Exchange Commission, the Company decided to adopt the fair
value accounting provisions of SFAS 115 as opposed to the amortized cost
accounting the Company believed applicable under SFAS 115. The fair value
accounting provisions require the recognition in earnings of temporary changes
in the fair values of the Company's REMIC Certificates investments, irrespective
of the Company's reservations about the realizability of such earnings.
Accordingly, the 1996 financial statements, which include the results of
operations for the years ended December 31, 1996, 1995 and 1994, have been
restated to reflect the adjustment to estimated fair value, of the Company's
REMIC Certificate investments. As a result, the Company has increased earnings
by $6,173,000 for the year ended 1996, decreased earnings by $1,656,000 in 1995
and increased earnings by $1,872,000 in 1994, to record the temporary changes in
the fair value of its REMIC Certificate investments during each reporting
period.
36
<PAGE>
LTC PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying consolidated financial statements include the accounts of
the Company, its wholly-owned subsidiaries and controlled partnerships. All
intercompany accounts and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of the consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the consolidated financial
statements and accompanying notes. Actual results could differ from those
estimates.
Revenue Recognition
Interest income on mortgage loans and REMIC Certificates is recognized on
the accrual basis using the effective interest method. The total amount of the
base rent payments from operating leases is accrued as earned over the term of
the lease. Contingent rental income, which is generated by a percentage of
increased revenue over a specified base period revenue of the long-term care
facilities, is recognized as earned.
Cash Equivalents
Cash equivalents consist of highly liquid investments with a maturity of
three months or less and are stated at cost which approximates market.
Land, Buildings and Improvements
Land, buildings and improvements are recorded at cost. Depreciation is
provided on a straight-line basis over the estimated useful lives of the related
assets which range from 7 years for equipment to 40 years for buildings.
Depreciation expense on buildings and improvements, including facilities owned
under capital leases, was $6,214,000, $2,996,000 and $1,740,000 for the years
ended December 31, 1996, 1995 and 1994, respectively.
During the year, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 121, "Accounting the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed of". This pronouncement requires that
impairment losses for such assets be based on the fair value of the asset. In
accordance with this pronouncement, the Company records impairment losses on
long-lived assets when indicators of impairment are present and the undiscounted
cash flows estimated to be generated by these assets are less than their
carrying amounts. Management assesses the potential for impairment on a
property by property basis. The adoption of SFAS No. 121 had no impact on the
Company's consolidated financial statements as no impairment write-downs were
necessary.
37
<PAGE>
LTC PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Mortgage Loans Receivable
The Company maintains a long-term investment interest in its mortgages
either through the direct retention of mortgages or through the retention of
REMIC certificates originated in the Company's securitizations. The Company may,
from time-to-time, securitize a portion of its mortgage loan portfolio in
transactions accounted for as sales, when a securitization provides the Company
with the best available form of raising capital to make additional long-term
investments. Because portions of the Company's mortgage loan portfolio are
anticipated to be securitized in the future, the Company is required to classify
its mortgages as held for sale and account for them at the lower of cost-or-
market under the provisions of SFAS 65. However, historically, the Company has
sold its mortgages solely in connection with its REMIC securitizations and does
not anticipate selling any of its mortgages other than in the course of
completing future securitizations.
The Company considers mortgages that have not yet been securitized to be
"uncommitted mortgages" (as defined under SFAS No. 65) until they have been
accepted for securitization by two independent rating agencies. In determining
the estimated market value for such mortgages, the Company considers estimated
prices and yields, which are based in part on a spread over the applicable U.S.
Treasury Note Rate, sought by qualified institutional buyers of the REMIC
certificates originated in the Company's securitizations. As of December 31,
1996, the estimated market value of Company's mortgage loan investments, all
which are considered uncommitted mortgages, exceeded their amortized cost. The
Company determines the lower of cost or market of its mortgage loans on an
aggregate basis. To the extent that the aggregate cost basis exceeds the
aggregate market value, a valuation allowance is established with the resulting
amount included in the determination of net income. Changes in the valuation
allowance are included in current period earnings.
Hedging of Anticipated Transactions
As further discussed in Notes 4 and 9, the Company has entered into forward
interest rate swap agreements to hedge certain firm commitments and to hedge
anticipated securitization transactions. Firm commitments subject the Company to
interest rate risk to the extent that debt or other fixed rate financing will be
used to fund such investments. In such circumstances, the Company may elect to
hedge such financings thereby reducing its exposure to interest rate risk. The
Company designates such interest rate swaps as hedges when the significant
characteristics and expected terms of the anticipated transaction are identified
and when it is probable that the anticipated transaction will occur. Any gains
or losses on the qualifying hedges are recognized upon the completion of the
hedged transaction.
Federal Income Taxes
No provision has been made for federal income taxes. The Company qualifies
as a real estate investment trust under Sections 856 through 869 of the Internal
Revenue Code of 1986, as amended. As such, the Company is not taxed on its
income which is distributed to stockholders, provided that such distribution is
at least 95 percent of its taxable income. At December 31, 1996, the reported
amount of the Company's net assets and liabilities exceeds the tax bases by
approximately $21,000,000.
For Federal Tax purposes, depreciation is taken on the Company's owned
properties based on the assets' tax bases (which is materially the same as GAAP
book value) calculated, in general, at a rate of 3.6%, using the straight-line
method over a period of 27.5 years.
Earnings and profits, which determine the taxability of dividends to
stockholders, differ from net income for financial statement purposes due to the
treatment required under the Internal Revenue Code of certain interest income
and expense items, depreciable lives and bases of assets.
38
<PAGE>
LTC PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Investments in REMIC Certificates
Income on investments in the Company's REMIC Certificates, including
interest-only Certificates, is recognized based on the effective interest
method using the anticipated yield over the expected life of these investments.
These Certificates are recorded at their estimated fair value at the time of the
transactions and are accounted for under the provisions of SFAS No. 115 (as
described before in "Debt Securities"). Impairment adjustments are made if the
projected yield of a certificate class is less than the risk-free rate of return
on an investment with similar duration. Such projected yields are based on
management's best estimate of future cash flows at each reporting date.
Concentrations of Credit Risk
The Company's credit risks primarily relate to cash and cash equivalents,
the investment in REMIC Certificates, mortgage loans receivable, facility leases
and interest rate swaps. Cash and cash equivalents are primarily held in bank
accounts and overnight investments. The REMIC Certificates relate to
participating interests in real estate mortgage investment conduits ("REMICs")
as discussed in Note 4. The Company's mortgage loans receivable relate primarily
to loans secured by long-term care facilities as discussed in Note 4. The
facility leases relate to the long-term care facilities the Company owns and
leases to third party operators.
The Company's financial instruments, principally its investment in REMIC
Certificates and mortgage loans receivable, are subject to the possibility of
loss of the carrying values as a result of either the failure of other parties
to perform according to their contractual obligations or changes in market
prices which may make the instrument less valuable. The Company obtains various
collateral and other protective rights, and continually monitors these rights,
in order to reduce such possibilities of loss. In addition, the Company
provides reserves for potential losses based upon management's periodic review
of its portfolio.
The REMIC Certificates retained by the Company are subordinate in rank and
right of payment to the certificates sold to third-party investors and as such
would bear the first risk of loss in the event of an impairment to any of the
underlying mortgages. The returns on the Company's investment in REMIC
Certificates are subject to certain uncertainties and contingencies including,
without limitation, the level of prepayments, estimated future credit losses,
prevailing interest rates, and the timing and magnitude of credit losses on the
underlying mortgages collateralizing the securities that are a result of the
general condition of the real estate market or long-term care industry. As
these uncertainties and contingencies are difficult to predict and are subject
to future events that may alter management's estimations and assumptions, no
assurance can be given that current yields will not vary significantly in future
periods. To minimize the impact of prepayments, the mortgage loans underlying
the REMIC Certificates generally prohibit prepayment unless the property is sold
to an unaffiliated third party (with respect to the borrower). Additionally,
management believes it employs conservative underwriting policies and to date
there have been no credit losses on any of the mortgages underlying the
certificates nor are any credit losses currently anticipated.
Certain of the Certificates retained by the Company have designated
certificate principal balances and a stated certificate interest "pass-through"
rate. These Certificates are subject to credit risk to the extent that there
are estimated or realized credit losses on the underlying mortgages, and as such
their
39
<PAGE>
LTC PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
effective yield would be negatively impacted by such losses. The Company
also retains the interest-only (I/O) Certificates, which provide cash flow
(interest-only) payments that result from the difference between the interest
collected from the underlying mortgages and interest paid on all the outstanding
pass-through rate certificates. In addition to the risk from credit losses, the
I/O Certificates are also subject to prepayment risk, in that prepayments of the
underlying mortgages reduce future interest payments of which a portion flows to
the I/O Certificates, thus, reducing their effective yield. The Certificates'
fair values are estimated, in part, based on a spread over the applicable U.S
Treasury rate, and consequently, are inversely affected by increases or
decreases in such interest rates. There is no active market in these securities
from which to readily determine their value. The estimated fair values of both
classes of Certificates are subject to change based on the estimate of future
prepayments and credit losses, as well as fluctuations in interest rates and
market risk.
Net Income Per Share
Computation of net income per share is based on weighted average number of
shares of common stock outstanding and dilutive common stock equivalents
(principally stock options).
Debt Securities
The Company's investment in debt securities is limited to its investments
in REMIC Certificates, which resulted from its past securitizations. It is the
Company's intent to hold its REMIC Certificate investments as long-term
investments. SFAS No. 115 "Accounting for Certain Investments in Debt and Equity
Securities" (SFAS 115), requires that securities retained which resulted from
the origination and securitization of mortgage loans be recorded and accounted
for at fair value, with changes in the securities' fair value reflected as a
separate component of earnings in the current period, irrespective of an
organization's intent or ability to hold such securities or the level of
marketability, if any, with respect to such securities. As such, the Company
reflects the change in the Certificates' estimated fair value as a separate
component of earnings at each reporting period. The Company believes that any
unrealized gains and/or losses reflected in its income statement, as required by
SFAS 115, would not be immediately realizable because of the investment posture
of the Company and the illiquid nature of certain of the Certificates retained
from its securitizations.
In estimating the Certificates' fair value, significant judgment is used
since there is no market for these Certificates. In arriving at such estimates,
management considers factors which affect the Certificates' projected cash flows
including, but not limited to, actual and estimated prepayments, projected
credit losses, if any, on the underlying mortgages, as well as general economic
and regulatory factors affecting the long-term care industry and prevailing
market interest rate conditions. Since many of these factors are difficult to
predict and are beyond the control of the Company's management, changes in the
reported fair values may vary widely and may not be indicative of amounts
immediately realizable if the Company was forced to liquidate any of the
Certificates.
Securitization Transactions
Under the Company's securitization structure (see Note 4), transfers of
mortgage loans to a Real Estate Mortgage Investment Conduit ("REMIC Trust"), a
qualifying special-purpose entity, are accounted for as a sale upon completion
of the transaction with any gain or loss recorded in earnings
40
<PAGE>
LTC PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
at the time of the transaction. In determining a gain or loss, the Company
compares the carrying value of the mortgages sold, net of any transaction costs
incurred and any gains or losses associated with the underlying hedge, to the
cash proceeds and fair market value of any subordinated certificates received.
Subordinated certificates received by the Company are recorded at their
estimated fair value on the date of the transaction. Additionally, under this
structure, the Company has no controlling interest in the REMIC since the
majority of the beneficial ownership interests (in the form of REMIC
certificates) are sold to third-party investors. Consequently, the financial
statements of the REMIC Trust are not consolidated with those of the Company for
financial reporting purposes.
Stock-Based Compensation
In October 1995, the FASB issued SFAS No. 123 "Accounting for Stock-Based
Compensation" (Statement 123) which provides companies an alternative to
accounting for stock-based compensation as prescribed under APB Opinion No. 25
(APB 25). Statement 123 encourages, but does not require companies to recognize
expense for stock-based awards based on their fair value at date of grant.
Statement 123 allows companies to continue to follow existing accounting rules
(intrinsic value method under APB 25) provided that pro-forma disclosures are
made of what net income and earnings per share would have been had the new fair
value method been used. The Company has elected to adopt the disclosure
requirements of Statement 123 but will continue to account for stock-based
compensation under APB 25. Statement 123's disclosure requirements are
applicable to stock-based awards granted in fiscal years beginning after
December 15, 1994.
Mortgage Servicing Rights
Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards No. 122 "Mortgage Servicing Rights" (SFAS 122). SFAS 122
requires the recognition of a separate asset for the right to service mortgage
loans that are acquired through either the purchase or origination of mortgage
loans. The pronouncement also requires the allocation of costs among servicing
rights and the loans, based on their relative fair values. Currently, the
Company serves as the sub-servicer on its REMIC transactions comprising 85 loans
at December 31, 1996. In that capacity, the Company receives fees which are
determined based on prevailing market rates for such services at the time of
each REMIC transaction. Because the fees received for such servicing result in
only adequate compensation after considering the costs to service the loans, the
Company does not recognize a separate asset for servicing rights.
With respect to servicing rights associated with mortgage loans originated
by the Company, the estimated fair value of such rights would be determined
based on the underlying characteristics of the mortgages the Company services in
its REMIC securitizations. Since the fair value of such rights only
sufficiently covers the cost of such servicing, no separate servicing asset is
recognized since it would be immaterial. Therefore, the entire cost of
originating the mortgage loans is allocated to such mortgages.
New Accounting Pronouncement
In June 1996, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 125 "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities" (SFAS 125)
which is effective for transactions occurring after December
41
<PAGE>
LTC PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
31, 1996 and applicable to assets held on or acquired after January 1, 1997.
SFAS 125 amends SFAS No. 115 and supersedes SFAS No. 77 "Reporting by
Transferors for Transfers of Receivables with Recourse." In addition, Statement
125 amends certain other accounting literature which provided guidance with
respect to the Company's REMIC securitization transactions.
SFAS 125 provides specific criteria for determining whether or not a
transfer of assets is a sale or a secured borrowing. In order for sales
accounting to apply, the new criteria specifies that 1) transferred assets must
be isolated from the transferor 2) the transferee obtains the right free of any
conditional constraints to pledge or exchange the assets, or the transferee is a
qualifying special purpose entity of which the holders of the beneficial
interests have the right free of any conditional constraints to pledge or
exchange those interests, and 3) the transferor does not maintain effective
control over the transferred assets. The Company believes that the structure of
its securitizations would continue to meet the sales accounting standards
established in SFAS 125, however, to the extent that recent interpretations of
certain provisions of SFAS 125 would require modification to the REMIC
structure, the Company would make the necessary modifications to allow for its
future securitizations to continue to be accounted for as sales. In addition,
SFAS 125 provides that upon completion of a sale, the assets received and the
liabilities incurred, if any, shall be recognized at their fair values at the
time of the transaction with any gains or losses recognized in earnings.
Management believes that these new provisions will not have a material impact on
the financial position or results of operations of the Company with respect to
any future securitizations.
SFAS 125 also requires the measurement of servicing assets and liabilities
when an entity undertakes an obligation to service financial assets. The
Company currently provides servicing on the loans from its three previous REMIC
securitizations and would expect to do so in any future REMIC. However,
historically, the Company receives only adequate compensation for such servicing
and, as such, has determined that any servicing asset would be immaterial.
Therefore, management believes that this provision of SFAS 125 will not
materially impact the Company's financial position.
Furthermore, SFAS 125 modifies the accounting for certain financial assets
that can contractually be prepaid or otherwise settled in such a way that the
holder would not substantially recover all of its recorded investment to be
accounted for at their fair value under SFAS 115. The Company currently accounts
for its investments in REMIC Certificates at estimated fair value, consequently,
there would be no material effect on the financial position or results of
operations of the Company resulting from the adoption of these provisions of
SFAS 125.
3. SUPPLEMENTAL CASH FLOW INFORMATION
The details of net changes in other assets and liabilities for the years
ended December 31, 1996, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
--------------- --------------- --------------
<S> <C> <C> <C>
(Increase) in interest receivable $ (875) $ (741) $ (462)
(Increase) decrease in prepaid, other assets and allowance (99) (285) 475
Increase (decrease) in accrued interest 2,819 1,224 (755)
Increase (decrease) in accrued expenses and other liabilities 1,112 (1,276) 1,464
------- ------- --------
Net change $ 2,957 $(1,078) $ 722
======= ======= ========
Non-cash investing and financing transactions:
Securitization of mortgage loans for REMIC Certificates $80,962 $ - $127,640
</TABLE>
42
<PAGE>
LTC PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
1996 1995 1994
-------------- ------------- -------------
<S> <C> <C> <C>
Issuance of mortgage loans payable for REMIC Certificates
31,525 - -
Conversion of debentures into common stock 18,813 19,357 33,306
Assumption of mortgage loans payable relating to
acquisitions of real estate properties 9,641 13,407 3,337
Assumption of capital lease obligations - 5,965 -
Minority interest 8,932 1,041 -
</TABLE>
4. REAL ESTATE INVESTMENTS
MORTGAGE LOANS
During 1996, the Company invested $99,440,000 in mortgage loans secured by,
among other things, first mortgages on 31 skilled nursing facilities with a
total of 4,077 beds and five assisted living residences with a total of 177
units and certain borrower guarantees. The mortgage loans, which individually
range from $305,000 to $11,250,000 in principal amount, have an initial weighted
average interest rate of 10.42%, have stated maturities of 5 to 20 years,
generally have 25-year amortization schedules, and provide for certain facility
fees. Most of the loans provide for annual interest rate increases in the
initial rate based upon a specified increase, which range from 10 to 12.5 basis
points. Approximately $9,825,000 of the loans due in 1997 will be paid off once
the Company completes a sale-leaseback transaction for the same amount on
assisted living facilities that are being constructed.
In March 1996, the Company provided non-recourse mortgage loans secured by
long-term care facilities to three of its wholly owned subsidiaries and to
certain partnerships in which the Company was a general partner totaling
$31,525,000. Concurrent with the closing of the loans, the Company completed a
real estate investment conduit ("REMIC") transaction in which loans totaling
$112,487,000, including the $31,525,000 originated in 1996, were exchanged for
mortgage pass-through certificates for an equal amount. See "REMIC
Certificates." See Note 5 - Other Long-term Obligations.
At December 31, 1996, the Company had 67 mortgage loans receivable secured
by first mortgage loans on 73 skilled nursing facilities with a total of 8,672
beds and 11 assisted living residences with 588 units located in 23 states. The
mortgage loans, which have a carrying amount of approximately $177,262,000 at
December 31, 1996, are reflected in the Company's financial statements net of
$1,000,000 of loan loss reserves. The mortgage loans, which individually range
from $302,500 to $11,240,000 in principal amount, have current interest rates
ranging from 9.16% to 13.2% with final payments due from 1997 to 2017. The
minimum future principal payments from the mortgage loans at December 31, 1996
are as follows: $11,617,000 in 1997, $3,035,000 in 1998, $5,095,000 in 1999,
$7,189,000 in 2000, $7,327,000 in 2001 and $143,999,000 thereafter.
43
<PAGE>
LTC PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
REMIC CERTIFICATES
REMIC Structure
The Company has organized itself as a REIT, and, as such, makes its
investments with the intent to hold them for long-term purposes. However, from
time-to-time, securitization transactions may be entered into when a
securitization provides the Company with the best available form of raising
capital to be used to make additional long-term investments, considering the
Company's current and expected future interest rate posture, liquidity and
leverage position, as well as overall economic and financial market trends. As
of December 31, 1996 the Company had completed three REMIC securitizations (the
"1993-1 Pool", the "1994-1 Pool" and the "1996-1 Pool").
The Company structures its securitizations through the creation of a REMIC
in a two-step process. Under this structure, a wholly-owned special-purpose
bankruptcy remote corporation (LTC REMIC Corp.) is formed and the mortgages to
be securitized are transferred to such entity without recourse by the Company.
From this special-purpose corporation, the loans are transferred to a trust (the
"REMIC Trust") and exchanged for commercial mortgage pass-through certificates
(the "REMIC certificates") issued by the REMIC Trust which represent beneficial
ownership interests in the REMIC Trust assets (the mortgages). The certificates
include various levels of senior and subordinated certificate classes, as well
as interest only (I/O) certificates and a minor residual class. The senior
certificates and the residual class (which historically have represented between
66% and 81% of the certificates for the three securitization transactions) are
then sold to outside third-party investors through a private placement under
Rule 144A of the Securities Act of 1933, as amended. The subordinated
certificates, which generally provide a level of credit enhancement to the
senior certificates, along with the cash proceeds from the sale of the senior
certificates are retained by LTC REMIC Corp. as consideration for the initial
transfer of the mortgage loans to the REMIC Trust. Neither the Company nor LTC
REMIC Corp. is obligated to purchase any of the REMIC Trust assets or assume any
liabilities.
General Description of the Certificates
With respect to the Company's REMIC securitizations, the certificates
issued represent beneficial ownership interests in the REMIC Trust and can be
grouped into four categories; senior, subordinated, interest-only
(subordinated), and residuals. The certificates are designated in alphabetical
format (e.g. "A", "B", "C", etc.) with each class of certificates having a later
alphabetical designation being subordinated to each class of certificates having
an earlier alphabetical designation (except for in general, the class R and LR
certificates which share in seniority rank to the class "A" certificates). The
certificates sold to outside third-party investors are referred to herein as the
"Senior certificates" while the certificates transferred to and retained by the
Company as part of the sale proceeds are referred to as the "Subordinated
Certificates." Both classes of these certificates have stated principal
balances, as well as stated interest rates known as the "pass-through rate." In
addition, the I/O certificates have no principal denomination, but rather they
are entitled to interest distributions which typically represent the spread
between the monthly cash interest received from the underlying mortgage
collateral and the monthly amount paid by the REMIC Trust in interest
distributions on the outstanding pass-through certificates. Interest on each
outstanding class of the certificates accrues in arrears at the respective pass-
through rate applicable to the certificates and is
44
<PAGE>
LTC PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
payable monthly. In addition, monthly principal distributions are also made. The
interest and principal distributions are made from the allocated cash flows
received by the REMIC Trust from the underlying mortgages. Payments are made
first to satisfy the certificates' pass-through rate requirements and then
principal distributions are made, both in order of certificate seniority. As
such, to the extent there are defaults or unrecoverable losses on the underlying
mortgages resulting in reduced cash flows, the Subordinated Certificates held by
the Company would bear the first risk of loss. As of December 31, 1996 none of
the three REMIC pools had experienced any realized losses nor had any of the
Company's REMIC Certificate investments been determined to be permanently
impaired.
REMIC Transactions
On March 29, 1996, the Company securitized approximately $112,487,000 of
loans by creating a REMIC which, in turn, issued mortgage pass-through
certificates for the same amount in the form of various classes of certificates
(the "1996-1 Pool"). As part of the securitization, the Company sold
approximately $90,552,000 of certificates to third parties at an effective
interest rate of 7.19%. The Company retained the remaining $21,935,000 face
amount of such Certificates which are effectively subordinated in right of
payment to the certificates sold to third parties. Included in the REMIC
Certificates are interest-only certificates which have no face amount but are
entitled to receive cash flows designated as interest. The net proceeds from
the REMIC transaction were used to repay borrowings outstanding under the
Company's lines of credit. The mortgage loans represented by the certificates
consisted of 34 mortgage loans, including the loans provided to the Company's
wholly owned subsidiaries and to the limited partnerships totaling $31,525,000,
and were secured by 55 skilled nursing facilities in 17 states. The mortgage
loans in the REMIC pool had an initial weighted average mortgage interest rate
of 10.69% and a weighted average remaining term to stated maturity of
approximately 107 months. Concurrently with the closing of the REMIC
transaction, the Company's interest rate swap agreement entered into in May 1995
was terminated at a cost of approximately $1,500,000 and was included as a
component of the transactions cost in the determination of the fair value of the
assets received in the transaction.
During 1993 and 1994, the Company securitized approximately $242,340,000 of
loans by creating REMICs which, in turn, issued mortgage pass-through
certificates for the same amount in the form of various classes of certificates
(the 1993-1 and 1994-1 Pools, respectively). As part of these securitizations,
the Company sold approximately $158,664,000 of certificates to third parties
(the "Senior certificates") and retained $83,676,000 face amount of the
Certificates.
REMIC Certificates
As of December 31, 1996 the outstanding certificate principal balance and
the weighted average pass-through rate for the Senior certificates (all held by
outside third parties) in the 1993-1, 1994-1 and 1996-1 REMIC pools were
$59,223,000, $47,649,000, and $85,338,000, and 7.5%, 9.2% and 7.2%,
respectively. As of December 31, 1996, the estimated fair value of the
Subordinated Certificates held by the Company in the 1993-1, 1994-1 and 1996-1
REMIC pools were $29,461,000, $37,236,000 and $32,237,000, respectively.
As of December 31, 1995 the outstanding certificate principal balance and
the weighted average pass-through rate for the Senior certificates (all held by
outside third parties) in the 1993-1 and 1994-1
45
<PAGE>
LTC PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
REMIC pools were $70,128,000 and $72,858,000, and 7.5% and 9.1%, respectively.
As of December 31, 1995, the estimated fair value of the Subordinated
Certificates held by the Company in the 1993-1 and 1994-1 REMIC pools were
$31,251,000 and $36,349,000, respectively.
For the years ended December 31, 1996, 1995 and 1994, income recorded by
the Company under the effective interest method for its investments in the
Subordinated REMIC Certificates for the 1993-1, 1994-1 and 1996-1 REMIC pools
was $5,603,000, $5,118,000 and $3,662,000 in 1996, $5,628,000, $5,275,000 and $0
in 1995, and $6,767,000, $1,156,000and $0 in 1994, respectively.
As part of the REMIC transaction discussed above, the Company serves as the
sub-servicer and, in such capacity, is responsible for performing substantially
all of the servicing duties relating to the mortgage loans represented by the
certificates. The Company receives monthly fees equal to a fixed percentage of
the then outstanding mortgage loans in the REMIC which, in management's opinion,
represent currently prevailing terms for similar transactions. In addition, the
Company will act as the special servicer to restructure any mortgage loans in
the REMIC that are in default. At December 31, 1996, all of the payments
currently due on its REMIC Certificates were received.
INTEREST RATE SWAP AGREEMENTS
In November 1996, the Company entered into a one-year forward ten-year
interest rate swap agreement (the "November 1996 Agreement") to hedge a
$50,180,000 firm commitment to purchase assisted living facilities. The terms
of the commitment provide for an initial lease term of twelve years and an lease
rate of 9.90% on each facility acquired. The Company will finance this
commitment with fixed rate financing, and as such, has utilized an interest rate
swap to "lock-in" the rate at which such financing will be obtained. Interest
rate swaps are contractual agreements between the Company and third parties to
exchange fixed and floating interest payments periodically without the exchange
of the underlying principal amounts (notional amounts). Under the November 1996
Agreement, the Company will be credited with interest at the three-month LIBOR
and will incur interest at a fixed rate of 6.835% on a $40,000,000 notional
amount beginning on November 7, 1997. The November 1996 Agreement will be
terminated on or before November 7, 1998 which is the latest date on which the
Company expects to fully fund the commitment and have long-term financing in
place. At December 31, 1996, the Company had an unrealized gain of $251,000
under the November 1996 Agreement. (See Note 9).
In September 1995, the Company entered into a seven-year forward interest
rate swap agreement (the "September 1995 Agreement") to hedge a securitization
which is expected to be completed by the end of 1997. As of December 31, 1996,
the Company believes that it is probable that the securitization transaction
will occur as scheduled. Under the September 1995 Agreement, beginning on March
31, 1997 and continuing semi-annually thereafter, the Company is to be credited
interest at the six month LIBOR and incur interest at a fixed rate of 6.64% on a
notional amount of $60,000,000 which is being accounted for as a hedge. This
effectively "locked-in" the net interest margin on $60,000,000 principal amount
of senior certificates the Company anticipates will be sold in the
securitization transaction. Concurrent with the closing of the hedged
transaction, any gains and losses associated with the interest rate swap will be
included as a component of the proceeds of the transaction. The September 1995
Agreement will be terminated at the earlier of (i) an anticipated securitization
transaction to be completed during the second half of 1997 or (ii) November 17,
1997. At December 31, 1996, the Company had an unrealized loss of $253,000 under
the September 1995 Agreement.
46
<PAGE>
LTC PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
At December 31, 1996, the total notional amount of the interest rate swap
agreements with off-balance sheet risk was $100,000,000.
REAL ESTATE PROPERTIES AND LEASE COMMITMENTS
During 1996, the Company acquired for approximately $45,345,000 22 assisted
living facilities ("ALFs") in Alabama, Idaho, Oklahoma, Oregon, Texas and
Washington with a total of 820 units. Eighteen of these ALFs were purchased for
a total of $38,495,000 and have been leased to Assisted Living Concepts, Inc.
("ALC") for a total annual rent of approximately $3,758,000 (subject to annual
increases) pursuant to long-term non-cancelable agreements. Included in the
leases to ALC were five ALFs in Washington which were purchased for $11,280,000
and had been financed by the Company through the issuance of $8,300,000 of
multi-family tax-exempt revenue bonds in December 1995 that have a total cost of
funds of approximately 5.9%. As of December 31, 1996, the Company had acquired
all five of the Washington ALFs and had leased them to ALC generating an initial
annual rent of approximately $948,000. The Company also acquired for
$14,450,000 four skilled nursing facilities in Alabama, Georgia and Tennessee
with a total of 472 beds. See Note 5- Other Long-term obligations.
During the twelve months ended December 31, 1996, six newly formed limited
partnerships, of which the Company, through certain of its subsidiaries, is the
general partner, acquired 16 skilled nursing facilities in Alabama, Arizona,
Iowa and Texas for a total of approximately $54,063,000. These facilities were
purchased subject to mortgage loans of approximately $9,641,000. Under the
partnership agreements, the Company has guaranteed payment of a 10% preferred
return to the holders of the $8,932,000 in limited partnership interests. Under
certain circumstances, the limited partnership interests can be exchanged, at
the option of the holders, into 628,511 shares of the Company's common stock at
exercise prices ranging from $13.00 to $15.00 commencing in January and July
1997. The mortgage loans of $9,641,000 assumed by the Company have an initial
average interest rate of 11.64%, are due in 2002-2005 and are currently owned by
REMICs formed by the Company in 1993 and 1994. In conjunction with these
REMICs, the Company sold senior certificates to third parties in 1993 and 1994
at a blended interest rate of approximately 7.1% and 8.9%, respectively, and
retained the remaining certificates. See Note 5- Other Long-term obligations.
The Company leases its owned long-term facilities under operating leases
generally with an initial term of ten to twelve years. Many of the leases
contain renewal options and some contain options that permit the operators to
purchase the facilities. The leases provide for a fixed minimum base rent
during the initial and renewal periods. Most of the leases provide for annual
fixed rent increases or increases based on increases in consumer price indices
over the term of the lease. Certain of the Company's leases provide for
additional rent through participation in incremental revenues generated by the
facilities, over a defined base period, effective at various times during the
term of the lease. Each lease is a triple net lease which requires the lessee
to provide for the payment of all taxes, insurance, maintenance and other costs
of the facilities by the lessee. Contingent rent income for the years ended
December 31, 1996, 1995 and 1994 was immaterial.
47
<PAGE>
LTC PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Future minimum base rents receivable under the remaining non-cancelable
terms of operating leases are as follows (dollars in thousands):
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
------------------------
<S> <C>
1997 $ 24,520
1998 24,083
1999 24,503
2000 23,553
2001 22,893
Thereafter 100,103
</TABLE>
5. DEBT OBLIGATIONS
SHORT TERM BORROWINGS
The Company has a repurchase agreement with an institution (the "Repurchase
Agreement") whereby it may borrow up to $84,000,000 for general corporate and
real estate investment purposes at LIBOR plus 2.0% subject to annual renewal.
Under the Repurchase Agreement, the Company may borrow an amount based on the
Company's existing mortgage loans with no additional commitment or unused fees.
At December 31, 1996, there were $38,000,000 outstanding borrowings under the
Repurchase Agreement. Under the terms of the agreement, borrowings are secured
by the mortgage loans of the Company and mature on or before November 15, 1997.
However, the Company has historically been able to renew the Repurchase
Agreement annually.
The Company entered into a $25,000,000 unsecured revolving credit agreement
(the "Credit Agreement" as amended) with certain banks to provide the Company
with short term borrowings. In May 1996, the terms of the Credit Agreement were
amended, including certain financial covenants, to increase the amount of the
line to $45,000,000 and to extend the expiration date from December 31, 1996 to
May 31, 1998. Revolving credit borrowings, at the option of the Company,
accrued interest at the agent bank's base rate or LIBOR plus 1.50%. Under the
Credit Agreement, the Company pays a commitment fee equal to .25% per annum of
the average unused commitment, an annual agency fee of $25,000 plus a one-time
commitment fee. Borrowings under the Credit Agreement must be repaid annually
with a 30-day "zero-balance period." The Credit Agreement contains, among other
things, certain financial covenants including an interest coverage ratio, ratio
of total liabilities to net worth, and ratio of funded debt to total net worth.
At December 31, 1996, the Company had $41,400,000 outstanding under the Credit
Agreement bearing an interest rate of approximately 7.2%.
48
<PAGE>
LTC PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
CONVERTIBLE SUBORDINATED DEBENTURES
The following is a summary of Convertible Subordinated Debentures
outstanding at December 31, 1996 and 1995:
<TABLE>
<CAPTION>
Conversion
Issue Date Interest Rate Maturity Price per share 1996 1995
- ------------- ----------------- ----------------- --------------- ------------------ ---------------
<S> <C> <C> <C> <C> <C>
1992 9.75% June 2004 $10.00 $ 843,000 $ 3,141,000
1994 8.50% January 2000 $15.00 22,023,000 30,000,000
1995 8.50% January 2001 $15.50 45,157,000 51,500,000
1995 8.25% January 1999 $15.50 10,000,000 10,000,000
1996 7.75% January 2002 $16.50 27,840,000 -
1996 8.25% July 2001 $17.25 29,965,000 -
------------ -----------
$135,828,000 $94,641,000
============ ===========
</TABLE>
The 9.75% debentures due 2004 are redeemable by the Company at any time at
100% of the principal plus accrued interest. During the year ended December 31,
1996 and 1995, $2,298,000 and $19,357,000 in principal amount of such debentures
converted into 229,800 and 1,935,700 shares of common stock, respectively.
The 8.5% debentures due 2000 are not redeemable by the Company prior to
January 1, 1998. During the year ended December 31, 1996, $7,977,000 of
debentures converted into 531,794 shares of common stock. No debentures were
converted in 1995.
The 8.5% debentures due 2001 and the 8.25% debentures due 1999 are not
redeemable by the Company. During the year ended December 31, 1996, $6,343,000
of debentures converted into 409,224 shares of common stock. No debentures were
converted in 1995.
On February 5, 1996, the Company sold, through a public offering, $30,000,000
aggregate principal amount of 7.75% Convertible Subordinated Debentures due
January 1, 2002. The debentures are convertible at any time prior to maturity
into shares of the Company's common stock at a conversion price of $16.50 per
share, subject to adjustments under certain circumstances. The debentures are
not redeemable by the Company prior to January 1, 2001. The net proceeds were
used to repay borrowings outstanding under the Company's lines of credit.
During the year ended December 31, 1996, $2,160,000 of debentures converted into
130,908 shares of common stock.
On March 15, 1996, the Company filed a shelf-registration statement with the
Securities and Exchange Commission covering up to $125,000,000 of debt and
equity securities to be sold from time to time in the future. The registration
statement was declared effective on April 4, 1996. Pursuant to the shelf
registration, the Company, in August 1996, completed the sale of $30,000,000 of
8.25% Convertible Subordinated Debentures due 2001. The debentures are
convertible into shares of the Company's common stock at a price of $17.25 and
are not redeemable by the Company. Net proceeds from the offering were used to
repay short-term borrowings. During the year ended December 31, 1996, $35,000
of debentures converted into 2,028 shares of common stock.
49
<PAGE>
LTC PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
OTHER LONG-TERM OBLIGATIONS
The following information relates to other long-term obligations as of December
31:
<TABLE>
<CAPTION>
1996 1995
---------------- ---------------
<S> <C> <C>
Mortgage loans payable, interest rates from 9.25%
to 12.00%, maturing 2002 to 2006 $54,205,000 $16,707,000
Multi-family tax-exempt revenue bonds, variable interest (4.35%
at 12/31/96), maturing at various dates to 2015 8,300,000 8,300,000
Obligations under capital leases, effective interest rates
---------------- -----------
from 7.49% to 7.92%, maturing at various dates to 2013 5,739,000 5,965,000
----------- -----------
Totals $68,244,000 $30,972,000
=========== ===========
</TABLE>
In 1996, the Company provided non-recourse mortgage loans to three of its
wholly owned subsidiaries and to certain newly formed limited partnerships in
which the Company is a general partner totaling $31,525,000. During 1996, the
Company acquired, through the newly formed limited partnerships, 16 skilled
nursing facilities. These facilities were purchased subject to mortgage loans
of approximately $9,641,000. Also during 1996, the Company paid off one of its
outstanding mortgage loans totaling $3,331,000.
Aggregate maturities of other long-term obligations, including capitalized
leases, are as follows: $630,000 in 1997, $931,000 in 1998, $1,009,000 in 1999,
$1,098,000 in 2000, $1,197,000 in 2001 and $63,379,000 thereafter. These
obligations are secured by 31 long-term care facilities with a total net book
value of $81,915,000. Five of the mortgage loans provide for annual increases
in the interest rate in an amount equal to 10 basis points with the interest
rates capped at 12%.
6. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following estimated fair value amounts have been determined using
available market information and other valuation methods. However, considerable
judgment is required to interpret market data and, therefore, the estimates
presented below are not necessarily indicative of the amounts the Company could
realize in a current market.
Mortgage loans receivable are estimated by discounting future cash flow using
the current rates at which similar loans would be made to borrowers with similar
credit ratings and for the same remaining maturities. At December 31, 1996 and
1995, the fair value of real estate mortgages amounted to approximately
$189,483,000 and $166,758,000, respectively. The fair value of the Company's
REMIC Certificates as of December 31, 1996 and 1995 was estimated at
approximately $98,934,000 and $67,600,000, respectively, based upon expected
cash flows discounted at a market interest rate, adjusted to reflect the
inherent risk of prepayment and credit losses on an investment with similar
duration. At December 31, 1996 and 1995, the September 1995 interest rate swap
had an unrealized loss of $253,000 and an unrealized gain of $2,424,000,
respectively. The November 1996 interest rate swap had an unrealized gain of
$251,000, based on valuations from an investment bank. Based on the quoted
market price of the Company's common stock and the conversion price of the
convertible debentures, the fair value of the debentures was estimated at
$159,365,000 at December 31, 1996 and $97,584,000 as of December 31, 1995.
50
<PAGE>
LTC PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. STOCKHOLDERS' EQUITY
REPURCHASE OF COMMON STOCK
During 1996, the Company repurchased and retired 120,000 shares of common
stock for an aggregate price of approximately $1,831,000.
OPTION PLAN
The Company has a Stock Option Plan (the "Plan") in which options may be
granted as either incentive or nonqualified options. Incentive options may be
granted only to officers and employees of the Company, while nonqualified
options may be granted to directors, officers, consultants, and other key
persons who provide services to the Company. In 1995, the Plan was amended
("Amended and Restated Option Plan) to provide for issuance of restricted shares
to officers, employees, directors and other key persons. Under the Amended and
Restated Plan, options vest over two to five years and are exercisable within
seven years from the date of vesting. In general, each option shall expire on
the date specified in the option agreement, but not later than the tenth
anniversary of the date on which the option was granted.
The following summarizes transactions regarding the nonqualified options for
the years ended December 31, 1994, 1995 and 1996:
<TABLE>
<CAPTION>
Shares Option Price Per Share ($)
---------------- ------------------------------
<S> <C> <C>
Outstanding at December 31, 1993 624,000 10.000 to 12.250
Granted 215,500 12.200 to 13.250
Exercised -
Canceled - -
-------
Outstanding at December 31, 1994 839,500 10.000 to 13.250
Granted 27,000 12.000 to 12.250
Exercised (2,000) 12.250
Canceled (3,000) 12.250
-------
Outstanding at December 31, 1995 861,500 10.000 to 13.250
Granted 18,000 15.125
Exercised (3,200) 12.000 to 12.250
Canceled (3,000) 12.250
-------
Outstanding at December 31, 1996 873,300 10.000 to 15.125
=======
Exercisable at December 31, 1994 170,500 10.000 to 12.250
Exercisable at December 31, 1995 272,333 10.000 to 13.250
Exercisable at December 31, 1996 436,466 10.000 to 13.250
Available for grant at December 31, 1994 557,000
Available for grant at December 31, 1995 533,000
Available for grant at December 31, 1996 358,000
</TABLE>
In 1996, the Company's Board of Directors approved the issuance of 160,000
shares of restricted stock to certain employees and non-employee directors
pursuant to the Company's Amended and Restated Option Plan. The restricted
shares will vest over five years, beginning January 1998.
51
<PAGE>
LTC PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Dividends are payable on the restricted shares to the extent and on the same
date as dividends are paid on all of the Company's common stock.
In 1996, the Company adopted the disclosure requirement provision of SFAS 123
in accounting for stock-based compensation issued to employees. As of December
31, 1996 and 1995, there were 44,000 and 27,000 options outstanding,
respectively, that are subject to SFAS 123 disclosure requirements. The fair
value of these options was estimated utilizing the Black-Scholes valuation model
using the applicable assumptions as of each respective grant date. The
significant assumptions used in the Black-Scholes model include the expected
life and volatility of the options and the risk-free interest rate at the grant
date. In determining the estimated fair values for the options granted in 1996
and 1995, the weighted average expected life assumption was seven years,
respectively, the weighted average volatility assumptions used were 0.15 and
0.16, respectively, and weighted average risk-free interest rate assumption was
6.6%, respectively. Based on the results of the estimates, the weighted-average
fair value of the options granted was estimated to be $0.63 in 1996 and $0.62 in
1995. Management determined that there was no material effect on pro forma net
income or earnings per share for the years ended December 31, 1996 and 1995.
The weighted average exercise price of the options were $13.55 and $12.45 and
the weighted average remaining contractual lives were 7.7 and 8.3 years as of
December 31, 1996 and 1995, respectively.
FOUNDERS' STOCK
In May 1992, prior to the completion of the initial public offering, the
Company issued 300,000 shares of common stock, subject to certain restrictions
or forfeitures, to the Founders of the Company. The market value of shares
awarded (estimated at $5.00 per share) has been recorded as unearned stock grant
compensation and has been recorded as a reduction in capital in excess of par
value. The unearned compensation is being charged to expense over a vesting
period ranging from two to five years.
For the years ended December 31, 1996, 1995 and 1994, the Company recorded an
expense totaling $114,000, $221,000, and $372,000, respectively.
8. DISTRIBUTIONS
The Company must distribute at least 95% of its taxable income in order to
continue to qualify as a real estate investment trust. Distributions in a given
year may exceed the Company's earnings and profits due to non-cash expenses such
as depreciation and amortization. Under special tax rules for real estate
investment trusts, dividends declared in the last quarter of the calendar year
and paid by January 31 of the following year are treated as paid on December 31
of the year declared. Distributions per share are broken down according to the
following categories for income tax purposes:
<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Ordinary income $1.228 $1.05 $1.10
Non-taxable distribution 0.107 .16 -
------ ----- -----
Total $1.335 $1.21 $1.10
====== ===== =====
</TABLE>
52
<PAGE>
LTC PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. Transactions with Assisted Living Concepts, Inc.
In 1996, the Company's Board of Directors authorized an increase in the
Company's investment in assisted living facilities ("ALFs") from 10% to 20% of
its adjusted gross real estate investment portfolio (adjusted to include the
mortgage loans to third parties underlying the investment in REMIC
Certificates). In addition, the Board of Directors also authorized an increase
in the Company's investment in properties operated by Assisted Living Concepts,
Inc. ("ALC"), an owner, operator and developer of ALFs whose securities are
listed on the American Stock Exchange, from 5% to 10% of its adjusted gross real
estate investment portfolio (which was approximately $626,516,000 as of December
31, 1996). Currently, two of the Company's executive officers serve as members
of the Board of Directors of ALC. As of December 31, 1996, three executive
officers of the Company own approximately 5.5% of ALC's common stock. The
Company has discussed with its Board of Directors and anticipates increasing the
percentage of its adjusted gross real estate investment portfolio that can be
invested in ALFs and properties operated by ALC to 30% and 15%, respectively,
during 1997. At December 31, 1996, the Company had investments in ALFs and
properties operated by ALC of approximately 10.64% and 6.48%, respectively of
the Company's total adjusted gross real estate investment portfolio.
In July 1996, in connection with obtaining a $50,180,000 firm commitment to
purchase assisted living facilities through sale leaseback transactions with
ALC, the Company agreed to sell back four ALFs it acquired during 1996 in Texas
to ALC for approximately $7,589,000. There was no gain or loss recognized on
the sale, however, the Company received an administration fee of approximately
$214,000 in conjunction with the sale of the four ALF facilities. In connection
with the commitment, the Company entered into a one-year forward ten-year
interest rate swap agreement in November 1996 to hedge the firm commitment to
purchase the assisted living facilities. The terms of the commitment provide
for an initial lease term of twelve years and an lease rate of 9.90% on each
facility acquired. The Company will finance this commitment with fixed rate
financing, and as such, has utilized an interest rate swap to "lock-in" the rate
at which such financing will be obtained. Interest rate swaps are contractual
agreements between the Company and third parties to exchange fixed and floating
interest payments periodically without the exchange of the underlying principal
amounts (notional amounts). Under the November 1996 Agreement, the Company will
be credited with interest at the three-month LIBOR and will incur interest at a
fixed rate of 6.835% on a $40,000,000 notional amount beginning on November 7,
1997. The November 1996 Agreement will be terminated on or before November 7,
1998 which is the latest date on which the Company expects to fully fund the
commitment and have long-term financing in place. At December 31, 1996, the
Company had an unrealized gain of $251,000 under the November 1996 Agreement.
10. SUBSEQUENT EVENTS
On January 15, 1997, the Company sold, through a public offering, 1,000,000
shares of common stock at $17.75 per share. Of the total net proceeds,
$17,300,000 was used to pay borrowings under the Company's unsecured line of
credit.
During January 1997, the Company provided mortgage loans totaling
approximately $18,530,000 and acquired one skilled nursing facility for
$2,556,000. As of February 1, 1997, the Company had outstanding investment
commitments totaling $82,790,000, consisting of approximately $22,650,000 in
commitments to make mortgage loans and commitments for the acquisition of one
nursing and 25
53
<PAGE>
LTC PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
assisted living facilities for an aggregate purchase price of approximately
$60,140,000, including the remaining $35,330,000 commitment to Assisted Living
Concepts, Inc. discussed in Note 8. The Company expects to fund substantially
all of these commitments by the end of 1997.
During January 1997, an additional $26,358,000 in principal amount of
debentures converted into 1,614,153 shares of the Company's common stock.
11. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The following quarterly financial data summarizes the unaudited quarterly
results for the years ended December 31, 1996 and 1995:
<TABLE>
<CAPTION>
QUARTER ENDED (RESTATED)
---------------------------------------------------------------------------------
March 31 June 30 September 30 DECEMBER 31
--------------- -------------- -------------------- --------------------
1996 (In thousands, except per share amounts)
- ----
<S> <C> <C> <C> <C>
Revenues $12,363 $12,920 $14,292 $15,355
Net income 11,831 4,906 5,636 6,337
Net income per share 0.63 0.26 0.29 0.32
Dividends per share 0.315 0.34 0.34 0.34
</TABLE>
<TABLE>
<CAPTION>
QUARTER ENDED (1)
---------------------------------------------------------------------------------
1995 March 31 June 30 September 30 DECEMBER 31
- ---- -------------------- ------------ -------------------- --------------------
<S> <C> <C> <C> <C>
(In thousands, except per share amounts)
Revenues $7,505 $8,560 $9,232 $10,272
Net income 4,718 5,199 4,971 5,152
Net income per share 0.26 0.29 0.27 0.28
Dividends per share 0.29 0.29 0.315 0.315
</TABLE>
(1) The Company has restated its results of operations for the year ended
December 31, 1995 (See Note 1) which reflects a revision in reported net
income to $18,384,000 from the previously reported amount of $20,040,000.
Earnings per share has been revised to $1.01 per share from $1.10 per share.
The quarterly information presented above for 1995 has not been revised to
reflect the restatement because the quarterly data necessary to reflect the
restatement is not available.
54
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ACCOUNTING AND
FINANCIAL DISCLOSURE
Not Applicable.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
Incorporated herein by reference from the Company's definitive proxy statement
for the Annual Meeting of Stockholders to be held May 19, 1997, to be filed
pursuant to Regulation 14A.
ITEM 11. EXECUTIVE COMPENSATION
Incorporated herein by reference from the Company's definitive proxy statement
for the Annual Meeting of Stockholders to be held May 19, 1997, to be filed
pursuant to Regulation 14A.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Incorporated herein by reference from the Company's definitive proxy statement
for the Annual Meeting of Stockholders to be held May 19, 1997, to be filed
pursuant to Regulation 14A.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated herein by reference from the Company's definitive proxy statement
for the Annual Meeting of Stockholders to be held May 19, 1997, to be filed
pursuant to Regulation 14A.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K.
(a) 1 and 2. Consolidated Financial Statements and Consolidated Financial
Statement Schedules
The consolidated financial statements and consolidated financial statement
schedules listed in the accompanying index to consolidated financial statements
and consolidated financial statement schedules are filed as part of this annual
report.
3. Exhibits
The exhibits listed in the accompanying index to exhibits are filed as part
of this annual report.
(b) Reports on Form 8-K
A report on Form 8-K was filed on January 30, 1996 reporting the Company's
financial results for the year ended December 31, 1995.
55
<PAGE>
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
(ITEM 14(a))
<TABLE>
<CAPTION>
Page
----------
1. Financial Statements:
--------------------
<S> <C>
Report of Independent Auditors.................................................... 31
Consolidated Balance Sheets at December 31, 1996 and 1995......................... 32
Consolidated Statements of Income for the years ended December 31, 1996, 33
1995 and 1994...............................................................
Consolidated Statements of Stockholders' Equity for the years ended 34
December 31, 1996, 1995 and 1994............................................
Consolidated Statements of Cash Flows for the years ended December 31, 35
1996, 1995 and 1994..............................................................
Notes to Consolidated Financial Statements........................................ 36
2. Financial Statement Schedules:
VIII. Valuation and Qualifying Accounts........................................ 58
XI. Real Estate and Accumulated Depreciation.................................... 59
XII. Mortgage Loans on Real Estate............................................... 62
</TABLE>
All other schedules have been omitted since the required information is not
present or not present in amounts sufficient to require submission of the
schedule.
56
<PAGE>
LTC PROPERTIES, INC.
SCHEDULE VIII
VALUATION AND QUALIFYING ACCOUNTS
December 31, 1996
(In thousands)
<TABLE>
<CAPTION>
Additions
Balance ---------------------------------- Balance
at Beginning Charged to Charged to at end
Description of period Operations other accounts Deductions of period
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1994
Allowance for doubtful
accounts $447 550 - - $997
======== ======== ======== ======== ========
1995
Allowance for doubtful
accounts $997 - - - $997
======== ======== ======== ======== ========
1996
Allowance for doubtful
accounts $997 3 - - $1,000
======== ======== ======== ======== ========
</TABLE>
57
<PAGE>
LTC PROPERTIES, INC.
SCHEDULE XI
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1996
<TABLE>
<CAPTION>
Initial Cost to Gross Amount at which Carried
Company At Close of period
---------------------------- Cost Capitalized -----------------------------------------
Building and Subsequent to Building and
Description Encumbrances Land Improvements Acquisition Land Improvements Total (1)
- ------------- -------------------- ----------------------------------------------- -----------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Long-term care nursing facilities:
Nursing Homes:
Demopolis, AL $ 10,668,066.99 (3) $ 70,786 $ 2,141,276 $ - $ 70,786 $ 2,141,276 $ 2,212,062
Fort Payne, AL (3) 37,178 3,587,724 - 37,178 3,587,724 3,624,903
Jackson, AL (3) 63,641 2,620,000 - 63,641 2,620,000 2,683,640
Madison, AL (3) 30,083 2,327,808 - 30,083 2,327,808 2,357,891
Phoenix, AL (3) 59,089 2,122,670 - 59,089 2,122,670 2,181,760
Phoenix, AZ 7,797,583.12 431,750 6,764,084 - 431,750 6,764,084 7,195,834
Tucson, AZ 6,592,231.54 145,614 3,931,592 - 145,614 3,931,592 4,077,206
East Whittier, CA - 169,929 1,741,775 - 169,929 1,741,775 1,911,704
West Whittier, CA - 726,448 1,185,257 - 726,448 1,185,257 1,911,705
Yuba City, CA - 521,083 3,033,975 - 521,083 3,033,975 3,555,058
Bradenton, FL - 330,498 2,720,250 - 330,498 2,720,250 3,050,748
Clearwater, FL - 454,114 2,902,381 - 454,114 2,902,381 3,356,495
Crestview, FL - 140,000 2,305,979 - 140,000 2,305,979 2,445,979
San Destin, FL - 175,155 3,874,653 - 175,155 3,874,653 4,049,808
Gulf Breeze, FL - 600,000 6,020,146 - 600,000 6,020,146 6,620,146
Lecanto, FL - 350,795 2,664,455 2,251,990 350,795 4,916,445 5,267,240
Pensacola, FL - 190,000 4,295,297 - 190,000 4,295,297 4,485,297
Pensacola, FL 230,000 4,663,032 - 230,000 4,663,032 4,893,032
Starke, FL - 113,000 4,782,546 - 113,000 4,782,546 4,895,546
Chicago Heights, IL - 220,905 6,406,254 - 220,905 6,406,254 6,627,159
Alamagordo, NM - 314,215 3,567,268 - 314,215 3,567,268 3,881,483
Roswell, NM - 85,000 2,932,213 - 85,000 2,932,213 3,017,213
Great Falls, MT 4,335,297.45 397,217 3,433,391 397,217 3,433,391 3,830,608
Rusk, TX - 34,174 2,399,045 - 34,174 2,399,045 2,433,219
Chesapeake, VA - 372,667 3,298,218 372,667 3,298,218 3,670,885
Richmond, VA - 372,667 3,298,218 - 372,667 3,298,218 3,670,885
Tappahannock, VA - 372,667 3,298,218 - 372,667 3,298,218 3,670,885
Toppanish, WA 2,628,853 (4) 132,152 2,653,758 - 132,152 2,653,758 2,785,910
Vancouver, WA (4) 60,000 3,032,720 - 60,000 3,032,720 3,092,720
Jefferson, IA 10,554,832 (5) 36,272 1,932,778 - 36,272 1,932,778 1,969,050
Houston, TX 201,744 4,457,951 - 201,744 4,457,951 4,659,695
Houston, TX 361,655 3,771,839 - 361,655 3,771,839 4,133,493
Montgomery, AL 3,939,977 (6) 143,724 5,425,566 - 143,724 5,425,566 5,569,290
Carroll, IA (5) 60,016 1,020,271 - 60,016 1,020,271 1,080,287
Houston, TX 201,744 4,457,951 - 201,744 4,457,951 4,659,695
Woodbury, TN 100,000 2,900,000 - 100,000 2,900,000 3,000,000
Whiteright, TX 1,126,791 100,000 2,922,653 - 100,000 2,922,653 3,022,653
Granger, IA (5) 92,725 1,325,421 - 92,725 1,325,421 1,418,146
Bedford, TX (5) 344,683 3,195,303 - 344,683 3,195,303 3,539,985
Midland, TX 2,041,265 32,446 2,285,110 - 32,446 2,285,110 2,317,556
Tiptonville, TN 100,000 2,450,000 - 100,000 2,450,000 2,550,000
Gardendale, AL 83,660 6,316,340 - 83,660 6,316,340 6,400,000
Polk City, IA (5) 88,238 1,351,428 - 88,238 1,351,428 1,439,666
</TABLE>
<TABLE>
<CAPTION>
Accum. Orig. Construc-
Deprec tion/renovation Date
Description (2) (3) Date Acquired
- ------------- ---------- ------------- ----------
<S> <C> <C> <C>
Long-term care nursing facilities:
Nursing Homes:
Demopolis, AL $112,246 1972 Jun. 1995
Fort Payne, AL 202,835 1967/1973 Jun. 1995
Jackson, AL 133,842 1964 Jun. 1995
Madison, AL 127,640 1964/1974 Jun. 1995
Phoenix, AL 119,802 1969 Jun. 1995
Phoenix, AZ 655,290 1985/1992 May 1994
Tucson, AZ 504,450 1985 Mar. 1993
East Whittier, CA 161,433 1964 Sep. 1994
West Whittier, CA 124,898 1964 Sep. 1994
Yuba City, CA 555,383 1970 Jan. 1993
Bradenton, FL 305,559 1989 Sep. 1993
Clearwater, FL 387,360 1965/1993 Sep. 1993
Crestview, FL 198,998 1988 Jun. 1994
San Destin, FL 262,305 1986 Feb. 1995
Gulf Breeze, FL 518,010 1984 Jun. 1994
Lecanto, FL 445,201 1988 Sep. 1993
Pensacola, FL 375,378 1972 Jun. 1994
Pensacola, FL 401,645 1991 Jun. 1994
Starke, FL 410,182 1989 Jun. 1994
Chicago Heights, IL 524,818 1988 Sep. 1994
Alamagordo, NM 485,440 1985 Mar. 1993
Roswell, NM 511,603 1979 Nov. 1992
Great Falls, MT 604,046 1960/1990 Dec. 1992
Rusk, TX 279,030 1969 Mar. 1994
<CAPTION>
Accum. Orig. Construc-
Deprec tion/renovation Date
Description (2) (3) Date Acquired
- ------------- ---------- ------------- ----------
<S> <C> <C> <C>
Chesapeake, VA 173,090 1977 Oct. 1995
Richmond, VA 173,090 1970/1975/1980 Oct. 1995
Tappahannock, VA 173,090 1977/1978 Oct. 1995
Toppanish, WA 146,429 1960/1970 Jun. 1995
Vancouver, WA 172,831 1952/1994 Jun. 1995
Jefferson, IA 64,105 1968/1972 Jan. 1996
Houston, TX 90,254 1961 Jun. 1996
Houston, TX 75,971 1964/1968 Jun. 1996
Montgomery, AL 183,761 1967/1974 Jan. 1996
Carroll, IA 35,324 1969 Jan. 1996
Houston, TX 79,880 1967 Jun. 1996
Woodbury, TN 62,200 1972/75/90 May 1996
Whiteright, TX 106,990 1962/64/65 Jan. 1996
Granger, IA 45,973 1979 Jan. 1996
Bedford, TX 114,291 1960 Jan. 1996
Midland, TX 82,770 1973 Feb. 1996
Tiptonville, TN 56,833 1975 May 1996
Gardendale, AL 121,781 1976/1984 May 1996
Polk City, IA 44,981 1976 Jan. 1996
</TABLE>
58
<PAGE>
LTC PROPERTIES, INC.
SCHEDULE XI
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1996
<TABLE>
<CAPTION>
Initial Cost to
Company
---------------------------------------- Cost Capitalized
Building and Subsequent to
Description Encumbrances Land Improvments Acquisition
- ----------------------------- --------------- -----------------------------------------------------------
<S> <C> <C> <C> <C>
Atmore, AL (6) 23,142 2,985,308 -
Mesa, AZ 4,519,902 304,707 6,908,762 -
Houston, TX 571,889 5,964,457 -
Roberta, GA 100,000 2,400,000 -
Norwalk, IA (5) 45,486 1,034,802 -
Altoona, IA (5) 102,152 2,312,354 -
----------- ----------- ------------ ----------
Sub-total 54,204,799 10,295,110 163,422,497 2,251,990
----------- ----------- ------------ ----------
Assisted-living facilities:
Dodge City, KS 1,678,763 87,500 1,662,500 -
Great Bend, KS 1,415,908 86,842 1,563,159 -
McPherson, KS 1,231,666 75,000 1,575,000 -
Salina, KS 1,413,023 71,739 1,578,261 -
Longview, TX - 38,256 1,568,492 -
Marshall, TX - 38,256 1,568,492 -
Walla Walla, WA 8,300,000 (7) 100,000 1,940,000 -
Greenville, TX 42,098 1,565,286 -
Camas, WA (7) 100,000 2,175,000 -
Grandview, WA (7) 100,000 1,940,000 -
Vancouver, WA (7) 100,000 2,785,000 -
Athens, TX 95,678 1,511,707 -
Lufkin, TX 100,000 1,950,000 -
Kennewick. WA (7) 100,000 1,940,000 -
Gardendale, AL 16,340 1,233,660 -
Jacksonville, TX 100,000 1,900,000 -
Kelso, WA 100,000 2,500,000 -
Battleground, WA 100,000 2,500,000 -
Hayden, ID 100,000 2,450,000 -
Klamath Falls, OR 100,000 2,300,000 -
Newport, OR 100,000 2,050,000 -
Tyler, TX 100,000 1,800,000 -
Wichita Falls, TX 100,000 1,850,000 -
Ada, OK 100,000 1,650,000 -
----------- ----------- ------------ ----------
Subtotal 14,039,359 2,051,709 45,556,557 -
----------- ----------- ------------ ----------
Grand total $68,244,158 $12,346,818 $208,979,053 $2,251,990
=========== =========== ============ ==========
<CAPTION>
Gross Amount at which Carried
At Close of Period
-------------------------------------------- Accum. Orig. Construc-
Building and Deprec tion/renovation Date
Description Land Improvments Total (1) (2)(3) Date Acquired
- ---------------------------- -------------------------------------------- ---------- --------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Atmore, AL 23,142 2,985,308 3,008,450 98,518 1967/1974 Jan. 1996
Mesa, AZ 304,707 6,908,762 7,213,468 110,103 1975/1996 Jun. 1996
Houston, TX 571,889 5,964,457 6,536,346 131,548 1967 Jun. 1996
Roberta, GA 100,000 2,400,000 2,500,000 53,333 1964 May 1996
Norwalk, IA 45,486 1,034,802 1,080,287 35,548 1975 Jan. 1996
Altoona, IA 102,152 2,312,354 2,414,509 75,619 1973 Jan. 1996
----------- ------------ ------------ -----------
Sub-total 10,295,110 165,674,487 175,969,597 10,915,707
----------- ------------ ------------ -----------
Assisted-living facilities:
Dodge City, KS 87,500 1,662,500 1,750,000 49,896 1995 Dec. 1995
Great Bend, KS 86,842 1,563,158 1,650,000 46,921 1995 Dec. 1995
McPherson, KS 75,000 1,575,000 1,650,000 47,259 1994 Dec. 1995
Salina, KS 71,739 1,578,261 1,650,000 47,352 1994 Dec. 1995
Longview, TX 38,256 1,568,492 1,606,749 50,482 1995 Oct. 1995
Marshall, TX 38,256 1,568,492 1,606,748 50,482 1995 Oct. 1995
Walla Walla, WA 100,000 1,940,000 2,040,000 39,981 1996 Apr. 1996
Greenville, TX 42,098 1,565,286 1,607,384 43,192 1995 Jan. 1996
Camas, WA 100,000 2,175,000 2,275,000 34,524 1996 May 1996
Grandview, WA 100,000 1,940,000 2,040,000 44,424 1996 Mar. 1996
Vancouver, WA 100,000 2,785,000 2,885,000 44,043 1996 Jun. 1996
Athens, TX 95,678 1,511,707 1,607,384 41,435 1995 Jan. 1996
Lufkin, TX 100,000 1,950,000 2,050,000 40,169 1996 Apr. 1996
Kennewick. WA 100,000 1,940,000 2,040,000 48,866 1996 Feb. 1996
Gardendale, AL 16,340 1,233,660 1,250,000 23,786 1988 May 1996
Jacksonville, TX 100,000 1,900,000 2,000,000 44,003 1996 Mar. 1996
Kelso, WA 100,000 2,500,000 2,600,000 11,218 1996 Nov. 1996
Battleground, WA 100,000 2,500,000 2,600,000 5,609 1996 Nov. 1996
Hayden, ID 100,000 2,450,000 2,550,000 5,505 1996 Dec. 1996
Klamath Falls, OR 100,000 2,300,000 2,400,000 5,192 1996 Dec. 1996
<CAPTION>
Gross Amount at which Carried
At Close of Period
-------------------------------------------- Accum. Orig. Construc-
Building and Deprec tion/renovation Date
Description Land Improvments Total (1) (2)(3) Date Acquired
- ---------------------------- -------------------------------------------- ---------- --------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Newport, OR 100,000 2,050,000 2,150,000 0 1996 Dec. 1996
Tyler, TX 100,000 1,800,000 1,900,000 0 1996 Dec. 1996
Wichita Falls, TX 100,000 1,850,000 1,950,000 0 1996 Dec. 1996
Ada, OK 100,000 1,650,000 1,750,000 0 1996 Dec. 1996
----------- ------------ ------------ -----------
Subtotal 2,051,709 45,556,557 47,608,266 724,339
----------- ------------ ------------ -----------
Grand total $12,346,818 $211,231,043 $223,577,863 $11,640,046
=========== ============ ============ ===========
</TABLE>
59
<PAGE>
LTC PROPERTIES, INC.
SCHEDULE XI
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1996
(1) The aggregate cost for federal income tax purposes.
(2) Depreciation for building is calculated using a 35 year depreciation life
for nursing facilities and 40 year life for assisted living facilities and
additions to facilities (Lecanto, Florida). Depreciation for furniture and
fixtures is calculated based on a 7- year life for all facilities.
(3) This is a single note backed by five facilities in Alabama.
(4) This is a single note backed by two facilities in Washington.
(5) This is a single note backed by a total of seven facilities: Six in Iowa
and one in Texas
(6) This is a single note backed by two facilities in Alabama.
(7) This is a single note backed by five facilities in Washington.
(8) The activities for the years ended December 31, 1994, 1995 and 1996 are as
follows:
<TABLE>
<CAPTION>
Real Estate Accumulated
& Equipment Depreciation
------------ ------------
<S> <C> <C>
Beginning balance $ 28,560,689 $ 768,213
Additions during period -
Additions 44,557,538 1,722,148
Deductions during period -
Cost of real estate sold - -
------------ -----------
Balance at December 31, 1994 73,118,227 2,490,361
Additions during period -
Additions 44,150,274 2,996,167
Deductions during period -
Cost of real estate sold - -
------------ -----------
Balance at December 31, 1995 117,268,501 5,486,528
Additions during period -
Additions 113,959,361 6,214,190
Deductions during period -
Cost of real estate sold (7,650,000) (60,672)
------------ -----------
Balance at December 31, 1996 $223,577,862 $11,640,046
============ ===========
</TABLE>
60
<PAGE>
LTC PROPERTIES, INC.
SCHEDULE XII
MORTGAGE LOANS ON REAL ESTATE
DECEMBER 31, 1996
<TABLE>
<CAPTION>
Final
Number of Number of Interest Maturity Balloon
STATE Facilities Beds Rate (A) Date Amount (B)
- --------- ---------- --------- ------------- -------- ------------
<S> <C> <C> <C> <C> <C>
Long-term care facilities:
FL 2 251 10.750% Mar. 2006 $ 7,326,841
FL 1 180 9.158% Dec. 2006 6,212,944
MS 3 400 10.320% Oct. 2006 10,656,431
SC 5 509 11.700% Feb. 2003 11,118,772
Various (2) 73 7,920 9.75%-13.2% Jun. 1997 - 134,891,128
Oct. 2017
-------- -------- ----------- --------- ------------
84 9,260 $170,206,116
======== ======== ============
<CAPTION>
Loan Subject
Carrying Amount to Delinquent Current
Face Amount of Mortgages at Principal Monthly
STATE of Mortgages December 31, 1995 or Interest Debt Service
- -------- ------------ ----------------- ------------- ------------
<S> <C> <C> <C> <C>
Long-term care facilities:
FL $ 8,200,000 $ 8,154,021 $ - 78,891.60
FL 7,200,000 7,200,000 - 61,203.05
MS 11,250,000 11,240,003 - 101,397.29
SC 11,250,000 11,229,957 - 113,127.66
Various (2) 141,790,842 140,437,709 1,666,420 1,379,781.10
------------ --------------- ------------ ------------
$179,690,842 $ 178,261,690 (1)(3)(4) $ 1,666,420 1,734,401.00
============ =============== ============ ============
</TABLE>
(A) Represents current stated interest rate. Generally, the loans have 25-year
amortization with principal and interest payable at varying amounts over the
life to maturity with annual interest adjustments through specified fixed rate
increases effective either on the first anniversary or calendar year of the
loan.
(B) Balloon payment is due upon maturity, principally on the 10th year of the
loan, wtih various prepayment penalties (as defined in the loan agreement).
(1) The aggregate cost for federal income tax purposes.
(2) Includes 63 first-lien mortgage loans secured by skilled nursing facilities
and assisted living facilities as follows:
<TABLE>
<CAPTION>
No. of loans Original loan amounts:
<S> <C>
37 $ 305,000 - $2,000,000
12 $2,000,001 - $3,000,000
5 $3,000,001 - $4,000,000
5 $4,000,001 - $5,000,000
4 $5,000,001 - $5,861,000
</TABLE>
61
<PAGE>
LTC PROPERTIES, INC.
SCHEDULE XII
MORTGAGE LOANS ON REAL ESTATE
DECEMBER 31, 1996
The loans (each of which is less than 3% of the total carrying amount) are
secured by properties located in Alabama, Arizona, Arkansas, California,
Colorado, Florida, Georgia, Illinois, Iowa, Kansas, Louisiana, Missouri,
Nebraska, Nevada, North Carolina, Ohio, Oklahoma, Oregon, Tennessee,Texas and
Washington.
(3) Mortgage loans on real estate reconciliation:
<TABLE>
<S> <C>
Balance at December 31, 1993 $ 78,499,874
Additions during period:
New Mortgage loans 120,472,000
Deletions during period:
Sales of notes to REMIC (127,639,788)
Collections of principal (8,549,726)
-------------
Balance at December 31, 1994 62,782,360
Additions during period:
New Mortgage loans 101,907,720
Deletions during period:
Collections of principal (2,633,765)
-------------
Balance at December 31, 1995 $ 162,056,315
Additions during period:
New Mortgage loans 130,964,857
Deletions during period:
Sales of notes to REMIC (112,487,255)
Collections of principal $ (2,272,227)
-------------
Balance at December 31, 1996 178,261,690
=============
</TABLE>
4) None of the Company's mortgage loans have any prior liens. One mortgage loan
with a principal amount of $1,666,420 is subject to delinquent principal of
$11,095 and interest of $221,984 as of December 31, 1995. No loan has been
renewed or extended.
5) The Company has established a general reserve totaling $1,000,000. No loan
has been written off against this reserve.
62
<PAGE>
INDEX TO EXHIBITS
(ITEM 12(A))
<TABLE>
<CAPTION>
Exhibit
NUMBER DESCRIPTION
-----------
<S> <C>
3.1 Amended and Restated Articles of Incorporation of LTC Properties, Inc. (incorporated by
reference to Exhibit 3.1 to Pre-Effective Amendment No. 4 to LTC Properties, Inc.'s
Registration Statement on Form S-11 filed on August 7, 1992 (File No. 33-48085)
3.2 By-Laws of LTC Properties, Inc. (incorporated by reference to Exhibit 3.2 to LTC Properties,
Inc.'s initial Registration Statement on Form S-11 filed on May 22, 1992 (File No. 33-48085)
3.3 Amended and Restated By-Laws of the Company (incorporated by reference to Exhibit 3.1 to LTC
Properties, Inc.'s form 10-Q for the quarter ended June 30, 1996)
4.1 Indenture dated August 25, 1992 between LTC Properties, Inc. and Harris Trust and Savings Bank,
as trustee with respect to 9.75% Convertible Subordinated Debentures due 2004 (incorporated by
reference to Exhibit 4.1 to LTC Properties, Inc.'s Form 10-K for the year ended December 31,
1992)
4.2 Indenture dated September 23, 1994 between LTC Properties, Inc. and Harris Trust and Savings
Bank, as trustee (incorporated by reference to Exhibit 4.2 to LTC Properties, Inc.'s Form 10-K
for the year ended December 31, 1994)
4.3 First Supplemental Indenture dated as of September 23, 1994 to Indenture dated September 23,
1994 between LTC Properties, Inc. and Harris Trust and Savings Bank, as trustee with respect to
$30,000,000 in principal amount of 8.5% Convertible Subordinated Debentures due 2000
(incorporated by reference to Exhibit 4.3 to LTC Properties, Inc.'s Form 10-K for the year
ended December 31, 1994)
4.4 Second Supplemental Indenture dated as of September 21, 1995 to Indenture dated September 23,
1994 between LTC Properties, Inc. and Harris Trust and Savings Bank, as trustee with respect to
$51,500,000 in principal amount of 8.5% Convertible Subordinated Debentures due 2001
(incorporated by reference to Exhibit 10.17 to LTC Properties, Inc.'s Form 10-Q for the quarter
ended September 30, 1995)
4.5 Third Supplemental Indenture dated as of September 26, 1995 to Indenture dated September 23,
1994 between LTC Properties, Inc. and Harris Trust and Savings Bank, as trustee with respect to
$10,000,000 in principal amount of 8.25% Convertible Subordinated Debentures due 1999
(incorporated by reference to Exhibit 10.19 to LTC Properties, Inc.'s Form 10-Q for the quarter
ended September 30, 1995)
4.6 Fourth Supplemental Indenture dated as of February 5, 1996 to Indenture dated September 23,
1994 between LTC Properties, Inc. and Harris Trust and Savings Bank, as trustee with respect to
$30,000,000 in principal amount of 7.75% Convertible Subordinated Debentures due 2002
(incorporated by reference to Exhibit 4.6 to LTC Properties, Inc.'s Form 10-K for the year
ended December 31, 1995)
10.1 Employment contract with Andre C. Dimitriadis (incorporated by reference to Exhibit 10.2 to
Pre-Effective Amendment No. 4 to LTC Properties, Inc.'s Registration Statement on Form S-11
filed on August 7, 1992 (File No. 33-48085)
10.2 Employment contract with William McBride III (incorporated by reference to Exhibit 10.3 to
Pre-Effective Amendment No. 4 to LTC Properties, Inc.'s Registration Statement on Form S-11
filed on August 7, 1992 (File No. 33-48085)
10.3 1992 Stock Option Plan (incorporated by reference to Exhibit 10.4 to Post-Effective Amendment
No. 4 to LTC Properties, Inc.'s Registration Statement on Form S-11 filed on August 7, 1992
(File No. 33-48085)
</TABLE>
63
<PAGE>
INDEX TO EXHIBITS (CONTINUED)
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
-----------
<S> <C>
10.4 Master Repurchase Agreement dated May 14, 1993 between LTC Properties, Inc. and Goldman Sachs
Mortgage Company (incorporated by reference to Exhibit 10.5 to LTC Properties, Inc.'s Form 10-Q
for the quarter ended June 30, 1993)
10.5 Purchase Agreement dated July 28, 1993 between LTC Properties, Inc., LTC REMIC Corporation and
Goldman Sachs Mortgage Company (incorporated by reference to Exhibit 10.6 to LTC Properties,
Inc.'s Form 10-Q for the quarter ended June 30, 1993)
10.6 Master Repurchase Agreement dated December 15, 1993 between LTC Properties, Inc. and Goldman
Sachs Mortgage Company (incorporated by reference to Exhibit 10.7 to LTC Properties, Inc.'s
Form 10-K for the year ended December 31, 1994)
10.7 Amended and Restated 1992 Stock Option Plan (incorporated by reference to Exhibit 10.8 to LTC
Properties, Inc.'s Form 10-K for the year ended December 31, 1994)
10.8 Revolving Credit Agreement dated as of January 18, 1995 among LTC Properties, Inc., the lenders
named therein and Sanwa Bank California, as agent for such lenders (incorporated by reference
to Exhibit 10.9 to LTC Properties, Inc.'s Form 10-K for the year ended December 31, 1994)
10.9 Transfer and Repurchase Agreement, dated as of July 20, 1993, between LTC Properties, Inc. and
LTC REMIC Corporation (incorporated by reference to Exhibit 10.10 to LTC Properties, Inc.'s
Form 10-K for the year ended December 31, 1994)
10.10 Pooling and Servicing Agreement, dated as of July 20, 1993, among LTC REMIC Corporation, as
depositor, Bankers Trust Company, as master servicer, LTC Properties, Inc., as special servicer
and originator and Union Bank, as trustee (incorporated by reference to Exhibit 10.11 to LTC
Properties, Inc.'s Form 10-K for the year ended December 31, 1994)
10.11 Transfer and Repurchase Agreement, dated as of November 1, 1994, between LTC Properties, Inc.
and LTC REMIC Corporation (incorporated by reference to Exhibit 10.12 to LTC Properties, Inc.'s
Form 10-K for the year ended December 31, 1994)
10.12 Pooling and Servicing Agreement, dated as of November 1, 1994, among LTC REMIC Corporation, as
depositor, Bankers Trust Company, as master servicer, LTC Properties, Inc., as special servicer
and originator and Marine Midland Bank, as trustee (incorporated by reference to Exhibit 10.13
to LTC Properties, Inc.'s Form 10-K dated December 31, 1994)
10.13 Deferred Compensation Plan of LTC Properties, Inc. (incorporated by reference to Exhibit 10.14
to LTC Properties, Inc.'s Form 10-Q for the quarter ended June 30, 1995)
10.14 Swap Agreement by and between Goldman Sachs Capital Markets, L.P., Goldman Sachs Group, L.P.
and LTC Properties, Inc. dated May 23, 1995 (incorporated by reference to Exhibit 10.15 to LTC
Properties, Inc.'s Form 10-Q for the quarter ended June 30, 1995)
10.15 Swap Agreement by and between Goldman Sachs Capital Markets, L.P., Goldman Sachs Group, L.P.
and LTC Properties, Inc. dated September 12, 1995 (incorporated by reference to Exhibit 10.16
to LTC Properties, Inc.'s Form 10-Q for the quarter ended September 30, 1995)
10.16 Amended and Restated Revolving Credit Agreement dated as of October 17, 1995 among LTC
Properties, Inc., the lenders named therein and Sanwa Bank California, as agent for such
lenders (incorporated by reference to Exhibit 10.19 to LTC Properties, Inc.'s Form 10-Q for the
quarter ended September 30, 1995)
10.17 Amended Deferred Compensation Plan (incorporated by reference to Exhibit 10.17 to LTC
Properties, Inc.'s Form 10-K for the year ended December 31, 1995)
</TABLE>
64
<PAGE>
INDEX TO EXHIBITS (CONTINUED)
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
-----------
<S> <C>
10.18 Pooling and Servicing Agreement dated as of March 1, 1996, among LTC REMIC Corporation, as
depositor, GMAC Commercial Mortgage Corporation, as Master Servicer, LTC Properties, Inc., as
Special Servicer and Originator, LaSalle National Bank, as Trustee and ABN AMRO Bank, N.V., as
fiscal agent (incorporated by reference to Exhibit 10.1 to LTC Properties, Inc.'s Form 10-Q for
the quarter ended March 31, 1996)
10.19 Transfer and Repurchase Agreement by and between LTC Properties, Inc. and LTC REMIC Corporation
dated as of March 1, 1996 (incorporated by reference to Exhibit 10.2 to LTC Properties, Inc.'s
Form 10-Q for the quarter ended March 31, 1996)
10.20 Second Amended and Restated Revolving Credit Agreement between LTC Properties, Inc. and Sanwa
Bank California, as agent, dated as of May 21, 1996 (incorporated by reference to Exhibit 10.1
to LTC Properties, Inc.'s Form 10-Q for the quarter ended June 30, 1996)
10.21 Guarantee Agreement between Kansas-LTC Corporation, L-Tex GP, Inc., and L-Tex LP, Inc.,
Rusk-Tex, LP, Inc., Texas-LTC Limited Partnership, as guarantors, and Sanwa Bank California, as
the agent, dated as of May 21, 1996 (incorporated by reference to LTC Properties, Inc.'s Form
10-Q for the quarter ended June 30, 1996)
10.22 Amended and Restated 1992 Stock Option Plan (incorporated by reference to Exhibit 10.22 to LTC
Properties, Inc.'s Form 10-K for the year ended December 31, 1996)
10.23 Swap Agreement by and between Goldman Sachs Capital Markets, L.P., Goldman Sachs Group, L.P. and
LTC Properties, Inc. dated November 15, 1996 (incorporated by reference to Exhibit 10.23 to LTC
Properties, Inc.'s Form 10-K for the year ended December 31, 1996)
10.24 Swap Agreement by and between Goldman Sachs Capital Markets, L.P., Goldman Sachs Group, L.P. and
LTC Properties, Inc. dated February 11, 1997 (incorporated by reference to Exhibit 10.24 to LTC
Properties, Inc.'s Form 10-K for the year ended December 31, 1996)
10.25 Subservicing Agreement dated as July 20, 1993 by and between Bankers Trust Company, as Master
Servicer and LTC Properties, Inc., as Special Servicer as filed herewith
10.26 Custodial Agreement dated as of July 20, 1993 by and among Union Bank, as Trustee, LTC REMIC
Corporation, as Depositor, and Bankers Trust Company as Master Servicer and Custodian as filed herewith
10.27 Form of Certificates as Exhibit as filed herewith to the Pooling and Servicing Agreement dated as of July 20,
1993 among LTC REMIC Corporation, as Depositor, Bankers Trust Company, as Master Servicer,
LTC Properties, Inc. as Special Servicer and Originator and Union Bank as Trustee
(incorporated by reference to Exhibit 10.11 to LTC Properties, Inc.'s Form 10-K for the year
ended December 31, 1994)
10.28 Purchase Agreement dated November 16, 1994 between LTC REMIC Corporation, LTC Properties, Inc. and
Goldman Sachs & Co. as filed herewith
10.29 Form of Certificates, Form of Custodial Agreement and Form of Subservicing Agreement as
Exhibits as filed herewith to the Pooling and Servicing Agreement dated as of November 1, 1994 among LTC
REMIC Corporation, as Depositor, Bankers Trust Company, as Master Servicer, LTC Properties, Inc.
as Special Servicer and Originator and Marine Midland Bank as Trustee (incorporated by reference
to Exhibit 10.13 to LTC Properties, Inc.'s Form 10-K for the year ended December 31, 1994)
10.30 Purchase Agreement dated March 27, 1996 between LTC REMIC Corporation, LTC Properties, Inc.
and Goldman Sachs & Co. as filed herewith
10.31 Form of Certificates, Form of Custodial Agreement and Form of Subservicing Agreement as Exhibits as filed
herewith to the Pooling and Servicing Agreement dated as of March 1, 1996 among LTC REMIC Corporation, as
Depositor, GMAC Commercial Mortgage Corporation, as Master Servicer, LTC Properties, Inc. as Special
Servicer and Originator and LaSalle National Bank as Trustee and ABN AMRO Bank N.V., as Fiscal Agent
(incorporated by reference to Exhibit 10.1 to LTC Properties, Inc.'s Form 10-Q for the quarter ended
March 31, 1996)
11.1 Computation of Net Income Per Share for the years ended December 31, 1996, 1995 and 1994 as
filed herewith
21.1 List of Subsidiaries as filed herewith
23.1 Consent of Ernst & Young LLP with respect to the financial information of the Company as filed
herewith
27 Financial Schedules as filed herewith
</TABLE>
65
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the securities
Exchange Act of 1934, Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
LTC Properties, Inc.
Registrant
Dated: December 6, 1997 By: /s/ JAMES J. PIECZYNSKI
---------------------------
JAMES J. PIECZYNSKI
President and Chief Financial Officer
<TABLE>
<CAPTION>
<S> <C> <C>
/s/ ANDRE C. DIMITRIADIS Chairman of the Board, Chief Executive December 6, 1997
- ---------------------------------------- Officer and Director
ANDRE C. DIMITRIADIS
/s/ NEAL M. ELLIOTT Director December 6, 1997
- ----------------------------------------
NEAL M. ELLIOTT
/s/ EDMUND C. KING
- ----------------------------------------
EDMUND C. KING Director December 6, 1997
/s/ WENDY L. SIMPSON
- ----------------------------------------
WENDY L. SIMPSON Director December 6, 1997
/s/ SAM YELLEN
- ----------------------------------------
SAM YELLEN Director December 6, 1997
</TABLE>
66
<PAGE>
EXHIBIT 10.25
SUBSERVICING AGREEMENT
----------------------
THIS SUBSERVICING AGREEMENT (the "Agreement") is made as of this 20th
day of July, 1993, by and between Bankers Trust Company, a New York banking
corporation ("Bankers Trust") and LTC Properties, Inc., a Maryland corporation
("LTC").
RECITALS
--------
A. Pursuant to that certain Pooling and Servicing Agreement dated as
of July 20, 1993 (the "Pooling and Servicing Agreement") among LTC REMIC
Corporation, as Depositor (the "Depositor"), Bankers Trust, as master servicer,
LTC, as Special Servicer (the "Special Servicer") and Union Bank, as trustee
(the "Trustee"), the Depositor sold the entire beneficial ownership in certain
mortgage loans (the "Mortgage Loans") to the extent described in the Pooling and
Servicing Agreement in exchange for certain pass-through certificates issued in
multiple classes. Capitalized terms used herein and not otherwise defined shall
have the respective meanings set forth in the Pooling and Servicing Agreement.
B. Pursuant to the Pooling and Servicing Agreement, Bankers Trust
has agreed to service the Mortgage Loans and to perform certain other duties as
more fully described in the Pooling and Servicing Agreement.
C. Bankers Trust and LTC desire to enter into this Agreement for the
purpose of transferring from Bankers Trust to LTC certain of Bankers Trust's
rights and obligations under the Pooling and Servicing Agreement, as more fully
set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants, agreements,
representations and warranties set forth herein, the parties hereto do hereby
agree as follows:
1. Representations, Warranties and Covenants of Subservicer. LTC
--------------------------------------------------------
hereby represents and warrants to and covenants with Bankers Trust that as of
the date hereof and at all times during the term hereof:
1.1 Organization. LTC is a corporation duly organized, validly
------------
existing and in good standing under the laws of the State of Maryland and is or
will be in compliance with the laws of each state in which any Mortgaged
Property is located to the extent necessary to ensure the enforceability of each
Mortgage Loan by LTC in accordance with the terms of this Agreement.
1.2 No Breach. The execution and delivery of this Agreement by
---------
LTC and its performance of and compliance with the terms of this Agreement will
not violate LTC's articles of incorporation or by-laws or constitute a default
(or an event which, with
<PAGE>
notice or the lapse of time or both, would constitute a default) under, or
result in the breach of, any material contract, agreement or other instrument to
which LTC is a party or which may be applicable to LTC or any of it assets.
1.3 Authority. This Agreement, assuming due authorization,
---------
execution and delivery by Bankers Trust, constitutes a valid, legal and binding
obligation of LTC, enforceable against it in accordance with the terms hereof,
except as such enforcement may be limited by bankruptcy, insolvency,
reorganization, receivership, moratorium or other laws relating to or affecting
the rights of creditors generally, and by general principles of equity
(regardless of whether such enforcement is considered in a proceeding in equity
or at law).
1.4 No Violation. LTC is not in violation of, and the execution
------------
and delivery of this Agreement by LTC and its performance and compliance with
the terms of this Agreement will not constitute a violation with respect to, any
law or regulation applicable to LTC, any order to decree of any court or of any
federal, state, municipal or governmental agency having jurisdiction, which
violation might have consequences that would adversely affect the condition
(financial or otherwise) or operations of LTC or its properties, or might have
consequences that would adversely affect the performance of its duties
hereunder.
1.5 No Litigation. No litgation is pending or, to the best
-------------
knowledge of LTC, threatened, against LTC which would prohibit its entering into
or performing its obligations under this Agreement.
2. Subservicing of Mortgage Loans.
------------------------------
2.1 General Duties. LTC shall perform for Bankers Trust all
--------------
services and duties described in the Schedule of Duties to be Performed by
Subservicer attached to the Agreement as Exhibit A, in each case in accordance
with the terms of the Pooling and Servicing Agreement and of applicable law. In
performing its duties hereunder, LTC shall have the status of and shall act as
an independent contractor. Nothing herein shall be construed to create a
partnership or joint venture between Bankers Trust and LTC. Nothing contained in
this Agreement shall prohibit Bankers Trust from taking any action, including
the payment of advances or other amounts, which it deems necessary to assure the
fulfillment of any of its duties under the Pooling and Servicing Agreement or
any related document, agreement or instrument, whether or not LTC is also
required to fulfill such duty pursuant to this Agreement.
2.2 Remittance Reports and Accounting. In addition to the other
---------------------------------
reports and information that LTC is required to provide to Bankers Trust
pursuant to this Agreement, LTC shall provide to Bankers Trust in each month
during the term hereof, no later than the Determination Date (i) the information
described in the letter attached hereto as Exhibit B and (ii) with respect to
any Escrow Account, Subservicing Account or other fund or
-2-
<PAGE>
account maintained by LTC hereunder, a statement prepared by LTC setting forth
the status of the applicable fund or account as of the close of business on such
Determination Date and detailing, for the period covered by such statement, each
category of deposit into and withdrawal from and earnings on such fund or
account (clauses (i) and (ii) together, "Servicing Information"); provided,
--------
however, that LTC shall obtain and provide Bankers Trust with as much Servicing
- -------
Information as is available on the 22nd of the month in which the related
Determination Date occurs and shall continuously update such Servicing
Information through such Determination Date.
In addition, on or before April 15 of each year, beginning with April
15, 1994, LTC at its expense shall cause to be prepared and delivered to Bankers
Trust, a statement in the form, and prepared by a firm of Independent public
accountants satisfying the criteria described in Section 3.15 of the Pooling and
Servicing Agreement, except that such statement shall relate to LTC's
subservicing activities hereunder.
Notwithstanding any other provision contained herein, any required
statements, certificates, elections, notices, reports, plans or responses to
direction from any Person which are required by the Pooling and Servicing
Agreement to be in the name of or to be otherwise provided by the Master
Servicer and which are delegated to LTC hereunder shall be prepared by LTC at
its expense in the form required by the Pooling and Servicing Agreement and
shall be delivered, no later than the second Business Day prior to the day such
item is required from the Master Servicer under the Pooling and Servicing
Agreement, to Bankers Trust for its execution as Master and its distribution in
accordance with Pooling and Servicing Agreement.
2.3 Fidelity Bond and Insurance. LTC, at no expense to Bankers
---------------------------
Trust, shall keep in force during the term of this Agreement, for the benefit of
the Trustee and Bankers Trust, a policy or policies of insurance covering errors
and omissions for failure in the performance of LTC's obligations under this
Agreement, which policy or policies shall be in such form and amount that would
meet the servicing requirements of prudent institutional commercial mortgage
lenders and loan servicers. LTC shall also maintain a fidelity bond in the form
and amount that would meet the servicing requirements of prudent institutional
commercial mortgage lenders and loan servicers. LTC shall be deemed to have
complied with this provision if an affiliate of LTC has such errors and
omissions and fidelity bond coverage and, by the terms of such insurance policy
or fidelity bond, the coverage afforded thereunder extends to LTC. Each such
fidelity bond and errors an omissions policy shall be issued by an insurer
having a claims-paying rating of at least "A" for S&P and "A" for Fitch or
otherwise acceptable to the Rating Agencies. Any such errors and omissions
policy and fidelity bond shall not be canceled without 10 days' prior written
notice to the Trustee and Bankers Trust.
2.4 Documents Received After Termination. LTC shall promptly
------------------------------------
deliver and remit to Bankers Trust any Mortgage Files and any and all bills,
invoices,
-3-
<PAGE>
insurance policies, letters, documents and all other correspondence or
communications relating to the Mortgage Loans (collectively, "Loan Documents")
that are received by LTC after termination of this Agreement. LTC's obligations
under this Section 2.4 with respect to such documents, correspondence and
communications shall be those of a trustee or other fiduciary.
2.5 Establishment of Accounts. LTC shall establish and
-------------------------
maintain one or more accounts, referred to collectively as the Subservicing
Account, in accordance with Section 3.01(c)(1) of the Pooling and Servicing
Agreement. LTC shall deposit into the Subservicing Account not later than the
first Business Day after receipt all proceeds of Mortgage Loans received by LTC,
without any deduction for LTC's servicing compensation, and LTC shall deliver
all Principal Prepayments and Balloon Payments to the Master Servicer in
accordance with Section 3.01(c)(3) of the Pooling and Servicing Agreement not
later than one Business Day after receipt.
2.6 Statements as to Compliance. On or before April 15 of
---------------------------
each year, beginning in April 15, 1994, LTC will deliver to Bankers Trust, the
Trustee and the Depositor an Officers' Certificate stating, as to each signatory
thereof, that (i) a review of the activities of LTC during the preceding
calendar year (or such shorter period from the Closing Date to the end of the
related calendar year) and of performance under this Agreement has been made
under such officer's supervision, (ii) to the best of such officer's knowledge,
based on such review, LTC has fulfilled all of its obligations under this
Agreement throughout such year (or such shorter period from the Closing Date to
the end of the related calendar year), or, if there has been a default in the
fulfillment of any such obligation, specifying each such default known to such
officer and the nature and status thereof and what action LTC proposes to take
with respect thereto and (iii) whether it has received any notice regarding
qualification, or challenging the status, of either of the Upper-Tier or the
Lower-Tier REMIC as a REMIC from the Internal Revenue Service or any other
governmental agency or body.
2.7 Purchase of All Outstanding Mortgage Loans. LTC shall
------------------------------------------
have the right of the Master Servicer during the term of this Agreement to
exercise the option contained in Section 9.01(c) of the Pooling and Servicing
Agreement to purchase all of the Mortgage Loans then included in the Trust Fund
and all property acquired in respect of any Mortgage Loan.
If LTC elects to exercise such option, it shall notify Bankers
Trust and the Trustee of such election no later than 30 days prior to the Early
Termination Determination Date, as provided in Section 9.01.
Upon payment by LTC to Bankers Trust for deposit into the
Distribution Account in accordance with the Pooling and Servicing Agreement of
the amount required by Section 9.01 in connection with the exercise of such
option, Bankers Trust shall release or cause to be released to LTC, promptly
upon its receipt thereof, the Mortgage Files for the remaining Mortgage Loans
and REO Properties, and shall execute and deliver such
-4-
<PAGE>
instruments of transfer or assignment, in each case without recourse, as shall
be necessary to vest in LTC title to such Mortgage Loans and REO Properties.
2.8 Filing and Recording Fees. All costs and fees incurred in
-------------------------
connection with the filing of any UCC-2 or UCC-3 filings or the recording of any
Assignments or Reassignments of Leases, Rents and Profits pursuant to Section
2.01 of the Pooling and Servicing Agreement shall be borne by LTC at its sole
expense.
3. Compensation to LTC.
-------------------
3.1 Subservicing Fee. As compensation for the activities of
----------------
LTC hereunder, Bankers Trust shall, no later than the first Business Day
following each Distribution Date, remit to LTC the Subservicing Fee, as
described below, with respect to each Mortgage Loan, payable from amounts in the
Collection Account paid to Bankers Trust pursuant to Section 3.06(iv) of the
Pooling and Servicing Agreement. The Subservicing Fee, with respect to each
Mortgage Loan and for each Due Period, shall be an amount equal to thirty days'
interest (or, in the event of any payment of interest which accompanies a
Principal Prepayment in full made by the Borrower during such Due Period,
interest for the number of day covered by such payment of interest) at a rate
equal to 0.015% per annum on the Scheduled Principal Balance of such Mortgage
Loan; provided, however, that LTC's right to receive the Subservicing Fee is
-------- -------
subject to the requirement that the Servicing Fee be applied to make
Compensating Interest Payments pursuant to the Pooling and Servicing Agreement
and Section 3.6 hereof. The right to receive the Subservicing Fee may not be
transferred in whole or in part except in connection with the transfer of all of
LTC's responsibilities and obligations under this Agreement.
3.2 Reimbursements. Bankers Trust shall remit to LTC, solely
--------------
from funds available to Bankers Trust pursuant to the Pooling and Servicing
Agreement, the following amounts: (i) amounts sufficient to reimburse LTC for
advances in respect of Property Protection Expenses, taxes, assessments, ground
rents and insurance premiums and for P&I Advances and other advances made
pursuant to Section 3.22 of the Pooling and Servicing Agreement made by LTC plus
any applicable interest on any such advances pursuant to the Pooling and
Servicing Agreement, if and when funds are available for withdrawal in respect
thereof by Bankers Trust pursuant to Section 3.06(ii) of the Pooling and
Servicing Agreement; and (ii) amounts sufficient to indemnify LTC for any loss,
liability or expense incurred by LTC for which indemnity from the Trust Fund is
received by Bankers Trust pursuant to Section 6.03 of the Pooling and Servicing
Agreement if and when funds are available for withdrawal in respect thereof by
Bankers Trust pursuant to the Pooling and Servicing Agreement subject to Bankers
Trust's recovery of its loss, liability or expenses from such monies.
3.3 Other Expenses. LTC shall be required to pay all expenses
--------------
incurred by it in connection with its subservicing activities hereunder,
including payment of
-5-
<PAGE>
premiums for the fidelity bond and insurance required by Section 2.3 hereof.
Except as otherwise provided herein, Bankers Trust shall not be responsible to
reimburse LTC for any expenses incurred by LTC or any disbursements or advances
required to be made by LTC in the performance of LTC's duties hereunder and
under the Pooling and Servicing Agreement. It is hereby understood that the
Subservicing Fee and the reimbursement payments payable under Section 3.2 hereof
represent the sole compensation payable by Bankers Trust to LTC hereunder.
3.4 Expenses of Bankers Trust. LTC covenants and agrees to pay or
-------------------------
reimburse Bankers Trust, upon request, for all reasonable expenses,
disbursements, and advances, if any, incurred or made by Bankers Trust in
accordance with any of the provisions of the Pooling and Servicing Agreement
(including the reasonable compensation and the expenses and disbursements of its
counsel and of all Persons not regularly in its employ, whether or not such
expenses are incurred in connection with any Opinion of Counsel required or
permitted to be obtained by Bankers Trust), including, without limitation, any
costs of enforcing this Agreement and any insurance premiums paid pursuant to
Section 3.08 of the Pooling and Servicing Agreement (other than any fees and
expenses of independent public accountants incurred pursuant to Section 3.15 of
the Pooling and Servicing Agreement on behalf of Bankers Trust and any premiums
for errors and omissions insurance with respect to Bankers Trust, for which
Bankers Trust shall be solely responsible); provided, however, that LTC shall
-------- -------
have no obligation to pay reimburse Bankers Trust for any such expense,
disbursement or advance as may arise solely and directly from Bankers Trust's
negligence, intentional misconduct or bad faith.
3.5 Bankers Trust Obligations. Bankers Trust agrees to request
-------------------------
payment and/or reimbursement as contemplated by Sections 3.1 and 3.2 hereof when
and as permitted by, and in accordance with, the Pooling and Servicing
Agreement. In addition, Bankers Trust shall furnish LTC with copies of all
notices received by Bankers Trust under the Pooling and Servicing Agreement
(other than such notices furnished by LTC) as soon as is practicable following
Bankers Trust's receipt of the same.
3.6 Compensating Interest: Any application of the Servicing Fee
---------------------
to make Compensating Interest Payments pursuant to Section 3.22 of the Pooling
and Servicing Agreement shall first reduce the Subservicing Fee payable to LTC
hereunder and then to reduce the compensation of Bankers Trust.
3.7 Rating Agency Fees. All expenses of the Trust Fund in
------------------
connection with ongoing fees of the Rating Agencies shall be borne by LTC at its
sole expense.
-6-
<PAGE>
4. Term. Except in event that this Agreement is terminated pursuant
----
to Section 5.1, 5.2 or 5.3 hereof, this Agreement shall continue in effect until
the termination of the obligations and responsibilities of the parties to the
Pooling and Servicing Agreement under the Pooling and Servicing Agreement
pursuant to Article IX thereof.
5. Termination.
-----------
5.1 Termination for Cause. The occurrence of any of the
---------------------
following events shall constitute a "Subservicer Default";
(a) If LTC shall fail to pay to Bankers Trust any amount due to
Bankers Trust pursuant to Section 3.4 or 7.1 hereunder and such
failure shall continue for a period of 50 days after notice thereof
has been delivered to LTC by Bankers Trust;
(b) If LTC shall fail to make any payment, other than as
described in (a) above, when due hereunder;
(c) If LTC shall materially breach any other term of this
Agreement or any term of the Pooling and Servicing Agreement specified
in Exhibit A hereto and such breach shall not be cured within 50 days;
(d) If a decree or order for relief of a court or agency or
supervisory authority having jurisdiction in the premises in an
involuntary case under any present or future federal or state
bankruptcy, insolvency or similar law or the appointment of a
conservator or receiver or liquidator in any insolvency, readjustment
of debt, marshalling of assets and liabilities or similar proceeding,
or for the winding-up or liquidation of its affairs, shall have been
entered against LTC and such decree or order shall have remained in
force undischarged or unstayed for a period of 50 days; or LTC shall
consent to the appointment of a conservator or receiver or liquidator
in any insolvency, readjustment of debt, marshalling of assets and
liabilities or similar proceedings of or relating to LTC or of or
relating to all or substantially all of its property; or LTC shall
admit in writing its inability to pay its debts generally as they
become due, file a petition to take advantage of any applicable
bankruptcy, insolvency or reorganization statue, make an assignment
for the benefit of its creditors, voluntarily suspend payment of its
obligations; or
-7-
<PAGE>
(e) If LTC shall assign or attempt to assign its interest under
this Agreement or delegate or attempt to delegate any portion of its
rights, duties or obligations hereunder without the written consent of
Bankers Trust; provided, however, that delegation of LTC's duties and
obligations shall not constitute a default hereunder so long as LTC
remains primarily liable to Bankers Trust for the duties or
obligations so delegated.
In each and every case, so long as a Subservicer Default shall not
have been remedied, Bankers Trust may, by notice in writing to LTC, terminate
all of the rights and obligations of LTC as subservicer under this Agreement. On
or after the receipt by LTC of such written notice, all of its authority and
power under this Agreement shall pass to and be vested in Bankers Trust pursuant
to and under this Section.
5.2 Termination by Trustee. Notwithstanding anything to the
----------------------
contrary contained herein, in the event that Bankers Trust shall, for any reason
(including, without limitation, termination of the Master Servicer pursuant to
Article VII of the Pooling and Servicing Agreement) no longer be the Master
Servicer under the Pooling and Servicing Agreement, the Trustee or its designee
shall, pursuant to Section 9 hereof, assume the rights and obligations of
Bankers Trust under this Agreement. The Trustee shall only be entitled to
terminate this Agreement upon the occurrence of the events described in 5.1
hereof.
5.3 Rights Upon Termination. Upon termination of this Agreement
-----------------------
pursuant to Section 5.1 hereof, LTC shall deliver to Bankers Trust all Loan
Documents not previously delivered to Bankers Trust, together with all funds
held with respect to the Mortgage Loans. In addition, LTC shall cooperate with
Bankers Trust and use its best efforts to assist Bankers Trust in the transfer
of the servicing rights to Bankers Trust or Bankers Trust's nominee. Upon
termination of this Agreement pursuant to Section 5.2 hereof, LTC shall deliver
to the Trustee, as successor to the rights and obligations of Bankers Trust
hereunder, all Loan Documents not previously delivered to Bankers Trust,
together with all funds held with respect to the Mortgage Loans, and shall
cooperate with and assist the Trustee to the same extent as it would Bankers
Trust pursuant to the preceding sentence. Bankers Trust and LTC each covenant
and agree to comply with all laws, rules and regulations of any federal, state
or local government authority applicable to the termination of this Agreement
and the transfer of the servicing rights to Bankers Trust or the Trustee, as
applicable.
5.4 Limitation on Resignation of LTC. LTC shall not resign from
--------------------------------
the obligations and duties hereby imposed on it except (a) by mutual consent of
Bankers Trust and LTC, or (b) upon determination that its duties hereunder are
no longer permissible under applicable law. Any such determination pursuant to
the foregoing clauses shall be evidenced by an Opinion of Counsel to such effect
delivered to Bankers Trust.
-8-
<PAGE>
6. Additional Rights of Bankers Trust.
----------------------------------
6.1 Ownership of Documentation. Subject to the rights of the
--------------------------
Trustee and the Certificateholders under the Pooling and Servicing Agreement,
all Mortgage Files held or received by LTC in connection with the subservicing
of the Mortgage Loans, whether or not prepared, developed or originated by LTC,
shall be and remain at all times the property of Bankers Trust, it being
expressly understood that any Mortgage Files in the possession of LTC are
retained in a custodial capacity only in order, and during only such time as is
necessary, to permit the performance of LTC's obligations hereunder. LTC shall
not acquire any vested rights with respect to the Mortgage Files and shall not
have the right to possession of them except as may be necessary to permit LTC to
fulfill its obligations hereunder. Subsequent to the termination of this
Agreement, LTC shall promptly deliver all such Mortgage Files to Bankers Trust
or the Trustee, as applicable. Such delivery shall be accompanied by a list
identifying the Mortgage Files for each Mortgage Loan, Bankers Trust's loan
number (provided that Bankers Trust previously has furnished its loan numbers to
LTC) and such other information as is requested by Bankers Trust or Trustee to
identify the Mortgage Loans so delivered. Notwithstanding anything contained in
this Section 6.1 to the contrary, copies of Mortgage Files maintained by LTC
shall remain the property of LTC and may be retained by LTC after the
termination of this Agreement.
6.2 Inspection of Mortgage Records. Bankers Trust and its
------------------------------
representatives, agents, consultants, examiners and other Persons authorized by
Bankers Trust shall have the right to inspect the documents and records
maintained by LTC with respect to the Mortgage Loans during LTC's regular
business hours upon reasonable notice, and LTC shall make such documents and
records available to Bankers Trust for inspection. LTC shall afford the
Depositor and the Trustee access to records in accordance with Section 6.05 of
the Pooling and Servicing Agreement.
7. Indemnification.
---------------
7.1 General. LTC agrees to pay, and shall indemnify, defend and
-------
hold harmless, Bankers Trust (as used in this Section 7, "Bankers Trust" refers
to Bankers Trust in its capacity as Master Servicer under the Pooling and
Servicing Agreement and in any of its other capacities) and Bankers Trust's
directors, officers, employees and agents (collectively, "Indemnitee"), from and
against any loss, liability, penalty, fine or expense incurred in connection
with any action or claim (including the reasonable compensation and the expenses
and disbursements of its counsel and all persons not regularly in its employ)
incurred in defending any claim or action or enforcing this indemnity that may
result from, relate to or arise out of LTC's acting as subservicer under, breach
of or failure to act under, this Agreement or any payment contemplated under, or
transaction contemplated by, this Agreement; provided, however, that the
-------- -------
indemnity obligation of LTC shall not apply to loss, liability or expense
arising or resulting from (a) the negligence, intentional misconduct or bad
-9-
<PAGE>
faith of such Indemnitee, (b) the failure of Bankers Trust to perform its
obligations hereunder (c) the breach of Bankers Trust's representations and
warranties in Section 2.05 of the Pooling and Servicing Agreement or (d) actions
taken, or omitted to be taken, by LTC specifically in accordance with
instructions furnished by Bankers Trust pursuant to or in connection with this
Agreement; and provided; further, that upon full payment of the indemnity
-------- -------
herein, LTC shall be subrogated to all rights and remedies of the Indemnitee so
indemnified, in respect of the matter against which indemnity has been paid.
7.2 Survival. All indemnities, obligations, adjustments and
--------
payments provided for in this Section 7 shall survive, and remain in full force
and effect, notwithstanding the expiration or other termination of this
Agreement or any other of the Pooling and Servicing Agreement. The obligations
of LTC in respect of all such indemnities, obligations, adjustments and payments
are expressly made for the benefit of, and shall be enforceable by, the
Indemnitee entitled thereto, without declaring any breach of or default under
the Pooling and Servicing Agreement or taking any other action thereunder, and
notwithstanding any provision of the Pooling and Servicing Agreement.
8. Notices. Any notices and communications hereunder shall be given
-------
and deemed given as provided for in Section 10.04 of the Pooling and Sevicing
Agreement. For such purpose, the address of the Special Servicer contained in
said Section shall be deemed to be the address of LTC hereunder.
9. Right of Assumption by Trustee. In the event that Bankers Trust
------------------------------
shall, for any reason, no longer be the Master Servicer under the Pooling and
Servicing Agreement, including without limitation termination of the Master
Servicer in accordance with Article VII thereof, the Trustee, as successor to
Bankers Trust in its capacity as the Master Servicer under the Pooling and
Servicing Agreement or its designee or any successor Master Servicer, shall be
entitled to succeed to all of the rights, title and interest of Bankers Trust
and assume all of the obligations, duties and liabilities of Bankers Trust under
this Agreement without any further act. In such event, the Trustee, its designee
or the successor Master Servicer appointed pursuant to the Pooling and Servicing
Agreement, shall be deemed to have replaced Bankers Trust as a party to this
Agreement to the same extent as if this Agreement had been assigned to the
assuming party. Notwithstanding the foregoing, Bankers Trust shall not thereby
be relieved of any obligations, duties or liabilities under this Agreement with
regard to events occurring prior to the date Bankers Trust ceased to be the
Master Servicer under the Pooling and Servicing Agreement. Following the
assumption of the rights and obligations of Bankers Trust pursuant to this
Section, LTC at the expense of Bankers Trust shall, upon the request of the
Trustee, deliver to the assuming party all documents and records relating to
this Agreement and the Mortgage Loans then being serviced and an accounting of
amounts collected and held by it and otherwise use its best efforts to effect
the orderly and efficient transfer of this Agreement to the assuming party.
-10-
<PAGE>
10. Miscellaneous.
-------------
10.1 Entire Agreement: Amendments. This Agreement together with
----------------------------
the other written agreements referred to herein is intended by the parties to be
the final expression of their agreement with respect to the subject matter
hereof, and is intended as the complete and exclusive statement of the terms of
the agreement between the parties. As such, this Agreement supersedes any prior
understanding between the parties, whether oral or written. Notwithstanding the
foregoing, in the event that the provisions of this Agreement are inconsistent
with the provisions of the Pooling and Servicing Agreement, the provisions of
the Pooling and Servicing Agreement shall prevail. Any amendments to this
Agreement shall be in writing and shall be signed by all parties hereto.
10.2 Invalidity. To the extent permitted by law, the invalidity
----------
of any portion of this Agreement shall in no way affect the remaining portions
hereof.
10.3 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the internal laws of the State of New York.
10.4 Agreement Binding. This Agreement shall be binding upon
-----------------
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns.
10.5 Counterparts. This Agreement may be executed in any number
------------
of counterparts. Each counterpart so executed shall be deemed an original, but
all such counterparts shall together constitute one and the same instrument.
10.6 Assignment. Neither party shall assign this Agreement or
----------
any rights hereunder (including but not limited to the right to receive
compensation or money due hereunder) without the prior written consent of the
other party hereto; provided, however, that any assumption of Bankers Trust's
rights pursuant to Section 9 hereof shall not require the consent of either
party hereto.
10.7 Disputes. In the event of any dispute between the parties
--------
to this Agreement, the prevailing party shall be entitled to immediate payment
of all costs incurred by such party in such dispute, including but not limited
to court costs and reasonable attorneys' fees.
10.8 Section Headings. Section headings of this Agreement are
----------------
inserted for convenience only and do not in any manner limit or expand this
Agreement and do not constitute a part of this Agreement.
10.9 Further Assurances. To the extent permitted by law, each
------------------
of Bankers Trust and LTC agree that it will, from time to time, execute,
acknowledge and deliver, or cause to be executed, acknowledged and delivered,
such further instruments as
-11-
<PAGE>
either party hereto or the Trustee may reasonably request to effectuate the
intention of or facilitate the performance of this Agreement or the Pooling and
Servicing Agreement.
10.10 Exercise of Rights. No failure or delay on the part of
------------------
either party to exercise any right, power or privilege under this Agreement and
no course or dealing between Bankers Trust and LTC shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, power or
privilege under this Agreement preclude any other or further exercise thereof or
the exercise of any other right, power or privilege. The rights and remedies
herein expressly provided are cumulative and not exclusive of any rights or
remedies which a party would otherwise have pursuant to law or equity. No notice
to or demand on any party in any case shall entitle such party to any other or
further notice or demand in similar or other circumstances, or constitute a
waiver of the right of the other party to any other or further action in any
circumstances without notice or demand.
-12-
<PAGE>
IN WITNESS WHEREOF, this Agreement is executed as of the date first
above written.
UNION BANK
as Trustee
By:/s/ Andrew R. Ball
--------------------------------
Name: Andrew R. Ball
Title: Assistant Vice President
LTC REMIC CORPORATION,
as Depositor
By:/s/ William McBride III
--------------------------------
Name: William McBride III
Title: President
BANKERS TRUST COMPANY,
as Master Servicer
By:/s/ Tracy A. Gevant
--------------------------------
Name: Tracy A. Gevant
Title: Assistant Vice President
BANKERS TRUST COMPANY,
as Custodian
By:/s/ Tracy A. Gevant
--------------------------------
Name: Tracy A. Gevant
Title: Assistant Vice President
-13-
<PAGE>
EXHIBIT A
<PAGE>
EXHIBIT A
---------
Schedule of Duties
to be Performed by LTC
In addition to the duties otherwise contained in the Subservicing
Agreement, LTC shall be obligated to perform the following, in each case at the
time and in the manner required under the terms of the Pooling and Servicing
Agreement:
1. To provide the Trustee and Bankers Trust with the list of
servicing officers of LTC as defined in the definition of "Servicing Officer" in
Article I of the Pooling and Servicing Agreement.
2. Upon discovery by LTC of a breach of any of the representations
and warranties made by the Originator pursuant to the Transfer and Repurchase
Agreement in respect of any Mortgage Loan, to give prompt notice to the Trustee
and Bankers Trust as required by the Master Servicer in Section 2.03 of the
Pooling and Servicing Agreement.
3. To give the notices required of the Master Servicer by Section
2.03(b) of the Pooling and Servicing Agreement.
4. To give the notices required of the Master Servicer by Section
2.05(b) of the Pooling and Servicing Agreement.
5. To give the notices required of the Master Servicer by Section
2.06(b) of the Pooling and Servicing Agreement.
6. To (a) perform the duties of the Master Servicer set forth in
Subsection 3.01(a) of the Pooling and Servicing Agreement, (b) indemnify Bankers
Trust, the Trustee and the Depositor, as specified in the Pooling and Servicing
Agreement, to the extent LTC breaches its obligations in this item or the
Agreement, (c) comply with all statutory or regulatory requirements with regard
to the manner in which it conducts its activities pursuant to this item and the
Agreement, and (d) cooperate with Bankers Trust in its performance of the Master
Servicer's duties in Section 3.01(a) of the Pooling and Servicing Agreement. The
indemnities of LTC pursuant to this item shall survive the termination or
discharge of the Agreement or the Pooling and Servicing Agreement.
7. To perform the duties of the Master Servicer set forth in Section
3.03 of the Pooling and Servicing Agreement.
8. To perform the duties of the Master Servicer set forth in Section
3.04 of the Pooling and Servicing Agreement.
<PAGE>
A-2
9. To perform the duties of the Master Servicer set forth in
Sections 3.08 through 3.10 of the Pooling and Servicing Agreement.
10. To provide information reasonably requested by Bankers Trust to
enable Bankers Trust to deliver the statements required by Section 3.13 of the
Pooling and Servicing Agreement.
11. To deliver to Bankers Trust (i) an officer's certificate of LTC,
containing substantially the information required pursuant to Section 3.14 of
the Pooling and Servicing Agreement, but referring to LTC's obligations under
this Agreement, and (ii) such other information, certified by a responsible
officer of LTC, regarding LTC's organization, activities and personnel as
Bankers Trust or the Trustee may reasonably request from time to time.
12. To perform the inspections required of the Master Servicer by
Section 3.19 of the Pooling and Servicing Agreement.
13. To perform the duties of the Master Servicer set forth in Section
6.05 of the Pooling and Servicing Agreement.
14. To make the P&I Advances and any other advances required of the
Master Servicer by Section 3.22 of the Pooling and Servicing Agreement.
<PAGE>
EXHIBIT B
<PAGE>
[LETTERHEAD OF LTC PROPERTIES]
EXHIBIT B
August 4, 1993
Bankers Trust Company
Four Albany St.
New York, New York 10006
Re: LTC REMIC Corporation Mortgage Pass-Through
Certificates. Series 1993-1
---------------------------
With regard to Bankers Trust company ("Bankers Trust") as Master
Servicer for the above mentioned transaction, LTC Properties, Inc., agrees to
provide Bankers Trust with the following loan level information no later than
the closing date of the transaction and, thereafter, the second business day
succeeding each Determination Date:
<TABLE>
<S> <C>
1. Beginning Scheduled Principal Balance $114,702,110.83
2. Mortgage Interest Rate 10.50% - 12.50%
3. Monthly Payment $ 1,152,974.09
4. Scheduled Interest $ 1,102,753.34
5. Scheduled Principal $ 50,220.75
6. Principal Prepayments $ .00
7. Payoff Date or Prepayment Interest Shortfalls $ .00
</TABLE>
<PAGE>
LTC PROPERTIES, INC.
Page 2
<TABLE>
<S> <C>
8. Ending Scheduled Principal Balance $114,651,890.08
9. Interest Paid-Through-Date See attached
</TABLE>
On receiving this data, Bankers Trust shall be under no duty to
recalculate, verify or recompute the information provided to it hereunder
by LTC.
LTC Properties, Inc.
By: /s/ Evelyn Yalung
--------------------
Name: Evelyn Yalung
Title: Controller
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE B
BEGINNING SCHEDULED MORTGAGE MONTHLY SCHEDULED SCHEDULED
LOAN PRINCIPAL BALANCE INTEREST RATE PAYMENT INTEREST PRINCIPAL
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1-4 19,168,815.45 11.50% 190,462.75 183,701.15 6,761.60
5 1,257,788.42 11.50% 12,497.48 12,053.81 443.67
6 4,597,605.50 11.50% 45,682.14 44,060.39 1,621.75
7-9 17,885,113.72 11.50% 177,707.80 171,399.01 6,308.79
10 3,526,192.95 11.50% 35,036.51 33,792.68 1,243.83
11 2,932,181.97 11.50% 29,134.37 28,100.08 1,034.29
13 2,327,207.65 11.50% 23,123.30 22,302.41 820.89
14 723,577.15 11.50% 7,189.52 6,934.28 255.24
15 2,517,570.21 11.50% 25,014.76 24,126.71 888.05
16 2,268,404.55 11.50% 22,539.03 21,738.88 800.15
17 1,146,162.22 11.50% 11,388.35 10,984.05 404.30
18 9,457,333.25 11.50% 93,968.75 90,632.78 3,335.97
19 1,793,992.97 11.50% 17,825.25 17,192.43 632.82
20 1,694,326.79 11.50% 16,834.95 16,237.30. 597.65
21 1,364,431.35 11.50% 13,557.09 13,075.80 481.29
22 2,334,184.20 11.50% 23,192.63 22,369.27 823.36
23 5,979,697.97 11.50% 61,037.42 57,305.44 3,731.98
24 2,986,468.56 10.00% 27,263.95 24,887.24 2,376.71
25 1,993,640.13 12.00% 21,066.48 19,936.40 1,130.08
26 4,088,697.72 11.75% 42,430.13 40,035.17 2,394.96
27 2,994,717.49 11.50% 30,494.07 28,699.38 1,794.69
28 6,690,413.14 12.50% 73,057.02 69,691.80 3,365.22
29 14,973,587.47 11.50% 152,470.34 143,496.88 8,973.46
-----------------------------------------------------------------------------
114,702,110.83 1,152,974.09 1,102,753.34 50,220.75
=============================================================================
<CAPTION>
ENDING
PAYOFF DATE OR SCHEDULED INTEREST
PRINCIPAL PREPAYMENT PRINCIPAL PAID-THROUGH
LOAN PREPAYMENTS INTEREST SHORTFALL BALANCE DATE
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1-4 0.00 0.00 19,162,053.85 19-AUG-93
5 0.00 0.00 1,257,344.75 19-AUG-93
6 0.00 0.00 4,595,983.75 19-AUG-93
7-9 0.00 0.00 17,878,804.93 19-AUG-93
10 0.00 0.00 3,524,949.12 19-AUG-93
11 0.00 0.00 2,931,147.68 19-AUG-93
13 0.00 0.00 2,326,386.76 19-AUG-93
14 0.00 0.00 723,321.91 19-AUG-93
15 0.00 0.00 2,516,682.16 19-AUG-93
16 0.00 0.00 2,267,604.40 19-AUG-93
17 0.00 0.00 1,145,757.92 19-AUG-93
18 0.00 0.00 9,453,997.28 19-AUG-93
19 0.00 0.00 1,793,360.15 19-AUG-93
20 0.00 0.00 1,693,729.14 19-AUG-93
21 0.00 0.00 1,363,950.06 19-AUG-93
22 0.00 0.00 2,333,360.84 19-AUG-93
23 0.00 0.00 5,975,965.99 31-JUL-93
24 0.00 0.00 2,984,091.85 31-JUL-93
25 0.00 0.00 1,992,510.05 14-AUG-93
26 0.00 0.00 4,086,302.76 31-JUL-93
27 0.00 0.00 2,992,922.80 31-JUL-93
28 0.00 0.00 6,687,047.92 31-JUL-93
29 0.00 0.00 14,964,614.01 31-JUL-93
----------------------------------------------------------------
0.00 0.00 114,651,890.08
================================================================
</TABLE>
<PAGE>
EXHIBIT 10.26
CUSTODIAL AGREEMENT
THIS CUSTODIAL AGREEMENT (as amended and supplemented from time to
time, the "Agreement"), is entered into as of July 20, 1993, by and among Union
Bank, having an address at 14500 Roscoe Boulevard, Panorama City, California
91402 (the "Trustee"), LTC REMIC Corporation, having an address at 300 Esplanade
Drive, Suite 1260, Oxnard, California 93030 (the "Depositor"), Bankers Trust
Company, having an address at Four Albany Street, New York, New York 10006 (the
"Master Servicer") and Bankers Trust Company, having an address at Four Albany
Street, New York, New York 10006, (the "Custodian").
W I T N E S S E T H T H A T:
- - - - - - - - - - - - - -
WHEREAS, the Depositor, the Master Servicer, LTC Properties, Inc. (the
"Special Servicer") and the Trustee have entered into a Pooling and Servicing
Agreement dated as of July 20, 1993 (as amended and supplemented from time to
time, the "Pooling and Servicing Agreement"); and
WHEREAS, the Custodian has agreed to (i) act as agent for the Trustee
for the purposes of receiving and holding certain documents and other
instruments delivered by the Depositor under the Pooling and Servicing
Agreement, (ii) act as Paying Agent under the terms of the Pooling and Servicing
Agreement, and (iii) act as Certificate Registrar under the terms of the Pooling
and Servicing Agreement, all upon the terms and conditions and subject to the
limitations hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements hereinafter set forth, the Trustee, the Depositor, the
Master Servicer, and the Custodian hereby agree as follows:
ARTICLE I
Definitions
Capitalized words and phrases used but not otherwise defined in this
Agreement shall have the respective meanings assigned to them in the Pooling and
Servicing Agreement.
ARTICLE II
Custody of Mortgage Documents
Section 2.1. Custodian to Act as Agent; Acceptance of Mortgage
-------------------------------------------------
Files. The Custodian, as the duly appointed agent and bailee of the Trustee,
- -----
appointed pursuant to Section 2.02 of the Pooling and Servicing Agreement, for
these purposes, hereby accepts the agency contemplated hereunder and
acknowledges
<PAGE>
receipt as of the Closing Date of the following documents and, as agent for the
Trustee, agrees to verify receipt of the following documents pertaining to each
of the Mortgage Loans identified on the Mortgage Loan Schedule attached to the
Pooling and Servicing Agreement in accordance with Section 2.2 hereof:
(a) the original Note, showing a complete chain of endorsement from the
Originator to the Depositor, and endorsed by the Depositor without
recourse to the order of the Trustee in the following form: "Pay to
the order of Union Bank, as Trustee under that certain Pooling and
Servicing Agreement, dated as of July 20, 1993, for LTC Commercial
Mortgage Pass-Through Certificates, Series 1993-1, without recourse";
(b) the original recorded Mortgage showing the Depositor as mortgagee or
accompanied by original recorded assignments showing a complete chain
of title to the Depositor, or, if any such original Mortgage or
assignment has not been returned from the applicable public recording
office, a copy of thereof certified by the Depositor to be a true and
complete copy of the original thereof to be submitted for recording;
(c) an executed Assignment of Mortgage, in form suitable for recordation
in the jurisdiction in which the Mortgaged Property is located from
Depositor to: "Union Bank, as Trustee under that certain Pooling and
Servicing Agreement, dated as of July 20, 1993, for LTC Commercial
Mortgage Pass-Through Certificates, Series 1993-1";
(d) if the related security agreement is separate from the Mortgage, the
original executed version of such security agreement and any
intervening assignments thereof, including the assignment thereof to
the Depositor and the Trustee;
(e) a copy of the UCC-1 financing statement or statements and related
continuation statements, if any, relating to the Mortgage Loan, each
with evidence of filing thereon, together with an original executed
form UCC-2 or UCC-3, in a form suitable for filing in the jurisdiction
in which the Mortgaged Property is located, disclosing the assignment
to the Trustee of the Depositor's and the Originator's security
interest in the personal property, if any, constituting security for
repayment of the Mortgage Loan;
(f) the original of each assumption, modification, written assurance or
substitution agreement, if any, relating to such Mortgage Loan;
-2-
<PAGE>
(g) the original lender's title insurance policy, together with any
endorsements thereto, or, with respect to each Mortgage Loan not
covered by a title insurance policy, a preliminary title report and an
attorney's opinion of title issued as of the date of origination of
the Mortgage Loan given by an attorney licensed to practice law in the
jurisdiction where the Mortgaged Property is located;
(h) the original of any guaranty or letter of credit relating to the
Mortgage Loan;
(i) if any related Assignment of Leases, Rents and Profits is separate
from the Mortgage, the original executed version thereof, together
with an executed reassignment of such instrument (a "Reassignment of
Assignment of Leases, Rents and Profits") in suitable form for
recordation in the jurisdiction in which the Mortgaged Property is
located from the Depositor to the Trustee (which reassignment,
however, may be included in the Assignment of Mortgage and need not be
a separate instrument);
(j) any and all amendments, modifications and supplements to, and waivers
related to, any of the foregoing;
(k) any other written agreements related to the Mortgage Loan; and
(l) the original of any environmental indemnity agreement relating to the
Mortgage Loan.
The Trustee also hereby delivers to the Custodian a list (the
"Assignments of Mortgage List"), that has been prepared by the Depositor or its
agent and delivered to the Trustee pursuant to Section 2.01 of the Pooling and
Servicing Agreement, of each Mortgage Loan, by Loan Number, as to which the
related Assignment of Mortgage has been submitted for recording in the
applicable jurisdiction.
On the Closing Date, the Custodian shall, to the extent possession
thereof has been delivered to it, deliver to the Master Servicer (a) for
recordation in accordance with Section 2.01 of the Pooling and Servicing
Agreement, (i) each original Assignment of Mortgage referred to in Section
2.1(c) which has not yet been submitted for recording and (ii) each Reassignment
of Assignment of Leases, Rents and Profits referred to in Section 2.1(i) (if not
otherwise included in the related Assignment of Mortgage) which has not yet
been submitted for recordation, and (b) for filing in accordance with Section
2.01 of the Pooling and Servicing Agreement, each UCC-2 or UCC-3 referred to in
Section 2.1(e) which has not yet been submitted for filing.
-3-
<PAGE>
From time to time the Depositor may forward or cause to be forwarded
to the Custodian additional original documents evidencing an assumption or
modification of a Mortgage Loan. All Mortgage Loan documents held by the
Custodian as to each Mortgage Loan shall hereinafter be referred to as the
"Mortgage File".
Section 2.2. Review of Mortgage Files.
------------------------
Within 45 days following the Closing Date the Custodian shall review
each Mortgage File to ascertain that all documents referred to in Section 2.1
above have been received, have been executed, appear to be what they purport to
be, purport to be recorded or filed (as applicable) and have not been torn,
mutilated or otherwise defaced, and that such documents relate to the Mortgage
Loans identified in the Mortgage Loan Schedule. In so doing, the Custodian may
rely on the purported due execution and genuineness of any such document and on
the purported genuineness of any signature thereon. At the conclusion of such
review, the Custodian shall promptly notify the Trustee and the Depositor, with
a copy to the Master Servicer and the Special Servicer, by providing a written
report in the form attached as Exhibit A (the "Custodian's Exception Report")
and, if the Custodian finds that (a) any document or documents constituting a
part of a Mortgage File have not been executed or received, have not been
recorded or filed (if required), are unrelated to the Mortgage Loans identified
in the Mortgage Loan Schedule, appear not to be what they purport to be or have
been torn, mutilated or otherwise defaced or (b) any Assignment of Mortgage has
not been submitted for recording, such report shall set forth for each affected
Mortgage Loan, with particularity, the nature of the defective or missing
document or the lack of evidence of recordation. The Custodian shall not be
responsible for any loss, cost, damage or expense to the Trust Fund resulting
from any failure to receive any document constituting a portion of a Mortgage
File noted on a Custodian's Exception Report or for any failure by the Depositor
to use its best efforts to deliver any such documents.
The Custodian shall have no responsibility for reviewing any Mortgage
File except as expressly provided above. Without limiting the effect of the
preceding sentence, in reviewing any Mortgage File pursuant to this Agreement,
the Custodian shall have no responsibility for determining whether any document
or opinion is valid and binding, whether the text of any deed, assignment or
endorsement is in proper or recordable form (except, if applicable, to determine
if the Trustee is the grantee, assignee or endorsee), whether any document has
been recorded in accordance with the requirements of any applicable
jurisdiction, whether a blanket assignment is permitted in any applicable
jurisdiction, or whether any Person executing any document or rendering any
opinion is authorized to do so or whether any signature thereon is genuine.
-4-
<PAGE>
The Custodian shall hold that portion of the Trust Fund delivered to
the Custodian consisting of "instruments" (as such term is defined in Section
9105 (i) of the Uniform Commercial Code as in effect in New York on the date
thereof) in New York, and, except as otherwise specifically provided in this
Agreement, shall not remove such instruments from New York unless it receives an
Opinion of Counsel (obtained and delivered at the expense of the Person
requesting the removal of such instruments from New York) that in the event the
transfer of the Mortgage Loans to the Trustee is deemed not to be a sale, after
such removal, the Trustee will possess a first priority perfected security
interest in such instruments.
Section 2.3. Release of Mortgage Files. Upon (i) the payment in full
-------------------------
of any Mortgage Loan, or (ii) the repurchase of any Mortgage Loan pursuant to
the Pooling and Servicing Agreement, and upon receipt by the Custodian of an
Officers' Certificate of the Master Servicer, the Special Servicer, as the case
may be, stating that all amounts required by the Pooling and Servicing Agreement
in connection with such payment, purchase or repurchase have been deposited in
the Collection Account pursuant to the Pooling and Servicing Agreement, the
Custodian shall promptly release the related Mortgage File to the Master
Servicer or Servicer, as applicable.
From time to time, the Custodian, shall, upon request of the Master
Servicer or Special Servicer and delivery to the Custodian of a Request for
Release, promptly release the Mortgage File (or any portion thereof) designated
in such Request for Release to the Master Servicer or Special Servicer, as
applicable. The Trustee agrees promptly to deliver to the Custodian any such
Request for Release received by it. Upon receipt of (a) such Mortgage File (or
portion thereof) from the Master Servicer or the Special Servicer as applicable,
or (b) in the event of a liquidation or the loan becoming an REO Property, of a
certificate of a Special Servicer Officer stating that such Mortgage Loan was
liquidated and that all amounts received or to be received in connection with
such liquidation which are required to be deposited into the Collection Account
or Distribution Account have been remitted to the Master Servicer for such
deposit or that such Mortgage Loan has become an REO Property, the Custodian
shall release a true and correct copy of the Request for Release to the Master
Servicer or the Special Servicer, as applicable, with a notation thereon
acknowledging receipt of the Mortgage File or the certificate of the Special
Servicer specified in clause (b) above.
Section 2.6. Audit and Examination of Mortgage Files. Upon reasonable
---------------------------------------
notice to the Custodian, the Trustee, the Master Servicer, the Special Servicer,
the Depositor, or any of their respective agents will be permitted, during
normal business hours, to examine the Mortgage Files, documents, records and
-5-
<PAGE>
other papers in possession of or under the control of Custodian relating to any
or all of the Mortgage Loans.
Section 2.7. Copies of Mortgage Files. Upon the written request of the
------------------------
Trustee, the Master Servicer, the Special Servicer, the Custodian shall timely
provide to the Trustee, the Master Servicer, the Special Servicer or the
Depositor, as the case may be, copies of the documents which constitute the
Mortgage Files. The Master Servicer shall pay all costs and expenses incurred by
the Custodian in preparing such copies.
Section 2.8. Safekeeping. The Custodian shall segregate the Mortgage Files
-----------
from all other mortgages and mortgage notes and similar records in its
possession, and agrees to hold the Mortgage Files in California on behalf of the
Trustee for the use and benefit of all present and future Certificateholders, to
maintain accurate records pertaining to each Note and Mortgage in the Mortgage
Files as will enable the Trustee to comply with the terms and conditions of the
Pooling and Servicing Agreement and at all times to maintain a current inventory
thereof and to conduct periodic physical inspections of the Mortgage Files held
by it under this Agreement in such a manner as shall enable the Trustee to
verify the accuracy of such inventory and record keeping. The Custodian will
promptly report to the Trustee any failure on its part to hold the Mortgage
Files as herein provided and promptly take appropriate action to remedy any such
failure.
Section 2.9. Administration; Reports. In general, the Custodian shall
-----------------------
attend to all nondiscretionary details in connection with maintaining custody of
the Mortgage Files on behalf of the Trustee, and to provide the Trustee with
notification of any change in status of any Mortgage File. In addition, the
Custodian shall assist the other parties hereto who are preparing reports to
Certificateholders or to regulatory bodies, at the request of any such party and
to the extent necessitated by the Custodian's custody of the Mortgage Files.
ARTICLE III
Concerning the Custodian
Section 3.1. Custodian a Bailee and Agent of the Trustee. With respect to
-------------------------------------------
each Mortgage Note, Mortgage, policy and other documents constituting each
Mortgage File which are delivered to the Custodian, the Custodian hereby agrees
to act as the agent and bailee of the Trustee, and to hold such documents, in
trust, for the exclusive use and benefit of all present and future
Certificateholders and undertakes to perform such duties and only such duties as
are specifically set forth in this Agreement. The Custodian may not delegate any
of its duties hereunder without the prior written consent of the Trustee. The
Custodian shall segregate and maintain all documents constituting
-6-
<PAGE>
the Mortgage Files received by it for the benefit of the Certificaterholders in
secure facilities in accordance with customary standards for such custody. The
Mortgage Files shall be maintained in secure fireproof facilities. Except upon
compliance with the provisions of Section 2.3 of this Agreement, no Mortgage
Note, Mortgage or other document constituting a part of a Mortgage File shall be
delivered by the Custodian to the Depositor, the Master Servicer or the Special
Servicer or otherwise released from the possession of the Custodian.
Section 3.2. Indemnification. The Depositor hereby agrees to indemnify
---------------
and hold harmless the Custodian from and against all claims, liabilities,
losses, actions, suits or proceedings at law or in equity, or any other
expenses, fees or charges of any character or nature, which the Custodian may
incur or with which the Custodian may be threatened by reasons of its acting as
custodian under this Agreement, including indemnification of the Custodian
against any and all expenses, including attorneys' fees if counsel for the
Custodian has been approved by the Depositor (provided such consent shall not be
unreasonably withheld), and the cost of defending any action, suit or
proceeding or resisting any claim. The Depositor further agrees to indemnify
the Trustee from and against all claims, liabilities, losses, actions, suits, or
proceedings at law or in equity, or any other expenses, fees or charges of any
character or nature, which the Trustee may incur by reason of any negligent act
or any negligent failure to act on the part of the Custodian.
Section 3.3. No Adverse Interest of Custodian. By execution of this
--------------------------------
Agreement, the Custodian represents, warrants and covenants that it currently
holds, and during the existence of this Agreement shall hold, no interest
adverse to the Trustee or the Certificateholders, by way of security or
otherwise, in any Mortgage Loan, and hereby waives and releases any such
interest which it may have in any Mortgage Loan as of the date hereof. Without
limiting the generality of the foregoing, the Custodian shall not at any time
exercise or seek to enforce any claim, right or remedy, including any statutory
or common law right of set-off, if any, that the Custodian may otherwise have
against any Mortgage Loan, against all or part of any Mortgage File or against
the proceeds of either.
Section 3.4. Master Servicer to Pay Custodian's Fees and Expenses. The
----------------------------------------------------
Master Servicer covenants and agrees to pay to the Custodian from time to time,
and the Custodian shall be entitled to, reasonable compensation for all services
rendered by it in the exercise and performance of any of the powers and duties
hereunder of the Custodian, and the Master Servicer will pay or reimburse the
Custodian upon its request for all reasonable expenses, disbursements and
advances incurred or made by the Custodian in accordance with any of the
provisions of this Agreement (including the reasonable compensation and the
expenses and disbursements of its counsel and of all persons not regularly
-7-
<PAGE>
in its employ), except any such expense, disbursement or advance as may arise
form its negligence or bad faith.
Section 3.5. Custodian May Resign; Trustee May Remove Custodian. The
--------------------------------------------------
Custodian may resign from the obligations and duties hereby imposed upon it as
such obligations and duties relate to its acting as Custodian of the Mortgage
Loans by giving 90 days' prior written notice thereof to the Depositor, the
Master Servicer, the Special Servicer and the Trustee. Upon receiving such
notice of resignation, the Trustee shall either take custody of the Mortgage
Files itself and give prompt notice thereof to the Depositor, the Master
Servicer and the Special Servicer or promptly appoint a successor Custodian by
written instrument, in duplicate, which instrument shall be delivered to the
resigning Custodian, the successor Custodian, the Depositor, the Master Servicer
and the Special Servicer. If the Trustee shall not have taken custody of the
Mortgage Files and no successor Custodian shall have been so appointed and have
accepted appointment within 30 days after the giving of such notice of
resignation, the resigning Custodian may petition any court of competent
jurisdiction for the appointment of a successor Custodian.
The Trustee may, with or without cause, remove the Custodian at any
time. In such event, the Trustee shall appoint, or petition a court of competent
jurisdiction to appoint, a successor Custodian hereunder. Any successor
Custodian shall be a depository institution or a trust company subject to
supervision by federal or state authority and shall be able to satisfy the other
requirements contained in Section 3.7.
Any resignation or removal of the Custodian and appointment of a
successor Custodian pursuant to any of the provisions of this Section 3.5 shall
become effective upon acceptance of appointment by the successor Custodian. The
Trustee shall give prompt notice to the Depositor, the Master Servicer and the
Special Servicer of the appointment of any successor Custodian. No successor
Custodian shall be appointed by the Trustee without the prior approval of the
Depositor.
Section 3.6. Merger or Consolidation of Custodian. Any Person into
------------------------------------
which the Custodian may be merged or converted or with which it may be
consolidated, or any Person resulting from any merger, conversion or
consolidation to which the Custodian shall be a party, or any Person succeeding
to the business of the Custodian, shall be the successor of the Custodian
hereunder, provided such Person shall be able to satisfy the requirements in
Section 3.7., without the execution or filing of any paper or any further act on
the part of any of the parties hereto, anything herein to the contrary
notwithstanding.
Section 3.7. Representations of the Custodian. The Custodian hereby
--------------------------------
represents and warrants that (i) it is a
-8-
<PAGE>
depository institution or a trust company subject to supervision by a federal or
state authority, has a combined capital and surplus of at least $50,000,000 and
is qualified to do business in the jurisdiction in which it will hold any
Mortgage File, (ii) it has been duly organized and is validly existing in good
standing under the laws of its jurisdiction of organization, (iii) it is duly
authorized to execute and deliver this Agreement and to perform its obligations
hereunder and has taken all necessary action to authorize such execution,
delivery and performance, (iv) the person signing this Agreement on its behalf
is duly authorized to do so on its behalf, (v) it has obtained all
authorizations of any governmental body required in connection with this
Agreement and such authorizations are in full force and effect, (vi) the
execution, delivery and performance of this Agreement will not violate any law,
ordiance, charter, by-law or rule applicable to it, any agreement by which it is
bound or by which any of its assets are affected or any judgment, decree or
order applicable to it of any court or other governmental authority and (vii)
this Agreement constitutes its legal, valid and binding obligation, enforceable
in accordance with its respective terms, except that the enforceability hereof
may be subject to the effects of any applicable bankruptcy, insolvency,
reorganization, moratorium or other similar law now or hereafter in effect
relating to creditors' rights and to general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
Section 3.8. Insurance. The Custodian shall, at its own expense,
---------
maintain in full force and effect at all times during the existence of this
Agreement the following:
(a) fidelity insurance;
(b) theft of documents insurance;
(c) forgery insurance; and
(d) errors and omission insurance.
All such insurance shall be in amounts with standard coverage and subject to
deductibles as is customary for insurance typically maintained by depository
institutions or trust companies which act as custodians, which insurance may be
self-insurance. The Custodian shall, upon written request, provide to the
Depositor or the Trustee a copy of any policy or certificate of insurance
required to be maintained by the Custodian pursuant to this Agreement.
ARTICLE IV
Custodian to Act as Certificate Registrar
and Paying Agent
Section 4.1. Custodian as Certificate Registrar. Pursuant to Section
----------------------------------
5.02 of the Pooling and Servicing Agreement,
-9-
<PAGE>
the Trustee hereby appoints the Custodian and the Custodian hereby accepts the
appointment, to act as Certificate Registrar in accordance with the terms of the
Pooling and Servicing Agreement.
Section 4.2. Custodian as Paying Agent. Pursuant to Section 5.06 of
-------------------------
the Pooling and Servicing Agreement, the Trustee hereby appoints the Custodian,
and the Custodian hereby accepts the appointment, to act as Paying Agent in
accordance with the terms of the Pooling and Servicing Agreement.
ARTICLE V
Miscellaneous Provisions
Section 5.1. Notices. All demands, notices and communications required
-------
under this Agreement or pursuant to any other instrument or document delivered
hereunder shall be in writing and shall be deemed to have been given upon
receipt at the addresses shown on the first page hereof, or such other address
as may hereafter be furnished to the other parties by like notice.
Section 5.2. Amendments. No modification or amendment of or supplement
----------
to this Agreement shall be valid or effective unless the same is in writing and
signed by all parties hereto and neither the Depositor, the Master Servicer, nor
the Trustee shall enter into any amendment hereof except as permitted by the
Pooling and Servicing Agreement. The Trustee shall give prompt notice to the
Custodian of any amendment or supplement to the Pooling and Servicing Agreement
and furnish the Custodian with written copies thereof.
Section 5.3. Governing Law. This Agreement shall be deemed a contract
-------------
made under the laws of the State of New York and shall be construed and enforced
in accordance with and governed by the laws of the State of New York.
Section 5.4. Recordation of Agreement. To the extent permitted by
------------------------
applicable law, this Agreement is subject to recordation in all appropriate
public offices for real property records in all the counties or other comparable
jurisdictions in which any or all of the properties subject to the Mortgages are
situated, and in any other appropriate public recording office or elsewhere,
such recordation to be effected by the Master Servicer and at its expense, but
only upon direction of the Trustee accompanied by an Opinion of Counsel to the
effect that such recordation materially and beneficially affects the interests
of the Certificateholders.
Section 5.5. Counterparts. For purpose of facilitating the recordation
------------
of this Agreement as herein provided and for other purposes, this Agreement may
be executed
-10-
<PAGE>
simultaneously in any number of counterparts, each of which counterparts shall
be deemed to be an original, and such counterparts shall constitute but one and
the same instrument.
Section 5.6. Severability of Provisions. If any one or more of the
--------------------------
covenants, agreements, provisions or terms of this Agreement shall be for any
reason whatsoever held invalid, then, to the extent permitted by applicable law,
such covenants, agreements, provisions or terms shall be deemed severable from
the remaining covenants, agreements, provisions or terms of this Agreement and
shall in no way affect the validity or enforceability of the other provisions of
this Agreement or of the Certificates or the rights of the Holders thereof.
Section 5.7. Termination of Agreement. Unless terminated earlier by
------------------------
the parties hereto, this Agreement shall terminate upon the termination of the
Pooling and Servicing Agreement.
Section 5.8. Assignment. Except as otherwise expressly set forth in
----------
this Agreement, no party to this Agreement may assign its rights or delegate its
obligations under this Agreement without the express written consent of the
other parties, and any assignment made without such consent shall be null and
void for all purposes.
Section 5.9. No Partnership. Nothing herein shall be deemed or
--------------
construed to create a partnership or joint venture between or among the parties
hereto.
Section 5.10. Prior Agreements. This Agreement shall supersede all
----------------
agreements prior to the date hereof with respect to the subject matter hereof.
-11-
<PAGE>
IN WITNESS WHEREOF, this Agreement is executed as of the date first
above written.
UNION BANK
as Trustee
By: /s/ Andrew R. Bill
--------------------------------
Name: Andrew R. Bill
Title: Assistant Vice President
LTC REMIC CORPORATION,
as Depositor
By: /s/ William McBride III
--------------------------------
Name: William McBride III
Title: President
BANKERS TRUST COMPANY,
as Master Servicer
By: /s/ Tracy A. Gevant
--------------------------------
Name: Tracy A. Gevant
Title: Assistant Vice President
BANKERS TRUST COMPANY,
as Custodian
By: /s/ Tracy A. Gevant
--------------------------------
Name: Tracy A. Gevant
Title: Assistant Vice President
-12-
<PAGE>
CUSTODIANS'S EXCEPTION REPORT
[DATE]
Union Bank
14500 Roscoe Boulevard
Panorama City, CA 91402
Attention:________________
LTC REMIC Corporation
300 Esplanade Drive
Suite 1260
Oxnard, CA 93030
Re: Custodial Agreement dated as of July 20, 1993 among LTC REMIC
Corporation, as Depositor, BAnkers Trust Company, in its capacity as
both Master Servicer and Custodian, and Union Bank, as Trustee (the
"Custodial Agreement")
Ladies and Gentlemen:
This exception report is being delivered to you in accordance with
Section 2.2 of the Custodial Agreement.
The Custodian certifies that it has reviewed the Mortgage Files with
respect to the Mortgage Loans listed on the Mortgage Loan Schedule and that,
except as noted on the exception list attached hereto, as to each Mortgage Loan
listed in the Mortgage Loan Schedule:
(1) it has received all documents referred to in Section 2.1 of the
Custodial Agreement (as identified to it in writing by the Depositor in
the case of the documents referred to in Section 2.1(d), (e), (f), (g) (in
the case of endorsements), (h), (i), (j) and (k));
(2) it has received all documents described in Section 2.1 as
original or certified recorded documents in such form;
(3) each such document has been executed, appears to be what it
purports to be, purports to be recorded or filed (as applicable) and has
not been torn, mutilated or otherwise defaced; and
(4) each document relates to the Mortgage Loan identified in the
Mortgage Loan Schedule.
<PAGE>
The Custodian has made no independent examination of any documents
contained in the Mortgage Files beyond the review specifically required by the
Custodial Agreement. The Custodian makes no representations as to whether any
document is valid and binding, whether the text of any assignment or endorsement
is in proper or recordable form (except, if applicable, to determine if the
Custodian is the assignee or endorsee), whether any document has been recorded
in accordance with the requirements of any applicable jurisdiction, whether a
blanket assignment is permitted in any applicable jurisdiction, or whether any
person executing any document is authorized to do so or whether any signature
thereon is genuine.
Capitalized terms used in this report have the meanings assigned to
them in the Custodial Agreement.
BANKERS TRUST COMPANY,
as Custodian
By ___________________________
Name:
Title:
<PAGE>
EXHIBIT 10.27
EXHIBIT A-5
<PAGE>
PRINCIPAL PAYMENTS ON THIS CERTIFICATE ARE PAYABLE IN INSTALLMENTS AS SET FORTH
HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS CERTIFICATE AT ANY
TIME MAY BE LESS THAN THE INITIAL CERTIFICATE PRINCIPAL AMOUNT SET FORTH BELOW.
THE RIGHTS OF HOLDERS OF THE CLASS E CERTIFICATES TO RECEIVE DISTRIBUTIONS OF
PRINCIPAL AND INTEREST IN RESPECT OF THE MORTGAGE LOANS WILL BE SUBORDINATED TO
THE RIGHTS OF THE CLASS A, CLASS B, CLASS C, CLASS D, CLASS I-1, CLASS I-2,
CLASS R AND CLASS LR CERTIFICATES TO RECEIVE DISTRIBUTIONS OF INTEREST AND THE
RIGHTS OF HOLDERS OF THE CLASS A, CLASS B, CLASS C, CLASS D, CLASS R AND CLASS
LR CERTIFICATES TO RECEIVE DISTRIBUTIONS OF PRINCIPAL.
THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "1933 ACT") OR THE SECURITIES LAWS OF ANY STATE OF
THE UNITED STATES ("BLUE SKY LAWS"), AND SUCH CERTIFICATE MAY NOT BE OFFERED,
RESOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (1) TO A PERSON THAT THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF
RULE 144A PROMULGATED UNDER THE 1933 ACT IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, (2) PURSUANT TO AN EXEMPTION FROM REGISTRATION
PROVIDED BY RULE 144 UNDER THE 1933 ACT (IF AVAILABLE) OR (3) TO AN ACCREDITED
INVESTOR AS DEFINED IN REGULATION D UNDER THE 1933 ACT IN A TRANSACTION EXCEPT
FROM THE REGISTRATION REQUIREMENTS OF THE 1933 ACT, AND IN EACH CASE IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES. NO REPRESENTATION IS MADE AS TO THE AVAILABILITY OF THE EXEMPTION
PROVIDED BY RULE 144 FOR RESALES OF THIS CERTIFICATE.
THIS CERTIFICATE MAY NOT BE PURCHASED BY OR TRANSFERRED TO ANY PERSON WHICH IS
AN EMPLOYEE BENEFIT PLAN SUBJECT TO THE FIDUCIARY RESPONSIBILITY PROVISIONS OF
THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR
SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") OR
ANY GOVERNMENTAL PLAN, AS DEFINED IN SECTION 3(32) OF ERISA SUBJECT TO ANY
FEDERAL, STATE OR LOCAL LAW WHICH IS, TO A MATERIAL EXTENT, SIMILAR TO THE
FOREGOING PROVISIONS OF ERISA OR THE CODE (COLLECTIVELY, A "PLAN"), OR ANY
PERSON INVESTING THE ASSETS OF A PLAN EXCEPT AS PROVIDED IN SECTION 5.03(b) OF
THE POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN.
<PAGE>
LTC COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATE,
SERIES 1993-1, CLASS E
evidencing a nonassessable, fully paid
percentage interest in a trust fund
which includes a pool of commercial mortgage loans
Pass-Through Rate: 9.78% No. R-
Initial Certificate Principal First Distribution Date:
Amount: $ August 28, 1993
Original Class E Aggregate Final Scheduled
Certificate Principal Amount: Distribution Date: November 28, 2012
$26,382,110.83
Cut-Off Date: July 20, 1993
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<PAGE>
This certifies that ____________________ is the registered owner of
the Percentage Interest evidenced by this Certificate (obtained by dividing the
initial Certificate Principal Amount of this Certificate by the Original Class E
Aggregate Certificate Principal Amount, each as noted on the face hereof) in the
Trust Fund, including the distributions to be made with respect to the Class E
Certificates. The Trust Fund, described more fully below, consists primarily of
Mortgage Loans held in trust by the Trustee and serviced by the Master Servicer
and the Special Servicer, as applicable. The Trust Fund was created, and the
Mortgage Loans are to be serviced, pursuant to the Agreement (as defined below).
The Holder of this Certificate, by virtue of the acceptance hereof, assents to
the terms, provisions and conditions of the Agreement and is bound thereby. Also
issued under the Agreement are Class A, Class B, Class C, Class D, Class I-1
Class I-2, Class R and Class LR Certificates (together with the Class E
Certificates, the "Certificates") (the Holders of Certificates issued under the
Agreement are collectively referred to herein as "Certificateholders").
This Certificate is issued pursuant to, and in accordance with, the
terms of a Pooling and Servicing Agreement dated as of July 20, 1993 (the
"Agreement") among LTC REMIC Corporation, as Depositor, Bankers Trust Company,
as Master Servicer, LTC Properties, Inc., as Special Servicer, and Union Bank,
as Trustee. To the extent not defined herein, capitalized terms used herein
shall have the meanings assigned thereto in the Agreement.
THIS CERTIFICATE DOES NOT REPRESENT AN INTEREST IN OR A DEPOSIT OR
OBLIGATION OF THE DEPOSITOR, THE ORIGINATOR, THE MASTER SERVICER, THE SPECIAL
SERVICER OR THE TRUSTEE, OR ANY OF THEIR AFFILIATES. THIS CERTIFICATE IS NOT
INSURED OR GUARANTEED BY ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY OR BY ANY
PRIVATE ENTITY.
This Certificate represents a "regular interest" in a "real estate
mortgage investment conduit," as those terms are defined, respectively, in
Sections 860G(a) (1) and 860D of the Internal Revenue Code of 1986, as amended
(the "Code"). Each Holder of this Certificate, by acceptance hereof, agrees to
treat, and to take no action inconsistent with the treatment of, this
Certificate in accordance with the preceding sentence for purposes of federal
income taxes, state and local income and franchise taxes and other taxes imposed
on or measured by income.
This Certificate is issued on August 4, 1993, and based on its issue
price of 73.90317%, including accrued interest, and a stated redemption price at
maturity equal to its initial principal balance (plus six days of interest at
the pass-through rate hereon), is issued with original issue discount ("OID")
for federal income tax purposes. Assuming that this Certificate pays
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<PAGE>
in accordance with projected cash flows reflecting the prepayment assumption of
3% CPR (as defined in the Offering Circular dated July 28, 1993 with respect to
the offering of the Class A Certificates, Class B Certificates, Class R
Certificates and Class LR Certificates) used to price this Certificate: (i) the
amount of OID as a percentage of the initial principal balance of this
Certificate is approximately 26.25983328%; (ii) the annual yield to maturity of
this Certificate, compounded monthly, is approximately 14.55%; and (iii) the
amount of OID allocable to the short first accrual period (August 4, 1993 to
August 28, 1993) as a percentage of the initial principal balance of this
Certificate, calculated using the exact method, is approximately 0.06392639%.
The Trustee makes no representation or warranty as to any of the
statements contained herein or the validity or sufficiency of the Certificates
or the Mortgage Loans and has executed and authenticated this Certificate in its
limited capacity as Trustee under the Agreement.
Pursuant to the terms of the Agreement, the Trustee, or the Paying
Agent on behalf of the Trustee, will distribute, on the twenty-eighth day of
each month or if any such twenty-eighth day is not a Business Day, on the next
succeeding Business Day (each such date, a "Distribution Date"), commencing in
August 1993, to the Person in whose name this Certificate is registered as of
the related Record Date, an amount equal to such Person's pro rata share (based
on the Percentage Interest represented by this Certificate) of that portion of
the aggregate amount of principal and interest then distributable, if any,
allocable to the Class E Certificates for such Distribution Date, all as more
fully described in the Agreement. The amount of interest which accrues on this
Certificate during an Interest Accrual Period will be subject to reduction with
respect to any Net Aggregate Prepayment Interest Shortfall allocated to the
Class E Certificates, as described in the Agreement.
Interest will accrue on the outstanding Certificate Principal Amount
of this Certificate at the Pass-Through Rate specified on the face of this
Certificate. Interest will be calculated on the basis of a 360-day year of
twelve 30-day months. Interest accrued on this Certificate during an Interest
Accrual Period, plus the Outstanding Class Interest Shortfall with respect to
this Certificate, if any, will be payable on the related Distribution Date to
the extent provided in the Agreement. The "Interest Accrual Period" relating to
any Distribution Date is the month beginning on the 21st day of the month
preceding the month in which such Distribution Date occurs and ending on the
20th day of the month in which such Distribution Date occurs, commencing in
July, 1993.
With the exception of the final distribution in respect of this
Certificate, distributions on this Certificate will be
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<PAGE>
made by the Trustee, Trustee, or the Paying Agent on behalf of the Trustee,
without the presentation or surrender of this Certificate or the making of any
notation hereon, by check mailed by first-class mail to the address of the
Holder set forth in the Certificate Register, or, provided the Holder holds
Certificates the aggregate initial Certificate Principal Amount of which exceeds
$5,000,000 and has provided the Trustee with wire instructions in writing at
least five Business Days before the related Record Date, by wire transfer of
immediately available funds to the account of such Holder at a bank or other
entity located in the United States and having appropriate facilities therefor.
The final distribution on this Certificate will be made in like manner after
notice by the Trustee of the pendency of such distribution and only upon
presentation and surrender of this Certificate at the Corporate Trust Office or
such other location specified in the notice to Holders of such final
distribution.
This Certificate is one of a duly authorized issue of Certificates
designated as LTC Commercial Mortgage Pass-Through Certificates, Series 1993-1
and represents a fractional undivided interest in a Trust Fund. As more fully
described in and subject to the limitations of the Agreement, the Trust Fund
will consist primarily of (i) such Mortgage Loans as from time to time are
subject to the Agreement, together with the Mortgage Files relating thereto;
(ii) all payments due on or collections in respect of the Mortgage Loans due
after the Cut-Off Date; (iii) any REO Property; (iv) all revenues received in
respect of any REO Property; (v) the rights of the Trustee, Master Servicer and
Special Servicer under the insurance policies with respect to the Mortgage Loans
required to be maintained pursuant to this Agreement and any proceeds thereof;
(vi) any Assignments of Leases, Rents and Profits; (vii) any guaranties given as
additional security for any Mortgage Loans; (viii) all assets deposited in the
Collection Account, the Distribution Account, the Upper-Tier Distribution
Account and the REO Account including reinvestment income; and (ix) the proceeds
of any of the foregoing.
This Certificate is limited in right of payment to, among other
things, certain collections and recoveries in respect of the Mortgage Loans, as
more specifically set forth herein and in the Agreement.
As provided in the Agreement, withdrawals from the Collection Account
may be made by the Master Servicer from time to time for purposes other than
distributions to Certificateholders, such purposes including, among other
things, reimbursement or payment to the Master Servicer, the Special Servicer or
the Trustee of certain expenses incurred or certain fees earned by the Master
Servicer, the Special Servicer or the Trustee, including, without limitation,
certain Nonrecoverable Advances.
-5-
<PAGE>
This Certificate does not purport to summarize the Agreement, and
reference is made to the Agreement for the interests, rights, benefits,
obligations and duties evidenced hereby, and the limitations thereon, and the
rights, duties and immunities of the Trustee.
As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Certificate Register only upon surrender of this Certificate for registration of
transfer at the office of the Certificate Registrar or at the office of its
agent in the City of New York. The Trustee or the Certificate Registrar may
require that this Certificate be duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Trustee and the Certificate
Registrar duly executed by, the Holder hereof or such Holder's attorney duly
authorized in writing. Thereupon, one or more new Certificates of a like
aggregate Percentage Interest in the same Class of authorized denominations will
be executed and authenticated by the Trustee and delivered by the Certificate
Registrar to the designated transferee or transferees.
Prior to due presentation of this Certificate for registration of
transfer, the Depositor, the Master Servicer, the Special Servicer, the Trustee,
the Certificate Registrar, any Paying Agent and any agent of any of them may
treat the Person in whose name this Certificate is registered as the owner
hereof for all purposes, and none of the Depositor, Master Servicer, the Special
Servicer, the Trustee, the Certificate Registrar, any Paying Agent or any agent
of any of them shall be affected by notice to the contrary.
As provided in the Agreement and subject to certain limitations herein
set forth, this Certificate is exchangeable for other Certificates of the same
Class of authorized denominations of like aggregate Percentage Interests, as
requested by the Holder surrendering the same.
No service charge will be made to a Certificateholder for any such
registration of transfer or exchange, but the Certificate Registrar may require
payment of a sum sufficient to cover any tax or other governmental charge
payable in connection therewith.
The Agreement permits, with certain exceptions therein provided, the
amendment of the Agreement and the modification of the rights of the
Certificateholders under the Agreement at any time by the Depositor, the Master
Servicer, the Special Servicer and the Trustee with the consent of the Holders
of Class A, Class B, Class C, Class D, Class E, Class I-1 Class I-2, Class R and
Class LR Certificates representing not less than 66-2/3% of the Voting Rights
allocated to each such Class of the Certificates affected by the amendment. Any
such consent by the Holder of
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<PAGE>
this Certificate shall be conclusive and binding on such Holder and upon all
future Holders of this Certificate and of any Certificates issued upon the
transfer hereof or in exchange herefor or in lieu hereof whether or not notation
of such consent is made upon this Certificate. The Agreement also permits the
amendment thereof in certain circumstances without the consent of the Holders of
any of the Certificates, provided that such amendment would not adversely affect
in any material respect the interests of any Certificateholder.
Each of the Master Servicer, any Holder of a Class LR Certificate and,
if all the Mortgage Loans are then Specially Serviced Mortgage Loans, the
Special Servicer, may at its option, upon not less than 30 days' prior notice
given to the Trustee, repurchase the Mortgage Loans and thereby effect an early
termination of the Trust Fund on any Distribution Date after the date on which
the aggregate Certificate Principal Amount of the Certificates (other than the
Class R or Class LR Certificates) is reduced to less than 10% of the initial
aggregate Certificate Principal Amount of the Certificates. All, but not less
than all, of the Mortgage Loans then included in the Trust Fund, and all
property acquired in respect of any Mortgage Loans, may be repurchased at a
purchase price, payable in cash, equal to not less than the greater of:
(i) the sum of:
(A) 100% of the unpaid principal balance of each Mortgage
Loan included in the Trust Fund as of the Early Termination
Determination Date;
(B) all unpaid interest accrued on such principal balance of
each such Mortgage Loan at the related Mortgage Interest Rate to such
Early Termination Determination Date; and
(C) the fair market value of all other property included in
the Trust Fund as of such Early Termination Determination Date; and
(ii) the aggregate fair market value (determined in accordance with
Section 9.01(d) (ii) (B) of the Agreement) of the Mortgage Loans, and all
other property acquired in respect of any Mortgage Loan in the Trust Fund,
as of the date of purchase.
The obligations created by the Agreement shall terminate upon the
earliest to occur of (i) the repurchase of all Mortgage Loans by the Master
Servicer, any Holder of a Class LR Certificate or the Special Servicer as
described above; (ii) the later of (a) the distribution to Certificateholders of
final payment with respect to the last outstanding Mortgage Loan or (b) the
disposition of all property acquired upon foreclosure or deed
-7-
<PAGE>
in lieu of foreclosure with respect to the last outstanding Mortgage Loan and
the remittance to the Certificateholders of all funds due under the Agreement;
or (iii) the sale of assets of the Trust Fund after the Certificate Principal
Amounts of all the Certificates (other than the Class R and Class LR
Certificates) have been reduced to zero under circumstances set forth in the
Agreement. In no event, however, will the trust created by the Agreement
continue beyond the expiration of 21 years from the death of the last surviving
descendant of a certain individual named in the Agreement living on the date
thereof.
Unless the Certificate of Authentication on this Certificate has been
executed by or on behalf of the Trustee, by manual signature, this Certificate
shall not be entitled to any benefit under the Agreement or be valid for any
purpose.
-8-
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.
UNION BANK, not in its individual
capacity but solely as Trustee
By:_____________________________________
Authorized Officer
This is one of the Class E Certificates referred to in the Agreement.
Dated:_____________________
BANKERS TRUST COMPANY, as Certificate
Registrar
By:_____________________________________
Authorized Officer
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned ("Assignor(s)") hereby sell(s),
assign(s) and transfer(s) unto _________________________________________________
________________________________________________________________________________
________________________________________________________________________________
__________________ (please print or typewrite name(s) and address(es), including
postal zip code(s) of assignee(s)) ("Assignee(s)") the entire Percentage
Interest represented by the within Class E Certificate and hereby authorize(s)
the registration of transfer of such interest to Assignee(s) on the Certificate
Register of the Trust Fund.
I (we) further direct the Certificate Registrar to issue a new Class E
Certificate of the entire Percentage Interest represented by the within Class E
Certificates to the above-named Assignee(s) and to deliver such Class E
Certificate to the following address:
________________________________________________________________________________
________________________________________________________________________________
Dated:________________ ______________________________
Signature by or on behalf of
Assignor(s)
______________________________
Taxpayer Identification Number
<PAGE>
DISTRIBUTION INSTRUCTIONS
The Assignee(s) should include the following for purposes of
distribution:
Address of the Assignee(s) for the purpose of receiving notices and
distributions:__________________________________________________________________
________________________________________________________________________________
Distributions, if be made by wire transfer in immediately available funds to ___
________________________________________________________________________________
for account of _________________________________________________________________
account number _________________________________________________________________
This information is provided by ________________________________________________
the Assignee(s) named above, or ________________________________________________
as its (their) agent.
By_________________________________
_________________________________
[Please print or type name(s)]
_________________________________
Title
_________________________________
Taxpayer Identification Number
<PAGE>
EXHIBIT A-6
<PAGE>
THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "1933 ACT") OR THE SECURITIES LAWS OF ANY STATE OF
THE UNITED STATES ("BLUE SKY LAWS"), AND SUCH CERTIFICATE MAY NOT BE OFFERED,
RESOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (1) TO A PERSON THAT THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF
RULE 144A PROMULGATED UNDER THE 1933 ACT IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, (2) PURSUANT TO AN EXEMPTION FROM REGISTRATION
PROVIDED BY RULE 144 UNDER THE 1933 ACT (IF AVAILABLE) OR (3) TO AN ACCREDITED
INVESTOR AS DEFINED IN REGULATION D UNDER THE 1933 ACT IN A TRANSACTION EXEMPT
FROM THE REGISTRATION REQUIREMENTS OF THE 1933 ACT, AND IN EACH CASE IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES.
THIS CERTIFICATE MAY NOT BE PURCHASED BY OR TRANSFERRED TO ANY PERSON WHICH IS
AN EMPLOYEE BENEFIT PLAN SUBJECT TO THE FIDUCIARY RESPONSIBILITY PROVISIONS OF
THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR
SECTION 4975 OF THE CODE OR ANY GOVERNMENTAL PLAN, AS DEFINED IN SECTION 3(32)
OF ERISA SUBJECT TO ANY FEDERAL, STATE OR LOCAL LAW WHICH IS, TO A MATERIAL
EXTENT, SIMILAR TO THE FOREGOING PROVISIONS OF ERISA OR THE CODE (COLLECTIVELY,
A "PLAN"), OR ANY PERSON INVESTING THE ASSETS OF A PLAN.
LTC COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATE,
SERIES 1993-1, CLASS I-1
evidencing a nonassessable, fully paid
percentage interest in a trust fund
which includes a pool of commercial mortgage loans
No. R
Percentage Interest evidenced First Distribution Date:
by this Certificate: August 28, 1993
Initial Class I-1 Certificate Final Scheduled
Notional Amount $88,270,000.00 Distribution Date: November 28, 2012
Cut-off Date: July 20, 1993
<PAGE>
This certifies that _____________________ is the registered owner of
the Percentage Interest evidenced by this Certificate in monthly Distributions
to Holders of Class I-1 Certificates with respect to the Trust Fund. The Trust
Fund, described more fully below, consists primarily of Mortgage Loans held in
trust by the Trustee and serviced by the Master Servicer and the Special
Servicer, as applicable. The Trust Fund was created, and the Mortgage Loans are
to be serviced, pursuant to the Agreement (as defined below) . The Holder of
this Certificate, by virtue of the acceptance hereof, assents to the terms,
provisions and conditions of the Agreement and is bound thereby. Also issued
under the Agreement are Class A, Class B, Class C, Class D, Class E, Class I-2,
Class R and Class LR Certificates (together with the Class I-1 Certificates, the
"Certificates") (the Holders of Certificates issued under the Agreement are
collectively referred to herein as "Certificateholders").
This Certificate is issued pursuant to, and in accordance with, the
terms of a Pooling and Servicing Agreement dated as of July 20, 1993 (the
"Agreement") among LTC REMIC Corporation, as Depositor, Bankers Trust Company,
as Master Servicer, LTC Properties, Inc., as Special Servicer, and Union Bank,
as Trustee. To the extent not defined herein, capitalized terms used herein
shall have the meanings assigned thereto in the Agreement.
THIS CERTIFICATE DOES NOT REPRESENT AN INTEREST IN OR A DEPOSIT OR
OBLIGATION OF THE DEPOSITOR, THE ORIGINATOR, THE MASTER SERVICER, THE SPECIAL
SERVICER OR THE TRUSTEE, OR ANY OF THEIR AFFILIATES. THIS CERTIFICATE IS NOT
INSURED OR GUARANTEED BY ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY OR BY ANY
PRIVATE ENTITY.
This Certificate represents a "regular interest" in a "real estate
mortgage investment conduit," as those terms are defined, respectively, in
Sections 860G(a) (1) and 860D of the Internal Revenue Code of 1986, as amended
(the "Code") . Each Holder of this Certificate, by acceptance hereof, agrees to
treat, and to take no action inconsistent with the treatment of, this
Certificate in accordance with the preceding sentence for purposes of federal
income taxes, state and local income and franchise taxes and other taxes imposed
on or measured by income.
The Trustee makes no representation or warranty as to any of the
statements contained herein or the validity or sufficiency of the Certificates
or the Mortgage Loans and has executed and authenticated this Certificate in its
limited capacity as Trustee under the Agreement.
Pursuant to the terms of the Agreement, the Trustee, or the Paying
Agent on behalf of the Trustee, will distribute, on the twenty-eighth day of
each month or if any such twenty-eighth day is not a Business Day, on the next
succeeding Business Day
-2-
<PAGE>
(as defined in the Offering Circular dated July 28, 1993 with respect to the
offering of the Class A Certificates, Class B Certificates, Class R Certificates
and Class LR Certificates) used to price this Certificate : (i) the amount of
OlD as a percentage of the initial Class I-1 Notional Amount is approximately
5.93847162%; (ii) the annual yield to maturity of this Certificate, compounded
monthly, is approximately 14.55%; and (iii) the amount of OID allocable to the
short first accrual period (August 4, 1993 to August 28, 1993) as a percentage
of the initial Class I-1 Notional Amount, calculated using the exact method, is
approximately 0.09007530%.
The Trustee makes no representation or warranty as to any of the
statements contained herein or the validity or sufficiency of the Certificates
or the Mortgage Loans and has executed and authenticated this Certificate in its
limited capacity as Trustee under the Agreement.
Pursuant to the terms of the Agreement, the Trustee, or the Paying
Agent on behalf of the Trustee, will distribute, on the twenty-eighth day of
each month or if any such twenty-eighth day is not a Business Day, on the next
succeeding Business Day (each such date, a "Distribution Date"), commencing in
August 1993, to the Person in whose name this Certificate is registered as of
the related Record Date, an amount equal to such Person's pro rata share (based
on the Percentage Interest represented by this Certificate) of that portion of
the aggregate amount of interest then distributable, if any, allocable to the
Class I-1 Certificates for such Distribution Date, all as more fully described
in the Agreement. The Class I-1 Certificates are not entitled to receive
distributions of principal. Interest will accrue on the Class I-1 Certificates
during each Interest Accrual Period in an amount equal to the sum of (i) the
product of 1/12 of 2.68% and the then outstanding Class A Certificate Principal
Amount, (ii) the product of 1/12 of 1.98% and the then outstanding Class B
Certificate Principal Amount, (iii) the product of 1/12 of 1.28% and the then
outstanding Class C Certificate Principal Amount, (iv) the product of 1/12 of
0.58% and the then outstanding Class D Certificate Principal Amount and (v) the
product of 1/12 of 3.06285714% and the then outstanding Class R Certificate
Principal Amount. The amount of interest which accrues on this Certificate
during an Interest Accrual Period will be subject to reduction with respect to
any Net Aggregate Prepayment Interest Shortfall allocated to the Class I-1
Certificates, as described in the Agreement.
Interest will be calculated on the basis of a 360-day year of twelve
30-day months. Interest accrued on this Certificate during an Interest Accrual
Period, plus the Outstanding Class Interest Shortfall with respect to this
Certificate, if any, will be payable on the related Distribution Date to the
extent provided in the Agreement. The "Interest Accrual Period" relating to any
Distribution Date is the month beginning on the 21st day of the month preceding
the month in
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<PAGE>
which such Distribution Date occurs and ending on the 20th day of the month in
which such Distribution Date occurs, commencing in July, 1993.
With the exception of the final distribution in respect of this
Certificate, distributions on this Certificate will be made by the Trustee, or
the Paying Agent on behalf of the Trustee, without the presentation or surrender
of this Certificate or the making of any notation hereon, by check mailed by
first-class mail to the address of the Holder set forth in the Certificate
Register, or, provided the Holder holds Certificates the aggregate initial
Notional Amount of which exceeds $5,000,000 and has provided the Trustee with
wire instructions in writing at least five Business Days before the related
Record Date, by wire transfer of immediately available funds to the account of
such Holder at a bank or other entity located in the United States and having
appropriate facilities therefor. The final distribution on this Certificate will
be made in like manner after notice by the Trustee of the pendency of such
distribution and only upon presentation and surrender of this Certificate at the
Corporate Trust Office or such other location specified in the notice to Holders
of such final distribution.
This Certificate is one of a duly authorized issue of Certificates
designated as LTC Commercial Mortgage Pass-Through Certificates, Series 1993-1
and represents a fractional undivided interest in a Trust Fund consisting of (i)
such Mortgage Loans as from time to time are subject to the Agreement, together
with the Mortgage Files relating thereto; (ii) all payments due on or
collections in respect of the Mortgage Loans due after the dates specified in
Section 2.01 of the Agreement; (iii) any REO Property; (iv) all revenues
received in respect of any REO Property; (v) the rights of the Trustee, Master
Servicer and Special Servicer under the insurance policies with respect to the
Mortgage Loans required to be maintained pursuant to this Agreement and any
proceeds thereof; (vi) any Assignments of Leases, Rents and Profits; (vii) any
guaranties given as additional security for any Mortgage Loans; (viii) all
assets deposited in the Collection Account, the Distribution Account, the Upper-
Tier Distribution Account and the REO Account including reinvestment income; and
(ix) the proceeds of any of the foregoing.
This Certificate is limited in right of payment to, among other
things, certain collections and recoveries in respect of the Mortgage Loans, as
more specifically set forth herein and in the Agreement.
As provided in the Agreement, withdrawals from the Collection Account
may be made by the Master Servicer from time to time for purposes other than
distributions to Certificateholders, such purposes including, among other
things, reimbursement or payment to the Master Servicer, the Special Servicer or
the Trustee of certain expenses incurred or certain
-4-
<PAGE>
fees earned by the Master Servicer, the Special Servicer or the Trustee,
including, without limitation, certain Nonrecoverable Advances.
This Certificate does not purport to summarize the Agreement, and
reference is made to the Agreement for the interests, rights, benefits,
obligations and duties evidenced hereby, and the limitations thereon, and the
rights, duties and immunities of the Trustee.
As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Certificate Register only upon surrender of this Certificate for registration of
transfer at the office of the Certificate Registrar or at the office of its
agent in the City of New York. The Trustee or the Certificate Registrar may
require that this Certificate be duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Trustee and the Certificate
Registrar duly executed by, the Holder hereof or such Holder's attorney duly
authorized in writing. Thereupon, one or more new Certificates of a like
aggregate Percentage Interest in the same Class of authorized denominations will
be executed and authenticated by the Trustee and delivered by the Certificate
Registrar to the designated transferee or transferees.
Prior to due presentation of this Certificate for registration of
transfer, the Depositor, the Master Servicer, the Special Servicer, the Trustee,
the Certificate Registrar, any Paying Agent and any agent of any of them may
treat the Person in whose name this Certificate is registered as the owner
hereof for all purposes, and none of the Depositor, Master Servicer, the Special
Servicer, the Trustee, the Certificate Registrar, any Paying Agent or any agent
of any of them shall be affected by notice to the contrary.
As provided in the Agreement and subject to certain limitations herein
set forth, this Certificate is exchangeable for other Certificates of the same
Class of authorized denominations of like aggregate Percentage Interests, as
requested by the Holder surrendering the same.
No service charge will be made to a Certificateholder for any such
registration of transfer or exchange, but the Certificate Registrar may require
payment of a sum sufficient to cover any tax or other governmental charge
payable in connection therewith.
The Agreement permits, with certain exceptions therein provided, the
amendment of the Agreement and the modification of the rights of the
Certificateholders under the Agreement at any time by the Depositor, the Master
Servicer, the Special Servicer and the Trustee with the consent of the Holders
of Class A, Class B, Class C, Class D, Class E, Class I-1 Class I-2, Class R and
-5-
<PAGE>
Class LR Certificates representing not less than 66-2/3% of the Voting Rights
allocated to each such Class of the Certificates affected by the amendment. Any
such consent by the Holder of this Certificate shall be conclusive and binding
on such Holder and upon all future Holders of this Certificate and of any
Certificates issued upon the transfer hereof or in exchange herefor or in lieu
hereof whether or not notation of such consent is made upon this Certificate.
The Agreement also permits the amendment thereof in certain circumstances
without the consent of the Holders of any of the Certificates, provided that
such amendment would not adversely affect in any material respect the interests
of any Certificateholder.
Each of the Master Servicer, any Holder of a Class LR Certificate and,
if all the Mortgage Loans are then Specially Serviced Mortgage Loans, the
Special Servicer, may at its option, upon not less than 30 days' prior notice
given to the Trustee, repurchase the Mortgage Loans and thereby effect an early
termination of the Trust Fund on any Distribution Date after the date on which
the aggregate Certificate Principal Amount of the Certificates (other than the
Class R or Class LR Certificates) is reduced to less than 10% of the initial
aggregate Certificate Principal Amount of the Certificates. All, but not less
than all, of the Mortgage Loans then included in the Trust Fund, and all
property acquired in respect of any Mortgage Loans, may be repurchased at a
purchase price, payable in cash, equal to not less than the greater of:
(i) the sum of:
(A) 100% of the unpaid principal balance of each Mortgage
Loan included in the Trust Fund as of the Early Termination
Determination Date;
(B) all unpaid interest accrued on such principal balance of
each such Mortgage Loan at the related Mortgage Interest Rate to such
Early Termination Determination Date; and
(C) the fair market value of all other property included in
the Trust Fund as of such Early Termination Determination Date; and
(ii) the aggregate fair market value (determined in accordance with
Section 9.01(d)(ii)(B) of the Agreement) of the Mortgage Loans, and all
other property acquired in respect of any Mortgage Loan in the Trust Fund,
as of the date of purchase.
The obligations created by the Agreement shall terminate upon the
earliest to occur of (i) the repurchase of all Mortgage Loans by the Master
Servicer, any Holder of a Class LR Certificate or the Special Servicer as
described above; (ii) the later of (a) the distribution to Certificateholders of
final
-6-
<PAGE>
payment with respect to the last outstanding Mortgage Loan or (b) the
disposition of all property acquired upon foreclosure or deed in lieu of
foreclosure with respect to the last outstanding Mortgage Loan and the
remittance to the Certificateholders of all funds due under the Agreement; or
(iii) the sale of assets of the Trust Fund after the Certificate Principal
Amounts of all the Certificates (other than the Class R and Class LR
Certificates) have been reduced to zero under circumstances set forth in the
Agreement. In no event, however, will the trust created by the Agreement
continue beyond the expiration of 21 years from the death of the last surviving
descendant of a certain individual named in the Agreement living on the date
thereof.
Unless the Certificate of Authentication on this Certificate has been
executed by or on behalf of the Trustee, by manual signature, this Certificate
shall not be entitled to any benefit under the Agreement or be valid for any
purpose.
-7-
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly executed.
UNION BANK, not in its individual
capacity but solely as Trustee
By:_____________________________________
Authorized Officer
This is one of the Class I-1 Certificates referred to in the
Agreement.
Dated:___________________________
BANKERS TRUST COMPANY, as Certificate
Registrar
By:_____________________________________
Authorized Officer
-8-
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned ("Assignor(s)") hereby sell(s),
assign(s) and transfer(s) unto _________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________ (please print or typewrite name(s) and address(es), including
postal zip code(s) of assignee(s)) ("Assignee(s)") the entire Percentage
Interest represented by the within Class I-1 Certificate and hereby
authorize(s) the registration of transfer of such interest to Assignee(s) on
the Certificate Register of the Trust Fund.
I (we) further direct the Certificate Registrar to issue a new Class
I-1 Certificate of the entire Percentage Interest represented by the within
Class I-1 Certificates to the above-named Assignee(s) and to deliver such Class
I-1 Certificate to the following address:
________________________________________________________________________________
________________________________________________________________________________
Date:____________________ ___________________________________
Signature by or on behalf of
Assignor (s)
___________________________________
Taxpayer Identification Number
-9-
<PAGE>
DISTRIBUTION INSTRUCTIONS
The Assignee(s) should include the following for purposes of
distribution:
Address of the Assignee(s) for the purpose of receiving notices and
distributions:__________________________________________________________________
________________________________________________________________________________
Distributions, if be made by wire transfer in available funds to ______________
________________________________________________________________________________
for the account of _____________________________________________________________
account number _________________________________________________________________
This information is provided by ________________________________________________
the Assignee(s) named above, or ________________________________________________
as its (their) agent.
By___________________________________________
___________________________________________
[Please print or type name(s)]
___________________________________________
Title
___________________________________________
Taxpayer Indentification Number
-10-
<PAGE>
EXHIBIT A-7
<PAGE>
THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "1933 ACT") OR THE SECURITIES LAWS OF ANY STATE OF
THE UNITED STATES ("BLUE SKY LAWS"), AND SUCH CERTIFICATE MAY NOT BE OFFERED,
RESOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (1) TO A PERSON THAT THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF
RULE 144A PROMULGATED UNDER THE 1933 ACT IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, (2) PURSUANT TO AN EXEMPT FROM REGISTRATION
PROVIDED BY RULE 144 UNDER THE 1933 ACT (IF AVAILABLE) OR (3) TO AN ACCREDITED
INVESTOR AS DEFINED IN REGULATION D UNDER THE 1933 ACT IN A TRANSACTION EXEMPT
FROM THE REGISTRATION REQUIREMENTS OF THE 1933 ACT, AND IN EACH CASE IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES.
THIS CERTIFICATE MAY NOT BE PURCHASED BY OR TRANSFERRED TO ANY PERSON WHICH IS
AN EMPLOYEE BENEFIT PLAN SUBJECT TO THE FIDUCIARY RESPONSIBILITY PROVISIONS OF
THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR
SECTION 4975 OF THE CODE OR ANY GOVERNMENTAL PLAN, AS DEFINED IN SECTION 3(32)
OF ERISA SUBJECT TO ANY FEDERAL, STATE OR LOCAL LAW WHICH IS, TO A MATERIAL
EXTENT, SIMILAR TO THE FOREGOING PROVISIONS OF ERISA OR THE CODE (COLLECTIVELY,
A "PLAN"), OR ANY PERSON INVESTING THE ASSETS OF A PLAN.
LTC COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATE,
SERIES 1993-1, CLASS 1-2
evidencing a nonassessable, fully paid
percentage interest in a trust fund
which includes a pool of commercial mortgage loans
No. R-
Percentage Interest evidenced First Distribution Date:
by this Certificate: August 28, 1993
Initial Class 1-2 Certificate Final Scheduled
Notional Amount $114,702,110.83 Distribution Date: November 28, 2012
Cut-Off Date: July 20, 1993
<PAGE>
This certifies that ______________________ is the registered
owner of the Percentage Interest evidenced by this Certificate in monthly
Distributions to Holders of Class 1-2 Certificates with respect to the Trust
Fund. The Trust Fund, described more fully below, consists primarily of Mortgage
Loans held in trust by the Trustee and serviced by the Master Servicer and the
Special Servicer, as applicable. The Trust Fund was created, and the Mortgage
Loans are to be serviced, pursuant to the Agreement (as defined below). The
Holder of this Certificate, by virtue of the acceptance hereof, assents to the
terms, provisions and conditions of the Agreement and is bound thereby. Also
issued under the Agreement are Class A, Class B, Class C, Class D, Class E,
Class I-1, Class R and Class LR Certificates (together with the Class 1-2
Certificates, the "Certificates") (the Holders of Certificates issued under the
Agreement are collectively referred to herein as "Certificateholders").
This Certificate is issued pursuant to, and in accordance with, the
terms of a Pooling and Servicing Agreement dated as of July 20, 1993 (the
"Agreement") among LTC REMIC Corporation, as Depositor, Bankers Trust Company,
as Master Servicer, LTC Properties, Inc., as Special Servicer, and Union Bank,
as Trustee. To the extent not defined herein, capitalized terms used herein
shall have the meanings assigned thereto in the Agreement.
THIS CERTIFICATE DOES NOT REPRESENT AN INTEREST IN OR A DEPOSIT OR
OBLIGATION OF THE DEPOSITOR, THE ORIGINATOR, THE MASTER SERVICER, THE SPECIAL
SERVICER OR THE TRUSTEE, OR ANY OF THEIR AFFILIATES. THIS CERTIFICATE IS NOT
INSURED OR GUARANTEED BY ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY OR BY ANY
PRIVATE ENTITY.
This Certificate represents a "regular interest" in a "real estate
mortgage investment conduit," as those terms are defined, respectively, in
Sections 860G(a)(1) and 860D of the Internal Revenue Code of 1986, as amended
(the "Code"). Each Holder of this Certificate, by acceptance hereof, agrees to
treat, and to take no action inconsistent with the treatment of, this
Certificate in accordance with the preceding sentence for purposes of federal
income taxes, state and local income and franchise taxes and other taxes imposed
on or measured by income.
The Trustee makes no representation or warranty as to any of the
statements contained herein or the validity or sufficiency of the Certificates
or the Mortgage Loans and has executed and authenticated this Certificate in its
limited capacity as Trustee under the Agreement.
Pursuant to the terms of the Agreement, the Trustee, or the Paying
Agent on behalf of the Trustee, will distribute, on the twenty-eighth day of
each month or if any such twenty-eighth day is not a Business Day, on the next
succeeding Business Day
-2-
<PAGE>
Class LR Certificates) used to price this Certificate and (b) that the interest
rate at which distributions of interest on this Certificate actually will be
made will be determined as though the pass-through rate on this Certificate
applicable to the first Distribution Date will not change thereafter: (i) the
amount of OID as a percentage of the initial Class 1-2 Notional Amount is
approximately 5.25227465%; (ii) the annual yield to maturity of this
Certificate, compounded monthly, is approximately 14.55%; and (iii) the amount
of OID allocable to the short first accrual period (August 4, 1993 to August 28,
1993) as a percentage of the initial Class 1-2 Notional Amount, calculated using
the exact method, is approximately 0.06577873%.
The Trustee makes no representation or warranty as to any of the
statements contained herein or the validity or sufficiency of the Certificates
or the Mortgage Loans and has executed and authenticated this Certificate in its
limited capacity as Trustee under the Agreement.
Pursuant to the terms of the Agreement, the Trustee, or the Paying
Agent on behalf of the Trustee, will distribute, on the twenty-eighth day of
each month or if any such twenty-eighth day is not a Business Day, on the next
succeeding Business Day (each such date, a "Distribution Date"), commencing in
August 1993, to the Person in whose name this Certificate is registered as of
the related Record Date, an amount equal to such Person's pro rata share (based
on the Percentage Interest represented by this Certificate) of that portion of
the aggregate amount of interest then distributable, if any, allocable to the
Class 1-2 Certificates for such Distribution Date, all as more fully described
in the Agreement. The Class 1-2 Certificates are not entitled to receive
distributions of principal. Interest will accrue on the Class 1-2 Certificates
during each Interest Accrual Period in an amount equal to the aggregate of (a)
1/12 of the excess of the weighted average of the Mortgage Interest Rates (net
of the related Servicing Fees) of all Mortgage Loans with net Mortgage Interest
Rates greater than 9.78% per annum over 9.78% (the "Class 1-2 Rate") multiplied
by the principal balance of such Mortgage Loans as of the related Determination
Date. The amount of interest which accrues on this Certificate during an
Interest Accrual Period will be subject to reduction with respect to any Net
Aggregate Prepayment Interest Shortfall allocated to the Class 1-2 Certificates,
as described in the Agreement.
Interest will be calculated on the basis of a 360-day year of twelve
30-day months. Interest accrued on this Certificate during an Interest Accrual
Period, plus the Outstanding Class Interest Shortfall with respect to this
Certificate, if any, will be payable on the related Distribution Date to the
extent provided in the Agreement. The "Interest Accrual Period" relating to any
Distribution Date is the month beginning on the 21st day of the month preceding
the month in which such Distribution Date occurs and ending on the 20th day of
-3-
<PAGE>
the month in which such Distribution Date occurs, commencing in July, 1993.
With the exception of the final distribution in respect of this
Certificate, distributions on this Certificate will be made by the Trustee, or
the Paying Agent on behalf of the Trustee, without the presentation or surrender
of this Certificate or the making of any notation hereon, by check mailed by
first-class mail to the address of the Holder set forth in the Certificate
Register, or, provided the Holder holds Certificates the aggregate initial
Notional Amount of which exceeds $5,000,000 and has provided the Trustee with
wire instructions in writing at least five Business Days before the related
Record Date, by wire transfer of immediately available funds to the account of
such Holder at a bank or other entity located in the United States and having
appropriate facilities therefor. The final distribution on this Certificate will
be made in like manner after notice by the Trustee of the pendency of such
distribution and only upon presentation and surrender of this Certificate at the
Corporate Trust Office or such other location specified in the notice to Holders
of such final distribution.
This Certificate is one of a duly authorized issue of Certificates
designated as LTC Commercial Mortgage Pass-Through Certificates, Series 1993-1
and represents a fractional undivided interest in a Trust Fund consisting of (i)
such Mortgage Loans as from time to time are subject to the Agreement, together
with the Mortgage Files relating thereto; (ii) all payments due on or
collections in respect of the Mortgage Loans due after the dates specified in
Section 2.01 of the Agreement; (iii) any REO Property; (iv) all revenues
received in respect of any REO Property; (v) the rights of the Trustee, Master
Servicer and Special Servicer under the insurance policies with respect to the
Mortgage Loans required to be maintained pursuant to this Agreement and any
proceeds thereof; (vi) any Assignments of Leases, Rents and Profits; (vii) any
guaranties given as additional security for any Mortgage Loans; (viii) all
assets deposited in the Collection Account, the Distribution Account, the Upper-
Tier Distribution Account and the REO Account including reinvestment income; and
(ix) the proceeds of any of the foregoing.
This Certificate is limited in right of payment to, among other
things, certain collections and recoveries in respect of the Mortgage Loans, as
more specifically set forth herein and in the Agreement.
As provided in the Agreement, withdrawals from the Collection Account
may be made by the Master Servicer from time to time for purposes other than
distributions to Certificateholders, such purposes including, among other
things, reimbursement or payment to the Master Servicer, the Special Servicer or
the Trustee of certain expenses incurred or certain fees earned by the Master
Servicer, the Special Servicer or the
-4-
<PAGE>
Trustee, including, without limitation, certain Nonrecoverable Advances.
This Certificate does not purport to summarize the Agreement, and
reference is made to the Agreement for the interests, rights, benefits,
obligations and duties evidenced hereby, and the limitations thereon, and the
rights, duties and immunities of the Trustee.
As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Certificate Register only upon surrender of this Certificate for registration of
transfer at the office of the Certificate Registrar or at the office of its
agent in the City of New York. The Trustee or the Certificate Registrar may
require that this Certificate be duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Trustee and the Certificate
Registrar duly executed by, the Holder hereof or such Holder's attorney duly
authorized in writing. Thereupon, one or more new Certificates of a like
aggregate Percentage Interest in the same Class of authorized denominations will
be executed and authenticated by the Trustee and delivered by the Certificate
Registrar to the designated transferee or transferees.
Prior to due presentation of this Certificate for registration of
transfer, the Depositor, the Master Servicer, the Special Servicer, the Trustee,
the Certificate Registrar, any Paying Agent and any agent of any of them may
treat the Person in whose name this Certificate is registered as the owner
hereof for all purposes, and none of the Depositor, Master Servicer, the Special
Servicer, the Trustee, the Certificate Registrar, any Paying Agent or any agent
of any of them shall be affected by notice to the contrary.
As provided in the Agreement and subject to certain limitations herein
set forth, this Certificate is exchangeable for other Certificates of the same
Class of authorized denominations of like aggregate Percentage Interests, as
requested by the Holder surrendering the same.
No service charge will be made to a Certificateholder for any such
registration of transfer or exchange, but the Certificate Registrar may require
payment of a sum sufficient to cover any tax or other governmental charge
payable in connection therewith.
The Agreement permits, with certain exceptions therein provided, the
amendment of the Agreement and the modification of the rights of the
Certificateholders under the Agreement at any time by the Depositor, the Master
Servicer, the Special Servicer and the Trustee with the consent of the Holders
of Class A, Class B, Class C, Class D, Class E, Class I-1, Class 1-2, Class R
and Class LR Certificates representing not less than 66-2/3% of the
-5-
<PAGE>
Voting Rights allocated to each such Class of the Certificates affected by the
amendment. Any such consent by the Holder of this Certificate shall be
conclusive and binding on such Holder and upon all future Holders of this
Certificate and of any Certificates issued upon the transfer hereof or in
exchange herefor or in lieu hereof whether or not notation of such consent is
made upon this Certificate. The Agreement also permits the amendment thereof in
certain circumstances without the consent of the Holders of any of the
Certificates, provided that such amendment would not adversely affect in any
material respect the interests of any Certificateholder.
Each of the Master Servicer, any Holder of a Class LR Certificate and,
if all the Mortgage Loans are then Specially Serviced Mortgage Loans, the
Special Servicer, may at its option, upon not less than 30 days' prior notice
given to the Trustee, repurchase the Mortgage Loans and thereby effect an early
termination of the Trust Fund on any Distribution Date after the date on which
the aggregate Certificate Principal Amount of the Certificates (other than the
Class R or Class LR Certificates) is reduced to less than 10% of the initial
aggregate Certificate Principal Amount of the Certificates. All, but not less
than all, of the Mortgage Loans then included in the Trust Fund, and all
property acquired in respect of any Mortgage Loans, may be repurchased at a
purchase price, payable in cash, equal to not less than the greater of:
(i) the sum of:
(A) 100% of the unpaid principal balance of each Mortgage
Loan included in the Trust Fund as of the Early Termination
Determination Date;
(B) all unpaid interest accrued on such principal balance
of each such Mortgage Loan at the related Mortgage Interest Rate to
such Early Termination Determination Date; and
(C) the fair market value of all other property included in
the Trust Fund as of such Early Termination Determination Date; and
(ii) the aggregate fair market value (determined in accordance with
Section 9.01(d)(ii)(B) of the Agreement) of the Mortgage Loans, and all
other property acquired in respect of any Mortgage Loan in the Trust Fund,
as of the date of purchase.
The obligations created by the Agreement shall terminate upon the
earliest to occur of (i) the repurchase of all Mortgage Loans by the Master
Servicer, any Holder of a Class LR Certificate or the Special Servicer as
described above; (ii) the later of (a) the distribution to Certificateholders of
final payment with respect to the last outstanding Mortgage Loan or (b)
-6-
<PAGE>
the disposition of all property acquired upon foreclosure or deed in lieu of
foreclosure with respect to the last outstanding Mortgage Loan and the
remittance to the Certificateholders of all funds due under the Agreement; or
(iii) the sale of assets of the Trust Fund after the Certificate Principal
Amounts of all the Certificates (other than the Class R and Class LR
Certificates) have been reduced to zero under circumstances set forth in the
Agreement. In no event, however, will the trust created by the Agreement
continue beyond the expiration of 21 years from the death of the last surviving
descendant of a certain individual named in the Agreement living on the date
thereof.
Unless the Certificate of Authentication on this Certificate has been
executed by or on behalf of the Trustee, by manual signature, this Certificate
shall not be entitled to any benefit under the Agreement or be valid for any
purpose.
-7-
<PAGE>
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.
UNION BANK, not in its individual
capacity but solely as Trustee
By:_____________________________________
Authorized Officer
This is one of the Class 1-2 Certificates referred to in the
Agreement.
Dated:_________________________________
BANKERS TRUST COMPANY, as Certificate
Registrar
By:_____________________________________
Authorized Officer
-8-
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned ("Assignor(s)") hereby sell(s),
assign(s) and transfer(s) unto _________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________ (please print or typewrite name(s) and address(es), including
postal zip code(s) of assignee(s)) ("Assignee(s)") the entire Percentage
Interest represented by the within Class 1-2 Certificate and hereby authorize(s)
the registration of transfer of such interest to Assignee(s) on the Certificate
Register of the Trust Fund.
I (we) further direct the Certificate Registrar to issue a new Class
1-2 Certificate of the entire Percentage Interest represented by the within
Class 1-2 Certificates to the above-named Assignee(s) and to deliver such Class
1-2 Certificate to the following address:
________________________________________________________________________________
________________________________________________________________________________
Date:____________________ ___________________________________
Signature by or on behalf of
Assignor (s)
___________________________________
Taxpayer Identification Number
-9-
<PAGE>
DISTRIBUTION INSTRUCTIONS
The Assignee(s) should include the following for purposes of
distribution:
Address of the Assignee(s) for the purpose of receiving notices and
distributions:__________________________________________________________________
________________________________________________________________________________
Distributions, if be made by wire transfer in available funds to ______________
________________________________________________________________________________
for the account of _____________________________________________________________
account number _________________________________________________________________
This information is provided by ________________________________________________
the Assignee(s) named above, or ________________________________________________
as its (their) agent.
By___________________________________________
___________________________________________
[Please print or type name(s)]
___________________________________________
Title
___________________________________________
Taxpayer Indentification Number
-10-
<PAGE>
EXHIBIT 10.28
_______________________________________________________
LTC COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1994-1
______________________________
PURCHASE AGREEMENT
Dated November 16, 1994
______________________________
_______________________________________________________
<PAGE>
LTC COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1994-1
PURCHASE AGREEMENT
----------------------
November 16, 1994
Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
Ladies and Gentlemen:
LTC REMIC Corporation, a Delaware corporation (the "Company"), LTC
Properties, Inc., a Maryland corporation, as originator ("LTC"), hereby agree
with Goldman Sachs & Co., a New York limited partnership (the "Purchaser"), as
follows:
1. The Certificates. The Company expects to enter into a Transfer
----------------
and Repurchase Agreement to be dated as of November 1, 1994 (the "Transfer
Agreement"), which will provide for the transfer by LTC to the Company of all of
the right, title and interest of LTC in a pool of mortgage loans (the "Mortgage
Loans") secured by first and second mortgage liens on properties that provide
healthcare and/or long-term nursing care (the "Mortgaged Properties"), together
with certain related assets. The Company, in its capacity as depositor, expects
to enter into a Pooling and Servicing Agreement, to be dated as of November 1,
1994 (the "Pooling Agreement"), with Marine Midland Bank, as trustee (the
"Trustee"), Bankers Trust Company, as master servicer (the "Master Servicer")
and LTC, as special servicer and originator. In addition, LTC will enter into a
subservicing agreement to be dated as of November 1, 1994 with Bankers Trust
Company (the "Subservicing Agreement"). The Pooling Agreement will provide for
the issuance of pass-through certificates (the "Certificates") that evidence
undivided interests in a trust (the "Trust Fund") whose assets will consist of
the Mortgage Loans and other related assets. The Mort-
<PAGE>
gage Loans have an aggregate unpaid principal balance of approximately $127,
639,788 as of the close of business on November 1, 1994 (the "Cut-Off Date"),
after giving effect to payments of principal due on or before the Cut-Off Date.
Unless otherwise specifically defined herein, all capitalized terms shall have
the meanings ascribed to them in the Pooling Agreement or the Offering Circular.
The Pooling Agreement, the Transfer Agreement, the Subservicing Agreement, this
Agreement and each Assignment (as defined in the Transfer Agreement) relating to
a Mortgage Loan are hereinafter referred to collectively as the "Agreements."
2. Representations and Warranties of the Company and LTC.
-----------------------------------------------------
(a) Each of the Company and LTC represents and warrants, jointly
and severally, to the Purchaser as of the date hereof, with respect to itself,
as follows:
(i) A preliminary offering circular dated November 7, 1994 (the
"Preliminary Offering Circular") and a final offering circular dated
November 16, 1994 (the "Final Offering Circular" and, together with the
Preliminary Offering Circular", the "Offering Circular") has been prepared
in connection with the offering of the Offered Certificates (as defined
herein). The Preliminary Offering Circular and the Offering Circular and
any amendments or supplements thereto will not, as of the date thereof,
contain any untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. There are no
facts known to it which, individually or in the aggregate, may impair its
ability to perform its obligations under any of the Agreements;
(ii) Each of the Agreements to which it is or will be a party has
or will have been duly authorized, executed and delivered by such party at
the time of closing and, assuming due execution and delivery by the other
parties thereto, constitutes or will constitute a legal, valid and binding
agreement of such party, enforceable against such party in accordance with
its terms. The Certificates and
2
<PAGE>
the Agreements will conform to the description thereof in the Offering
Circular;
(iii) the issuance and sale of the Offered Certificates and
the compliance by it with all of the provisions of the Certificates
and the Agreements, and the consummation of the transactions herein
and therein contemplated will not conflict with or result in a breach
or violation of any of the terms or provisions of, or constitute a
default under, any indenture, mortgage, deed of trust, loan agreement
or other agreement or instrument to which it is a party or by which it
is bound or to which any of its property or assets is subject, nor
will such action result in any violation of the provisions of its
Charter or By-laws or other similar documents or any statute or any
order, rule or regulation of any court or governmental agency or body
having jurisdiction over it or any of its properties; and no consent,
approval, authorization, order, registration or qualification of or
with any such court or governmental agency or body is required for the
issue and sale of the Offered Certificates or consummation by it of
the transactions contemplated by any of the Agreements, except such
consents, approvals, authorizations, registrations or qualifications
as may be required under the securities or Blue Sky laws of the United
States or any state in connection with the purchase and resale of the
Offered Certificates by the Purchaser and except for recordation of
assignments of the Mortgage Loans which will be effected following the
Closing. It is not in breach or violation of any indenture or other
material agreement or instrument to which it is a party or by which it
is bound, or in violation of any applicable statute or regulation or
any order of any court, regulatory body, administrative agency or
governmental body having jurisdiction over it, which breach or
violation would have a material adverse effect on the ability of such
party to perform its obligations under any of the Agreements to which
it is a party;
(iv) Any taxes, fees and other governmental charges in
connection with the execution and delivery of the Agreements, the
transfer of the Mortgage Loans to the Trust Fund and the execution,
3
<PAGE>
authentication, issuance and delivery of the Offered Certificates have been
or will be paid at or prior to the Closing Date;
(v) There is no action, suit or proceeding against, or
investigation of, such party pending or to its knowledge threatened, before
any court, administrative agency or other tribunal which, either
individually or in the aggregate, (A) asserts the invalidity of any of the
Agreements or the Certificates, (B) seeks to prevent the issuance of the
Certificates or the consummation of any of the transactions contemplated by
any of the Agreements, (C) could either individually or in the aggregate,
materially and adversely affect the performance by it of its obligations
under, or the validity or enforceability of, any of the Agreements or the
Certificates or (D) seeks to affect the federal income tax or ERISA
attributes of the Certificates described in the Offering Circular;
(vi) Neither it, nor any of its Affiliates, nor any person
authorized or employed by it has, directly or indirectly, sold or offered
for sale or disposed of, or attempted or offered to sell or dispose of, any
Offered Certificate or similar security other than the Certificates that
are not Offered Certificates, or solicited offers to buy any Offered
Certificate or similar security other than the Certificates that are not
Offered Certificates from, or otherwise approached or negotiated with
respect thereto, any person or persons other than the Purchaser. Neither
it, nor any of its Affiliates will, directly or indirectly, offer or sell
any Certificate or similar security in a manner which would render the
issuance and sale of the Certificates a violation of Section 5 of the
Securities Act of 1933, as amended (the "1933 Act"), or require
registration pursuant thereto, nor will it authorize any person to act in
such manner;
(vii) (A) It is not an open-end investment company, unit
investment company, unit investment trust or face-amount certificate
company that is or is required to be registered under Section 8 of the
United States Investment Company Act of 1940, as amended (the "1940 Act"),
and (B) neither it, nor any person
4
<PAGE>
acting on its behalf, other than the Purchaser, has offered or sold
the Certificates by means of any general solicitation or general
advertising within the meaning of Rule 502(c) under the 1933 Act;
(viii) It has been duly incorporated or created and is
validly existing as a corporation in good standing under the laws of
the jurisdiction of its incorporation, and, as applicable, has elected
to be treated as a real estate investment trust under Section 856(c)
of the Code, with the power and authority (corporate and other) to own
its properties and conduct its business as described in the Offering
Circular, with respect to it, and to enter into the Agreements to
which it is party and has been duly qualified as a foreign corporation
for the transaction of business and is in good standing under the laws
of each other jurisdiction in which it owns its properties or conducts
any such business as to require such qualification, except where
failure to obtain such qualification would not have a material adverse
effect on the condition (financial or otherwise), assets, business or
results of operations of the Company and LTC taken as a whole;
provided, however, that in no event shall LTC or the Company be
-------- -------
obligated to qualify to do business in any jurisdiction where it is
not now so qualified or to take any action which would subject it
to service of process in suits, other than those arising out of the
offering or sale of the Offered Certificates, in any jurisdiction
where it is not so subject;
(ix) It is not in violation of its Charter or By-laws or
in default in the performance or observance of any material
obligation, covenant or condition contained in any indenture,
mortgage, deed of trust, loan agreement, lease or other material
agreement or instrument to which it is respectively, a party or by
which it or any of its properties may be bound;
(x) It is not under any obligation to pay any broker's
fee or any commission in connection with the transactions contemplated
by this Agreement, other than the purchase discount and other amounts
payable to the Purchaser set forth in Schedule I hereto;
----------
5
<PAGE>
(xi) For federal income tax purposes, the Upper-Tier REMIC and the
Lower-Tier REMIC will each qualify as a REMIC pursuant to Section 860D of
the Internal Revenue Code of 1986 (the "Code"). Each Class of Certificates
other than the Class R Certificates and the Class LR Certificates, will
qualify as "regular interests" in the Upper-Tier REMIC, each class of
Lower-Tier Interests will qualify as "regular interests" in the Lower-Tier
REMIC, and the Class R and Class LR Certificates will be the "residual
interest" in the Upper-Tier REMIC and the Lower-Tier REMIC, respectively,
within the meaning of the Code; and
(xii) The offering and sale of the Offered Certificates are exempt
from the registration requirements of the 1933 Act. The Pooling Agreement
is not required to be qualified under the Trust Indenture Act of 1939, as
amended.
(b) LTC represents and warrants to the Purchaser as of the date
hereof as follows;
(i) Immediately prior to the transfer of the Mortgage Loans to the
Company pursuant to the Transfer Agreement, LTC will own full legal and
equitable title to each Mortgage Loan free and clear of any lien, mortgage,
pledge, charge, encumbrance, adverse claim or other security interest. The
transfer of the Mortgage Loans to the Company pursuant to the Transfer
Agreement will be effective to convey to the Company all of LTC's right,
title and interest in and to the Mortgage Loans; and
(ii) The transactions contemplated by the Transfer Agreement do not
involve all or substantially all of the assets of LTC. The transfer,
assignment and conveyance of the Mortgage Loans and related assets by LTC
pursuant to the Transfer Agreement is not subject to bulk transfer laws or
any similar statutory provisions in effect in any applicable jurisdiction.
(c) The Company represents and warrants to the Purchaser as of the
date hereof as follows:
(i) Immediately prior to the transfer of the Mortgage Loans to the
Trust Fund pursuant to the Pooling Agreement, the Company will own full
legal and equitable title to each Mortgage Loan free and clear of any lien,
mortgage, pledge, charge, encumbrance, adverse claim or other security
interest.
6
<PAGE>
The transfer of the Mortgage Loans to the Trust Fund pursuant to the
Pooling Agreement, either (A) will be effective to transfer to the Trust
Fund all of the Company's right, title and interest in and to the Mortgage
Loans or (B) will be effective to create a valid and perfected first
priority security interest (other than any lien granted pursuant to Article
II of the Transfer Agreement) in the Mortgage Loans in favor of the Trustee
for the benefit of the Certificateholders;
(ii) When the Offered Certificates are issued and delivered
pursuant to the Pooling Agreement and this Agreement, such Certificates
will not be of the same class (within the meaning of Rule 144A under the
1993 Act) as securities which are listed on a national securities exchange
registered under Section 6 of the Securities Exchange Act of 1934, as
amended (the "1934 Act"), or quoted in a U.S. automated inter-dealer
quotation system;
(iii) The transfer, assignment and conveyance of the Mortgage
Loans and related assets by the Company pursuant to the Pooling Agreement
is not subject to bulk transfer laws or any similar statutory provisions in
effect in any applicable jurisdiction; and
(vi) All of the issued shares of capital stock of the Company
have been duly and validly authorized and issued and are fully paid and
non-assessable.
3. Representations and Warranties of the Purchaser. The Purchaser
-----------------------------------------------
represents to the Company as follows:
(a) The Purchaser agrees not to solicit any offer to buy any
Offered Certificates from, or offer to sell any Offered Certificates to, any
person in the United States unless (i) the Purchaser reasonably believes that at
such time such person and each other person for whom such person is acting are
"qualified institutional buyers" within the meaning of Rule 144A under the 1933
Act or pursuant to an exemption from registration provided by Rule 144 under the
1933 Act, and (ii) the Purchaser reasonably believes that any purchase
7
<PAGE>
of Offered Certificates by such person will be for such person's own account or
for one or more accounts as to each of which such person exercises sole
investment discretion and not with a view to any distribution, as such term is
interpreted under the 1933 Act; provided, however, that if the purchase is of a
-------- -------
class of Certificates other than the Class A Certificates, then the person
shall not be a person that is an employee benefit plan subject to the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or Section 4975 of
the Code, or any person acting on behalf of such plan or using the assets of any
such plan in such transfer unless an exemption from the Plan Assets Rule
thereunder is applicable. The Purchaser understands that any such employee
benefit plan subject to the fiduciary responsibility provisions of ERISA or
Section 4975 of the Code, any governmental plan, as defined in Section 3(32) of
ERISA, and any such plan, are prohibited from acquiring the Class X-1, Class
X-2, Class R, Class LR, Class B, Class C, Class D, Class E or Class F
Certificates, and that disqualified organizations (as defined in the Code) are
prohibited from acquiring the Class R and Class LR Certificates unless such an
exemption applies.
(b) The Purchaser is an accredited investor within the meaning
of Rule 501(a) (1) under the 1933 Act.
(c) The Purchaser is not an employee benefit plan subject to
ERISA.
(d) The Purchaser has not offered or sold and will not offer or
sell the Offered Certificates by means of any general solicitation or general
advertising within the meaning of Rule 502(c) under the 1933 Act.
4. Purchase and Sale of the Certificates. In reliance upon the
-------------------------------------
representations and warranties contained in the Agreements and subject to the
terms and conditions set forth herein, the Company agrees to sell to the
Purchaser, and the Purchaser agrees to purchase from the Company, (i)
$68,901,000 aggregate principal amount of 8.85% Class A Certificates (the "Class
A Certificates"), (ii) $6,382,000 aggregate principal amount of 9.30% Class B
Certificates (the "Class B Certificates"), (iii) $6,381,000 aggregate principal
amount of
8
<PAGE>
9.50% Class C Certificates (the "Class C Certificates"), (iv) $1,000,000
aggregate principal amount of 8.85% Class R Certificates (the "Class R
Certificates") and (v) $300,000 aggregate principal amount of 8.85% Class
LR Certificates (the "Class LR Certificates" and, together with the Class
A, Class B, Class C and Class R Certificates, the "Offered Certificates) at
an aggregate price (the "Purchase Price") equal to the amount described in
Schedule I hereto
----------
The Purchase Price shall be payable to the Company by wire transfer to
an account at a bank in New York City specified by the Company, in
immediately available funds, or by such other method as the Purchaser and
the Company may agree upon in writing.
5. The Closing; Delivery of the Certificates. The purchase and sale
-----------------------------------------
of the Offered Certificates pursuant hereto (the "Closing") shall be held
on or prior to November 29, 1994, or on such other date as shall be
mutually acceptable to the Company and the Purchaser (the "Closing Date").
The Closing shall take place at the offices of Skadden, Arps, Slate,
Meagher & Flom, 919 Third Avenue, New York, New York 10022 at 10:00 a.m.
(New York City time) on the Closing Date or at such other time and place in
New York City as the Purchaser and the Company may agree upon in writing.
Not later than 1:00 p.m. (New York City time) on the Business Day prior to
the Closing Date the Company shall deliver through, and place in the
custody of, the facilities of The Depository Trust Company ("DTC"),
against payment of the Purchase Price, one global certificate for the Class
A Certificates in the denomination of $68,901,000 registered in the name of
Cede & Co., as nominee of DTC. At the Closing, the Company will deliver to
the Purchaser against payment of the Purchase Price, one Class B
Certificate in the denomination of $6,382,000, one Class C Certificate in
the denomination of $6,381,000, one Class R Certificate in the denomination
of $1,000,000 and one Class LR Certificate in the denomination of $300,000
in all cases registered in the Purchaser's name or in the name of its
nominee and delivered to the Purchaser in definitive certificated form;
provided, however, that if the Purchaser requests the Company in writing
-------- -------
not less than forty-eight hours prior to the Closing Date to the Purchaser
Offered Certificates in other denominations (authorized pursuant to Section
5.1 of the Pooling Agree-
9
<PAGE>
ment) that equal in the aggregate the denominations mentioned in this sentence
for the relevant Class, the Company will comply with such request. The
Certificates will be made available for checking and delivery at least
twenty-four hours prior to the Closing at the offices of Skadden, Arps, Slate,
Meagher $ Flom, 919 Third Avenue, New York, New York 10022.
6. Covenants of the Company and LTC. Each of the Company and LTC
--------------------------------
jointly and severally, agree with the Purchaser:
(a) To prepare the Offering Circular in a form approved by the
Purchaser and to make no further amendment or any supplement to the Offering
Circular to which the Purchaser objects promptly after reasonable notice
thereof; and to advise the Purchaser promptly of any such amendment or
supplement after such Closing and to furnish the Purchaser with copies thereof;
(b) Promptly from time to time to take such action as the
Purchaser may reasonably request to qualify the Offered Certificates for
offering and sale under the securities laws of such jurisdictions in the United
States as the Purchaser may request and to comply with such laws so as to permit
the continuance of sales and dealings therein in such jurisdictions for as long
as may be necessary to complete the distribution of the Offered Certificates;
provided, that in connection therewith neither the Company nor LTC shall be
- --------
required to qualify as a foreign corporation or to file a general consent to
service of process in any jurisdiction;
(c) To furnish the Purchaser with such number of copies as the
Purchaser may reasonably request of the Offering Circular and each amendment or
supplement thereto and additional copies in such quantities as the Purchaser may
from time to time reasonably request, and, if at any time prior to the
expiration of six months after the date hereof for such Offered Certificates,
any event shall have occurred as a result of which the Offering Circular as then
amended or supplemented would include an untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made when such
Offering Circular was which they were made when such Offering Circular was
delivered, not misleading, or, if for any other reason it
10
<PAGE>
shall be necessary or desirable during such same period to amend or supplement
the Offering Circular, to notify the Purchaser and upon its request to prepare
and furnish without charge to the Purchaser as many copies as the Purchaser may
from time to time reasonably request of an amended Offering Circular or a
supplement to the Offering Circular which will correct such statement or
omission or effect such compliance;
(d) If at any time after the period referred to in Section 6(c)
the Purchaser shall be required to deliver an Offering Circular in connection
with the offering or sale of Certificates, to promptly provide, at the expense
of the Purchaser, as many copies of an appropriately updated Offering Circular
as the Purchaser shall reasonably request;
(e) During the period beginning from the date hereof and
continuing until the expiration of six months after the Closing, not to offer,
sell, contract to sell or otherwise dispose of any securities which are
substantially similar to the Offered Certificates, without the prior written
consent of the Purchaser;
(f) Not to offer, sell, contract to sell or otherwise dispose of
any of the Certificates, or any securities that are substantially similar to the
Certificates, in any manner that would cause the offering and sale of the
Offered Certificates pursuant to this Agreement to fail to qualify for the
exemption from registration afforded by Section 4(2) of the Act; provided,
--------
however, that if the purchase is of a class of Certificates other than the Class
- -------
A, Class X-1 or Class X-2 Certificates, then the person shall not be a person
that is an employee benefit plan subject to the Employment Retirement Income
Security Act of 1974, as amended ("ERISA"), or Section 4975 of the Code, or any
person acting on behalf of such plan or using the assets of any such plan; and
7. Expenses. The Company and LTC jointly and severally covenant and
--------
agree with the Purchaser that, whether or not the transactions contemplated
hereby shall be consummated, it will pay, cause to be paid, or reimburse the
Purchaser upon demand for, all reasonable expenses (including, without
limitation, all reasonable out-of-pocket expenses which the Purchaser, in its
sole
11
<PAGE>
discretion, may incur) in connection with any of the Agreements, the
Certificates and the transactions contemplated thereby, including, without
limitation, (i) the fees, disbursements and expenses of the Company's counsel
and accountants in connection with the issuance of the Certificates, the
preparation and printing of the Offering Circular and amendments and supplements
thereto and the mailing and delivering of copies thereof to the Purchaser; (ii)
the cost of printing or producing this Agreement and any other Agreements, the
blue sky and legal investment memoranda and any other documents in connection
with the offering, purchase, sale and delivery of the Certificates; (iii) all
expenses in connection with the qualification of the Certificates for offering
and sale under state securities laws as provided in Section 6(b) hereof,
including the fees and disbursements of counsel for the Purchaser in connection
with such qualification and in connection with the Blue Sky and legal investment
surveys; (iv) any fees charged by securities rating services for rating the
Certificates; (v) the cost of preparing the Certificates, obtaining a private
placement number for the Certificates and delivering the Certificates to the
Purchaser; (vi) the fees and expenses of the Trustee and any agent of the
Trustee and the fees and disbursements of counsel for the Trustee in connection
with any of the Agreements and the Certificates; (vii) the legal fees, expenses
and disbursements of counsel to the Purchaser; and (viii) all other costs and
expenses incident to the performance by either of the Company or LTC or of its
obligations hereunder which are not otherwise specifically provided for in this
Section.
8. Conditions of the Purchaser's Obligation. The obligation of the
----------------------------------------
Purchaser set forth in Section 4 to purchase the Offered Certificates on the
Closing Date shall be subject to the accuracy of the representations and
warranties as of the date hereof and as of the Closing Date that are made on the
part of either or both of the Company and LTC and contained in this Agreement,
the accuracy of the statements made by either or both of the Company or LTC in
any certificates furnished pursuant to the provisions hereof and the following
additional conditions:
(i) Each of the Company and LTC shall have complied with all the
agreements and satisfied all the obligations on its part to be performed or
12
<PAGE>
satisfied at or prior to the Closing Date under any of the Agreements;
(ii) The Purchaser shall have completed a review of such
documentation relating to the Mortgage Loans as the Purchaser may deem
appropriate and, on the basis of such review, nothing shall have come to
the attention of the Purchaser that causes it to conclude that there is any
breach of or inaccuracy in the representations and warranties of either the
Company or LTC set forth in this Agreement;
(iii) On or prior to the date hereof and on or prior to the
Closing Date, the Purchaser shall have received a letter, dated as of each
such date, of Coopers and Lybrand, certified public accountants, to which
the Purchaser has previously agreed and otherwise in form and substance
satisfactory to the Purchaser and to counsel to the Purchaser;
(iv) The Purchaser shall have received an opinion from Weil,
Gotshal & Manges, counsel to the Company and LTC, dated the Closing Date in
form and substance satisfactory to the Purchaser to the effect that:
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware
and has all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as now being
conducted. The Company is duly qualified to transact business and is
in good standing as a foreign corporation in each jurisdiction where
the character of its activities requires such qualification, except
where the failure of the Company to be so qualified would not have a
material adverse effect on the business, operations or financial
condition of the Company;
(b) The Company has all requisite corporation power and
authority to execute and deliver the Agreements and the Assignments
and to perform its obligations thereunder. The execution, delivery and
performance of the Agree-
13
<PAGE>
ments and the Assignments by the Company and the consummation by the
Company of the transactions contemplated thereby have been duly
authorized by all necessary corporate action on the part of the
Company. The Agreements and the Assignments have been duly and validly
executed and delivered by the Company and the Agreements (assuming the
due authorization, execution and delivery thereof by LTC, the Trustee
and the Master Servicer) constitute the legal, valid and binding
obligations of the Company and LTC, to the extent a party thereto,
enforceable against them in accordance with their respective terms,
subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors'
rights and remedies generally, and subject, as to enforceability, to
general principles of equity, including principles of commercial
reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought in a proceeding at law or in equity) and except
that (A) rights to indemnification thereunder may be limited by
federal or state securities laws or public policy relating thereto and
(B) certain remedial provisions of the Agreements are or may be
unenforceable in whole or in part under the laws of the State of New
York, but the inclusion of such provisions does not affect the
validity of the Agreements, and the Agreements contain adequate
provisions for the practical realization of the rights and benefits
afforded thereby. No opinion shall be expressed in this paragraph as
to the perfection or priority of any liens granted pursuant to the
Pooling Agreement;
(c) Neither the issuance or sale of the Certificates nor the
execution and delivery of the Agreements, the consummation of the
transactions contemplated thereby and compliance by the Company with
any of the provisions thereof will conflict with, constitute a default
under or violate (i) any of the terms, conditions or provisions of the
certificate of incorporation or by-laws of the Company, (ii) any of
the
14
<PAGE>
terms, conditions or provisions of any material agreement or other
instrument to which the Company is a party or by which it is bound of
which such counsel is aware, (iii) any New York, Delaware corporate or
federal law or regulation (other than federal and state securities or
Blue Sky laws, as to which such counsel may express no opinion except
as set forth in paragraph (g) below), or (iv) any judgment, writ,
injunction, decree, order or ruling of any court or governmental
authority binding on the Company of which such counsel is aware;
(d) No consent, approval, waiver, license or authorization or
other action by or filing with any New York, Delaware corporate or
federal governmental authority is required in connection with the
execution and delivery by the Company of the Agreements, the issuance
of the Certificates or the offer, sale or delivery of the Certificates
in the manner and under the circumstances contemplated by this
Agreement or the consummation by the Company of the transactions
contemplated thereby, except for federal and state securities or Blue
Sky laws, as to which such counsel may express no opinion except as
set forth in paragraph (g) below;
(e) To such counsel's knowledge, there is no litigation,
proceeding or governmental investigation pending or overtly threatened
against the Company that relates to any of the transactions
contemplated by any of the Agreements;
(f) Each Certificate, when executed and authenticated by the
Trustee in accordance with the Pooling Agreement and delivered and
paid for by the Purchaser in accordance with this Agreement, will be
validly issued and outstanding and entitled to the benefits of the
Pooling Agreement, subject to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar laws
affecting creditors' rights and remedies generally, and subject, as to
enforceability, to general principles of equity, including principles
of com-
15
<PAGE>
mercial reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought in a proceeding at law or in equity) and except that
(A) rights to indemnification thereunder may be limited by federal or state
securities laws or public policy relating thereto and (B) certain remedial
provisions of the Pooling Agreement are or may be unenforceable in whole or
in part under the laws of the State of New York, but the inclusion of such
provisions does not affect the validity of the Pooling Agreement, and the
Pooling Agreement contains adequate provisions for the practical
realization of the rights and benefits afforded thereby. No opinion shall
be expressed in this paragraph as to the perfection or priority of any
liens granted pursuant to the Pooling Agreement;
(g) Assuming the accuracy of the representations and warranties of
the Company in Section 2 of this Agreement and of the Purchaser in Section
3 of this Agreement, the offer, issuance, sale and delivery of the Class A,
Class B, Class C, Class R and Class LR Certificates to the Purchaser and
the reoffer, resale and delivery of the Class A, Class B, Class C, Class R
and Class LR Certificates by the Purchaser in compliance with the
applicable provisions of this Agreement and the Pooling Agreement does not
require registration under the 1933 Act. The Pooling Agreement is not
required to be qualified under the Trust Indenture Act of 1939, as amended;
(h) The statements contained in the Offering Circular under the
headings "Certain Federal Income Tax Consequences," "ERISA Considerations"
and "Certain Legal Aspects of the Mortgage Loans," to the extent that they
constitute matters of law or legal conclusions with respect thereto, are a
fair and accurate summary of the matters addressed therein under existing
law and the assumptions stated therein;
16
<PAGE>
(i) The Trust Fund is not required to be registered as an "investment
company" under the Investment Company Act of 1940, as amended (the "1940
Act"); and
(j) The Pooling Agreement provides and the Company and the Trustee
state therein that they intend, that the transfer of the Mortgage Loans to
the Trustee constitutes a sale. If, however, a court were to find that such
transfer did not constitute a sale then assuming (i) delivery and continued
possession in New York by the Custodian of the Notes, endorsed in the name
of the Trustee or in blank, and (ii) that the Custodian was without notice
of any adverse claim (as such term is used in Section 8-302 of the New York
Uniform Commercial Code (the "UCC")) with respect to the Notes, the
execution and delivery of the Pooling Agreement are effective to create a
valid and duly perfected lien on and security interest in the Notes, as
security for the obligations of the Company to the Trustee pursuant to the
Pooling Agreement, which is subject to no prior lien or security interest.
The opinion set forth in this paragraph is subject to standard exceptions.
(k) Such counsel have participated in conferences with officers and
other representatives of the Company, Stern, Neubauer, Greenwald & Pauly,
LTC's California real estate counsel, the Purchaser and the Purchaser's
counsel in connection with the preparation of the Offering Circular and
although such counsel have not independently verified and are not passing
upon and assume no responsibility for the accuracy, completeness or
fairness of the statements contained in the Offering Circular, no facts
have come to such counsel's attention which lead such councel to believe
that the Offering Circular, at any time from the date thereof through the
date of such opinion, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary
to make the statements contained therein, in light of the circumstances
under which they were made, not
17
<PAGE>
misleading (it being understood that such counsel may express no
view with respect to the financial, statistical and accounting
data included in or appended as exhibits to the Offering
Circular).
(v) The Purchaser shall have received an opinion of
counsel from Weil, Gotshal & Manges, counsel to the Company and LTC,
dated the Closing Date, in form and substance satisfactory to the
Purchaser to the effect that:
(a) the Trust Fund will qualify for treatment for Federal
income tax purposes as two separate real estate mortgage
investment conduits, as defined in Section 860D of the Code (the
"Upper-Tier REMIC" and the "Lower-Tier REMIC");
(b) the Class A Certificates, Class B Certificates, Class
C Certificates, Class D Certificates, Class E Certificates, Class
F Certificates, Class X-1 Certificates, and Class X-2
Certificates will constitute "regular interests" in the Upper-
Tier REMIC and the Class R Certificates will constitute the
single class of "residual interests" in the Upper-Tier REMIC
within the meaning of the Code; and
(c) The Class AL Interest, the Class BL Interest, the Class
CL Interest, the Class DL Interest, the Class EL Interest, the
Class FL Interest, and the Class X-1L Interest will constitute
"regular interests" in the Lower-Tier REMIC and the Class LR
Certificates will constitute the single class or "residual
interests" in the Lower-Tier REMIC within the meaning of the
Code.
(vi) The Purchaser shall have received an opinion from
Ballard Spahr Andrews & Ingersoll, Maryland local counsel to LTC,
dated the Closing Date in form and substance satisfactory to the
Purchaser to the effect that:
18
<PAGE>
(a) LTC has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the State of
Maryland;
(b) LTC possesses the corporate power and authority to own
its current properties and to conduct its business as now being
conducted and as described in the Offering Circular and to
execute and deliver, and perform its obligations under, the
Agreements. LTC has all requisite corporate power and authority
to convey to the Company, the Mortgage Loans (as defined in the
Transfer Agreement) as contemplated by the Transfer Agreement;
(c) All necessary corporate action has been taken to
authorize the execution and delivery by LTC of the Agreements and
the performance by LTC of its obligations thereunder; and the
Agreements, have been duly executed and delivered on behalf of
LTC;
(d) The execution and delivery by LTC of the Agreements and
compliance by LTC with the provisions thereof: (i) does not, and
will not, conflict with or violate any of the terms and
provisions of LTC's Charter or By-laws or the Maryland General
Corporation Law (the "MGCL"); (ii) will not conflict with, result
in a breach or violation of or the acceleration of indebtedness
under or constitute a default under the terms of any indenture or
other agreement or instrument known to us and to which LTC is a
party or by which it is bound; and (iii) does not, and will not,
require any consent, approval, authorization of, registration or
filing with, or notice to, any governmental or regulatory
authority, agency, department, commission, board, bureau, body or
instrumentality of the State of Maryland pursuant to any
provision of the MGCL; and
(e) Based solely upon an officer's certificate and to such
counsel's knowledge, there is no action, suit or proceeding
against, or governmental investigation of LTC, pending or
threatened before any Maryland court or Mary-
19
<PAGE>
land administrative agency which (i) seeks to prevent the performance
by LTC of its obligations under the Agreements, (ii) might materially
and adversely affect the performance by LTC of its obligations under,
or the validity of, the Agreements or (iii) might materially and
adversely affect the rights of LTC with regard to any Mortgaged
Property except as disclosed in the applicable title insurance
policies and related documentation delivered at Closing.
(vii) the Purchaser shall have received an opinion from Latham &
Watkins, California counsel to LTC dated the Closing Date in form and
substance satisfactory to the Purchaser to the effect that:
(a) LTC is qualified to do business in the State of
California;
(b) The execution and delivery of the Transfer Agreement and
Pooling Agreement by LTC and the performance of the obligations of LTC
under the Transfer Agreement and Pooling Agreement do not (i) violate
any California statute or regulation applicable to LTC, (ii) require
any consents, approvals, authorizations, registrations, declarations
or filings by LTC under any California statute or regulation
applicable to LTC (except for any filings with respect to any UCC
financing statement for the transfer of the Mortgage Loans, as to
which we express no opinion), (iii) result in the creation or
imposition of any lien, charge or encumbrance upon the Mortgage Loans,
the Certificates or any property or assets of LTC, except such liens,
charges or encumbrances, if any, that may arise as a result of the
Transfer Agreement and Pooling Agreement, or (iv) violate any
judgment, writ, injunction, decree, order or ruling of any court or
governmental authority binding on LTC of which we are aware. No
opinion is expressed in this paragraph (b) as to the application of
any antifraud laws or securities or Blue Sky laws (not including the
California Real Property Securities Dealers law);
20
<PAGE>
(c) The transfer, assignment and conveyance of the Mortgage
Loans by LTC to the Company pursuant to the Transfer Agreement
are not subject to the Bulk Sales Law of Division 6 of the
California Commercial Code;
(d) A federal or state court sitting in California would
honor the parties' choice of law of New York as the law
applicable to the Transfer Agreement and Pooling Agreement
subject to the qualification that a court in California might not
apply the laws of New York respecting (a) the procedural rules
governing or affecting any action in California to enforce the
Transfer Agreement and Pooling Agreement or (b) any provision or
practice condoned or permitted by New York law which is
determined to be against a strong public policy of the State of
California;
(e) the Lower-Tier REMIC and the Upper-Tier REMIC will
each qualify as a REMIC for purposes of the California Revenue
and Taxation Code;
(f) As a result of the qualification of the Lower-Tier
REMIC and the Upper-Tier REMIC as REMICs for purposes of the
California Taxation Code, the Lower-Tier REMIc and the Upper-Tier
will not be subject to California income or franchise taxes,
except as provided below. The Lower-Tier REMIC and the Upper-Tier
REMIC may be subject to California income or franchise tax in
certain circumstances where Federal income tax is also imposed,
such as in the case of net income from foreclosure property. In
addition, the Lower-Tier REMIC and the Upper-Tier REMIC may be
subject to the minimum California franchise tax under section
23153 of the California Revenue and Taxation Code. The minimum
California franchise tax is currently $800.00 for each income
year; and
(g) We are unaware of any other California taxes that might
be imposed on the Lower-Tier REMIC and the Upper-Tier REMIC,
except for (i) local taxes, such as real property taxes
21
<PAGE>
and documentary transfer taxes, that might apply to the acquisition,
holding or disposition of real property as the result of foreclosure
of one more of the Mortgage Loans and (ii) local business license
taxes that might be imposed by various jurisdictions within
California.
(viii) The Purchaser shall have received an opinion of counsel
to the Trustee, dated the Closing Date and in form and substance
satisfactory to the Purchaser;
(ix) The Purchaser shall have received an opinion of its
counsel, dated the Closing Date and in form and substance satisfactory to
the Purchaser;
(x) The Purchaser shall have received an opinion of counsel
to Bankers Trust Company as Master Servicer, dated the Closing Date and in
form and substance satisfactory to the Purchaser;
(xi) The Purchaser shall have received all opinions required by
each of Standard & Poors Ratings Group and Fitch Investors Service, Inc.
in order to obtain the required ratings on the Offered Certificates;
(xii) The Company shall have furnished or caused to be
furnished to the Purchaser on the Closing Date certificates of officers of
the Company satisfactory to the Purchaser as to the accuracy of the
representations and warranties of the Company herein at and as of the
Closing Date, as to the performance by the Company of all of its
obligations hereunder to be performed at or prior to such Closing Date and
as to such matters as the Purchaser may reasonably request;
(xiii) LTC shall have furnished or caused to be furnished to the
Purchaser at the Closing Date certificates of officers of LTC satisfactory
to the Purchaser as to the accuracy of the representations and warranties
of LTC herein at and as of such Closing Date, as to the performance by LTC
of all of its obligations hereunder to be performed at or
22
<PAGE>
prior to such Closing Date as to such matters as the Purchaser may reasonably
requested;
(xiv) The Class A Certificates shall have been rated not less than
"AAA," by each of Standard & Poor's Ratings Group and Fitch Investors Service,
Inc;
(xv) All other opinions, certificates and other documents incident
to, and all proceedings in connection with the transactions contemplated by any
of the Agreements shall be reasonably satisfactory in form and substance to the
Purchaser and its counsel. The Purchaser and its councel shall have received
copies of all documents and other information as they may reasonably request,
in form and substance satisfactory to the Purchaser and its counsel, with
respect to such transactions and the taking of all proceedings in connection
therewith;
(xvi) On or after the date hereof there shall not have occurred any
of the following: (i) a suspension or material limitation in trading in
securities generally on the New York Stock Exchange; (ii) a suspension or
material limitation in trading in LTC securities on the New York Stock Exchange;
(iii) a general moratorium on commercial banking activities in New York declared
by either Federal or New York State authorities; or (iv) the outbreak or
escalation of hostilities involving the United States or the declaration by the
United States of a national emergency or war if the effect of any such event
specified in this clause (iv) in the Purchaser's judgement makes it
impracticable or inadvisable to proceed with the offering or the delivery of, on
the terms and in the manner contemplated by this Agreement and the Offering
Circular; and
(xvii) Subsequent to the date hereof, there shall not have been any
change, or any development involving a prospective change, in or affecting the
business or properties of the Company or LTC singly or in the aggregate, which
the Purchaser concludes in its judgement, materially impairs the investment
quality of the Offered Certificates so as to make it impractical or inadvisable
to market the
23
<PAGE>
Offered Certificates as contemplated by the Offering Circular.
If any of the conditions specified in this Section 8 shall not have
been fulfilled when and as provided by this Agreement, or if any of the opinions
and certificates mentioned above or elsewhere in this Agreement shall not be
satisfactory in form and substance to the Purchaser and counsel to the
Purchaser, this Agreement and all obligations of the Purchaser hereunder may be
cancelled at, or at any time prior to, the Closing Date by the Purchaser. Notice
of such cancellation shall be given to the Company in writing, or by telephone
confirmed in writing. Such cancellation shall be without prejudice to any
rights, claims or remedies that the Purchaser may have pursuant to this
Agreement or otherwise against any of the Company or LTC or any other person by
reason of such cancellation.
9. Indemnification and Contribution. (a) The Company and LTC will,
--------------------------------
jointly and severally, indemnify and hold harmless the Purchaser, the partners,
officers, employees and agents of the Purchaser and each person who controls the
Purchaser within the meaning of either the 1933 Act or the 1934 Act or
otherwise, against any losses, claims, damages or liabilities, joint or several,
to which they or any of them may become subject, under the 1933 Act, the 1934
Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon an untrue statement
or alleged untrue statement of a material fact contained in the Offering
Circular, any amendment or supplement thereto, or any information provided to
any holder or prospective purchaser of Offered Certificates pursuant to Section
6(d) herein, or arise out of or are based upon the omission or alleged omission
to state therein a material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, and will
reimburse each such indemnified party for any legal or other expenses reasonably
incurred by it in connection with investigating or defending any such action or
claim as such expenses are incurred; provided, however, that the Company and LTC
-------- -------
will not be liable in any such case to the extent that any loss, claim, damage
or liability arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in the Offering
24
<PAGE>
Circular or any such amendment or supplement in reliance upon and in conformity
with the information hereto furnished to the Company and LTC by the Purchaser
expressly for use therein.
(b) The Purchaser agrees to indemnify and hold harmless each of
the Company and LTC and their respective directors, officers, employees and
agents and each person who controls the Company or LTC within the meaning of
either the 1933 Act or the 1934 Act or otherwise, against any losses, claims,
damages or liabilities, joint or several, to which they or any of them may
become subject, under the 1933 Act, the 1934 Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in the Offering Circular or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading, in each case to
the extent, but only to the extent, that such statement or alleged untrue
statement or omission or alleged omission was made in the Offering Circular or
any such amendment or supplement in reliance upon and in conformity with the
information hereto furnished to the Company or LTC expressly for use therein,
and will reimburse each such indemnified party for any legal or other expenses
reasonably incurred by it in connection with investigating or defending any such
action or claim as such expenses are incurred. This indemnity agreement shall be
in addition to any liability which the Purchaser may otherwise have.
(c) Promptly after receipt by an indemnified party under
subsection (a) or (b) above of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made against an
indemnifying party under such subsection, notify the indemnifying party or
parties in writing of the commencement thereof, but the omission so to notify
the indemnifying party or parties shall not relieve the indemnifying party or
parties from any liability which it or they may have to any indemnified party
otherwise than under such subsection. In case any such action shall be brought
against any indemnified party, it shall notify the indemnifying party or parties
of the commencement
25
<PAGE>
thereof, and the indemnifying party or parties shall be entitled to participate
therein and, to the extent that it or they shall wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party (who shall not, except with the
consent of the indemnified party, be counsel to the indemnifying party or
parties), and, after notice from the indemnifying party or parties to such
indemnified party of its or their election so to assume the defense thereof, the
indemnifying party or parties shall not be liable to such indemnified party
under such subsection for any legal expenses of other counsel or any other
expenses, in each case subsequently incurred by such indemnified party, in
connection with the defense thereof other than reasonable costs of
investigation. No indemnifying party shall, without the written consent of the
indemnified party, effect the settlement or compromise of, or consent to the
entry of any judgment with respect to, any pending or threatened action or claim
in respect of which indemnification or contribution may be sought hereunder
(whether or not the indemnified party is an actual or potential party to such
action or claim) unless such settlement, compromise or judgement (i) includes an
unconditional release of the indemnified party from all liability arising out
of such action or claim and (ii) does not include a statement as to or an
admission of fault, culpability or a failure to act, by or on behalf of any
indemnified party.
(d) If the indemnification provided for in this Section 9 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof), then the Company and LTC on
the one hand and the Purchaser on the other shall contribute to the amount paid
or payable as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect the
relative benefits received by the Company and LTC on the one hand and the
Purchaser on the other from the offering of the Offered Certificates. If,
however, the allocation provided by the immediately preceding sentence is not
permitted by applicable law or if the indemnified party failed to give the
notice required under subsection (c) above, then each indemnifying party shall
contribute to such amount paid or payable by
26
<PAGE>
such indemnified party in such proportion as is appropriate to reflect not only
such relative benefits but also the relative fault of the Company and LTC on the
one hand and the Purchaser on the other in connection with the statements or
omissions which resulted in such losses, claims, damages or liabilities (or
actions in respect thereof) as well as any other relevant equitable
considerations. The relative benefits received by the Company and LTC on the one
hand and the Purchaser on the other shall be deemed to be in the same proportion
as the total net proceeds from the offering (before deducting expenses) received
by the Company bear to the total purchase discounts and commissions received by
the Purchaser. The relative fault shall be determined by reference to, among
other things, the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statements or omissions. The amount paid
or payable by a party as a result of the losses, claims, damages or liabilities
(or actions in respect thereof) referred to above shall be deemed to include any
legal or other fees or expenses incurred by such party in connection with
investigating or defending any such claim. The Company and LTC and the Purchaser
agree that it would not be just and equitable if contribution were determined by
pro rata allocation or any other method of allocation which does not take
- --- ----
account of the equitable considerations referred to above. Notwithstanding the
provisions of this subsection (d), no person guilty of fraudulent
misrepresentation (within the meaning of Section 11 (f) of the 1933 Act) shall
be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
(e) The obligations of the Company under this Section 9 shall be in
addition to any liability which the Company may otherwise have and shall extend,
upon the same terms and conditions, to each person, if any, who controls the
Purchaser within the meaning of the 1933 Act; and the obligations of the
Purchaser under this Section 9 shall be in addition to any liability which the
Purchaser may otherwise have and shall extend, upon the same terms and
conditions, to each officer and director of the Company and to each person, if
any, who controls the Company within the meaning of the 1933 Act.
10. Survival. The respective indemnities, agreements,
--------
representations, warranties and other state-
27
<PAGE>
ments of the Company, LTC and the Purchaser, as set forth in this Agreement or
made by or on behalf of them, respectively, pursuant to this Agreement, shall
remain in full force and effect, regardless of any investigation (or any
statement as to the results thereof) made by or on behalf of the Purchaser or
any controlling person of the Purchaser, the Company or LTC or any officer,
director, employee, agent or controlling person of the Company or LTC and shall
survive delivery of and payment for the Offered Certificates.
11. Notices. All notices and other communications hereunder shall be
-------
in writing and shall be sent by mail, telex or facsimile transmission, addressed
(a) if to the Purchaser, to Goldman, Sachs & Co., 85 Broad Street, New York, New
York 10004, Attention: Steven Stuart, facsimile: (212) 363-6148, (b) if to the
Company, to LTC REMIC Corporation, 300 Esplanade Avenue, Suite 1260, Oxnard, CA
93030, Attention: Andre Dimitriadis; and (c) if to the Originator or LTC, to LTC
Properties, Inc., 300 Esplanade Drive, Suite 1860, Oxnard, CA 93030 Attention:
James Pieczynski, facsimile: (805) 981-8663. Any notice so given shall take
effect upon receipt thereof.
12. Miscellaneous. (a) THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED
-------------
IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK.
(b) The headings in this Agreement are for purposes of reference only
and shall not limit or define the meaning hereof.
(c) This Agreement shall be binding upon, and inure solely to the
benefit of, the Purchaser, LTC and the Company and, to the extent provided in
Sections 9 and 10 hereof, the partners, officers, employees and agents of the
Purchaser and the directors, officers, employees and agents of each of the
Company and LTC and each person who controls the Company and LTC or the
Purchaser, and their respective heirs, executors, administrators, successors and
assigns, and no other person shall acquire or have any right under or by virtue
of this Agreement. Except with respect to Section 6(e), no purchaser of any of
the Offered Certificates from the Purchaser shall be deemed a successor or
assign by reason merely of such purchase. No right or duty under this Agreement
may be
28
<PAGE>
assigned or delegated by the Company or LTC without the written consent of the
Purchaser and any such assignment or delegation made without such consent shall
be null and void for all purposes.
(d) Except as otherwise provided in the final paragraph of Section 8,
this Agreement may be changed, waived, discharged or terminated only by an
instrument in writing signed by the party against which enforcement of such
change, waiver, discharge or termination is sought.
(e) This Agreement may be executed in any number of counterparts,
each of which counterparts shall be an original, but all of which shall
constitute one instrument.
29
<PAGE>
If the foregoing is in accordance with your understanding, please sign
and return to us two counterparts hereof, and upon the acceptance hereof by the
Purchaser, this letter and such acceptance hereof shall constitute a binding
agreement between the Purchaser, the Company and LTC.
Very truly yours,
LTC REMIC CORPORATION
By: /s/ James J. Pieczynski
----------------------------------------
Name: James J. Pieczynski
Title: Vice President
LTC PROPERTIES, INC.
By: /s/ James J. Pieczynski
----------------------------------------
Name: James J. Pieczynski
Title: Senior Vice President and C.F.O
Accepted as of the date hereof:
GOLDMAN, SACHS & CO.
By /s/ Goldman, Sachs & Co.
--------------------------------
(Goldman, Sachs & Co.)
30
<PAGE>
SCHEDULE I TO PURCHASE AGREEMENT
Title of Offered Certificates:
LTC Commercial Mortgage Pass-Through
Certificates, Series 1994-1
Aggregate principal amount:
$68,901,000 Class A Certificates
$ 6,382,000 Class B Certificates
$ 6,381,000 Class C Certificates
$ 1,000,000 Class R Certificates
$ 300,000 Class LR Certificates
<TABLE>
<CAPTION>
Price to Investor* Purchase Price to Purchaser*
------------------ ----------------------------
As a % of As a % of
The Principal The Principal
Amt. of Offered Amt. of Offered
Certificates Certificates
Class Price Price % Price Price %
<S> <C> <C> <C> <C>
A $68,881,708 99.972% $68,192,698 98.972%
B $ 6,381,681 99.995% $ 6,317,861 98.995%
C $ 6,364,792 99.746% $ 6,300,982 98.746%
R $ 459,986 45.999% $ 459,986 45.999%
LR $ 137,996 45.999% $ 137,996 45.999%
----------- ----------- ----------- -----------
$82,226,163 99.111% $81,409,523 98.126%
</TABLE>
* Does not include accrued interest which will be paid from November 1, 1994
up to the Closing Date.
Specified funds for payment of purchase price:
Immediately available funds
Pooling and Servicing Agreement:
Pooling and Servicing Agreement, to be dated as of November 1, 1994,
among LTC, as depositor, Bankers Trust Company as Master Servicer
and Marine Midland Bank, as trustee, LTC, as special servicer and,
as to certain provisions described therein, LTC, as originator.
Final Scheduled Distribution Date: June 15, 2026
I-1
<PAGE>
Interest Rate:
8.85% Class A Certificates
9.30% Class B Certificates
9.50% Class C Certificates
8.85% Class R Certificates
8.85% Class LR Certificates
Interest Payment Dates:
The 15th day of each month, or if such day is not a Business Day, on the
next succeeding Business Day.
Time of Delivery: November 29, 1994 (for Class A, B, R and LR Certificates)
December 23, 1994 (for Class C Certificates)
Closing Location: Skadden, Arps, Slate, Meagher & Flom 919 Third Avenue
New York, New York, 10022
Name and address of Purchaser:
Goldman, Sachs & Co.
85 Broad Street
New York, New York, 10004
Supplemental Documents, if any, to be delivered with the Final Offering
Circular:
None.
I-2
<PAGE>
EXHIBIT 10.29
EXHIBIT A-5
[FORM OF CLASS E CERTIFICATE]
PRINCIPAL PAYMENTS ON THIS CERTIFICATE ARE PAYABLE IN INSTALLMENTS AS SET FORTH
HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS CERTIFICATE AT
ANY TIME MAY BE LESS THAN THE INITIAL CERTIFICATE PRINCIPAL AMOUNT SET FORTH
BELOW.
THE RIGHTS OF HOLDERS OF THE CLASS E CERTIFICATES TO RECEIVE DISTRIBUTIONS OF
PRINCIPAL AND INTEREST IN RESPECT OF THE MORTGAGE LOANS WILL BE SUBORDINATED TO
THE RIGHTS OF HOLDERS OF THE CLASS A, CLASS B, CLASS C, CLASS D, CLASS R AND
CLASS LR CERTIFICATES TO RECEIVE DISTRIBUTIONS OF INTEREST AND PRINCIPAL.
THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "1933 ACT") OR THE SECURITIES LAWS OF ANY STATE OF
THE UNITED STATES ("BLUE SKY LAWS"), AND SUCH CERTIFICATES MAY NOT BE OFFERED,
RESOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A) BY THE INITIAL INVESTOR (1)
TO A PERSON THAT THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL
BUYER WITHIN THE MEANING OF RULE 144A PROMULGATED UNDER THE 1933 ACT IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A OR (2) PURSUANT TO AN
EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE 1933 ACT (IF
AVAILABLE) AND (B) BY SUBSEQUENT INVESTORS ASSET FORTH IN (A) ABOVE AND, IN
ADDITION, TO AN INSTITUTIONAL ACCREDITED INVESTOR AS DEFINED IN RULE 501(A)(1),
(2), (3) OR (7) OF REGULATION D PROMULGATED UNDER THE 1933 ACT IN A TRANSACTION
EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE 1933 ACT AND DELIVERY OF AN
OPINION OF COUNSEL, IF REQUIRED BY THE TRUSTEE, THE CERTIFICATE REGISTRAR OR THE
SELLER, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY
STATE OF THE UNITED STATES.
NOTWITHSTANDING THE ABOVE, THIS CERTIFICATE MAY NOT BE PURCHASED BY OR PLEDGED,
SOLD OR OTHERWISE TRANSFERRED TO ANY PERSON WHICH IS AN EMPLOYEE BENEFIT PLAN
SUBJECT TO THE FIDUCIARY RESPONSIBILITY PROVISIONS OF THE EMPLOYEE RETIREMENT
INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR SECTION 4975 OF THE
INTERNAL REVENUE CODE OF 1986, OR ANY PERSON ACTING ON BEHALF OF ANY SUCH PLAN
OR USING THE ASSETS OF SUCH PLAN TO ACQUIRE THIS CERTIFICATE EXCEPT PURSUANT TO
AN APPLICABLE PROHIBITED TRANSACTION EXEMPTION ISSUED BY THE UNITED STATES
DEPARTMENT OF LABOR.
A-5-1
<PAGE>
LTC COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES,
SERIES 1994-1, CLASS E-1
evidencing a nonassessable, fully paid
percentage interest in a trust fund
which includes a pool of commercial mortgage loans
Pass-Through Rate: ____% No. E-1
Initial Certificate Principal
Amount: $19,145,000 First Distribution Date:
December 15, 1994
Original Class C Aggregate Final Scheduled
Certificate Principal Amount: Distribution Date:
$19,145,000 June 15, 2026
Cut-Off Date: November 1, 1994
A-5-2
<PAGE>
This certifies that LTC REMIC Corporation is the registered owner of
the Percentage Interest evidenced by this Certificate (obtained by dividing the
initial Certificate Principal Amount of this Certificate by the Original Class E
Aggregate Certificate Principal Amount, each as noted on the face hereof) in the
Trust Fund, including the distributions to be made with respect to the Class E
Certificates. The Trust Fund, described more fully below, consists primarily of
Mortgage Loans held in trust by the Trustee and serviced by the Master Servicer
and the Special Servicer, as applicable. The Trust Fund was created, and the
Mortgage Loans are to be serviced, pursuant to the Agreement (as defined below).
The Holder of this Certificate, by virtue of the acceptance hereof, assents to
the terms, provisions and conditions of the Agreement and is bound thereby.
Also issued under the Agreement are the Class A, Class B, Class C, Class D,
Class F, Class X-1, Class X-2, Class R and Class LR Certificates (together with
the Class E Certificates, the "Certificates") (the Holders of Certificates
issued under the Agreement are collectively referred to herein as
"Certificateholders").
This Certificate is issued pursuant to, and in accordance with, the
terms of a Pooling and Servicing Agreement dated as of November 1, 1994 (the
"Agreement") among LTC REMIC Corporation, as Depositor, Marine Midland Bank, as
Trustee, Bankers Trust Company, as Master Servicer and LTC Properties, Inc., as
Originator and Special Servicer. In addition, LTC will be subservicer for the
Mortgage Loans pursuant to a subservicing agreement to be dated as of November
1, 1994 with Bankers Trust Company (in such capacity the "Subservicer"). To the
extent not defined herein, capitalized terms used herein shall have the meanings
assigned thereto in the Agreement.
THIS CERTIFICATE DOES NOT REPRESENT AN INTEREST IN OR A DEPOSIT OR
OBLIGATION OF THE DEPOSITOR, THE ORIGINATOR, THE MASTER SERVICER, THE SPECIAL
SERVICER, THE SUBSERVICER OR THE TRUSTEE, OR ANY OF THEIR AFFILIATES. THIS
CERTIFICATE WILL NOT BE A SAVINGS ACCOUNT OR DEPOSIT AND IS NOT INSURED OR
GUARANTEED BY ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY OR BY ANY PRIVATE
ENTITY.
This Certificate represents a "regular interest" in a "real estate
mortgage investment conduit," as those terms are defined, respectively, in
Sections 860G(a)(1) and 860D of the Internal Revenue Code of 1986 (the "Code").
Each Holder of this Certificate, by acceptance hereof, agrees to treat, and to
take no action inconsistent with the treatment of, this Certificate in
accordance with the preceding sentence for purposes of federal income taxes,
state and local income and franchise taxes and other taxes imposed on or
measured by income.
The Trustee makes no representation or warranty as to
A-5-3
<PAGE>
any of the statements contained herein or the validity or sufficiency of the
Certificates or the Mortgage Loans and has caused to be executed and
authenticated this Certificate in its limited capacity as Trustee under the
Agreement.
Pursuant to the terms of the Agreement, the Paying Agent will
distribute, on the fifteenth day of each month or if any such fifteenth day is
not a Business Day, on the next succeeding Business Day (each such date, a
"Distribution Date"), commencing in December 1994, to the Person in whose name
this Certificate is registered as of the related Record Date, an amount equal to
such Person's pro rata share (based on the Percentage Interest represented by
this Certificate) of that portion of the aggregate amount of principal and
interest then distributable, if any, allocable to the Class E Certificates for
such Distribution Date, all as more fully described in the Agreement. The
amount of interest which accrues on this Certificate during an Interest Accrual
Period will be subject to reduction with respect to any Net Prepayment Interest
Shortfall allocated to the Class E Certificates, as described in the Agreement.
Interest will accrue on the outstanding Certificate Principal Amount
of this Certificate at the Pass-Through Rate specified on the face of this
Certificate. Interest will be calculated on the basis of a 360-day year of
twelve 30-day months. Interest accrued on this Certificate during an Interest
Accrual Period, plus the Outstanding Class Interest Shortfall with respect to
this Certificate, if any, will be payable on the related Distribution Date to
the extent provided in the Agreement. The "Interest Accrual Period" relating
to any Distribution Date is the one-month period from and including the first
day of the month preceding the month in which such Distribution Date occurs to
and including the last day of such month, commencing in November 1994.
With the exception of the final distribution in respect of this
Certificate, distributions on this Certificate will be made by the Paying Agent
without the presentation or surrender of this Certificate or the making of any
notation hereon, by check mailed by first-class mail to the address of the
Holder set forth in the Certificate Register, or, provided the Holder holds
Certificates the aggregate initial Certificate Principal Amount of which exceeds
$5,000,000 and has provided the Paying Agent with wire instructions in writing
at least five Business Days before the related Record Date, by wire transfer of
immediately available funds to the account of such Holder at a bank or other
entity located in the United States and having appropriate facilities therefor.
The final distribution on this Certificate will be made in like manner after
notice by the Trustee of the pendency of such distribution and only upon
presentation and
A-5-4
<PAGE>
surrender of this Certificate at the Corporate Trust Office or such other
location specified in the notice to Holders of such final distribution.
This Certificate is one of a duly authorized issue of Certificates
designated as LTC Commercial Mortgage Pass-Through Certificates, Series 1994-1
and represents a fractional undivided interest in a Trust Fund. As more fully
described in and subject to the limitations of the Agreement, the Trust Fund
will consist primarily of (i) such Mortgage Loans as from time to time are
subject to the Agreement, together with the Mortgage Files relating thereto;
(ii) all payments due on or collections in respect of the Mortgage Loans due
after the Cut-Off Date; (iii) any REO Property; (iv) all revenues received in
respect of any REO Property; (v) the rights of the Trustee, Master Servicer and
Special Servicer under the insurance policies with respect to the Mortgage Loans
required to be maintained pursuant to this Agreement and any proceeds thereof;
(vi) any Assignments of Leases, Rents and Profits; (vii) any guaranties given as
additional security for any Mortgage Loans; (viii) all assets deposited in the
Collection Account, the Distribution Account, the Upper-Tier Distribution
Account and the REO Account including reinvestment income; and (ix) the proceeds
of any of the foregoing.
This Certificate is limited in right of payment to, among other
things, certain collections and recoveries in respect of the Mortgage Loans, as
more specifically set forth herein and in the Agreement.
As provided in the Agreement, withdrawals from the Collection Account
may be made by the Master Servicer from time to time for purposes other than
distributions to Certificateholders, such purposes including, among other
things, reimbursement or payment to the Master Servicer, the Special Servicer,
the Subservicer or the Trustee of certain expenses incurred or certain fees
earned by the Master Servicer, the Special Servicer or the Trustee, including,
without limitation, certain Nonrecoverable Advances.
This Certificate does not purport to summarize the Agreement, and
reference is made to the Agreement for the interests, rights, benefits,
obligations and duties evidenced hereby, and the limitations thereon, and the
rights, duties and immunities of the Trustee. This Certificate is issued under
and is subject to the terms, provisions and conditions of the Agreement, to
which Agreement, as amended from time to time, the holder of this Certificate by
virtue of the acceptance hereof assents and by which the holder of this
Certificate is bound.
As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate
A-5-5
<PAGE>
is registrable in the Certificate Register only upon surrender of this
Certificate for registration of transfer at the office of the Certificate
Registrar or at the office of its agent in the City of New York. The Trustee or
the Certificate Registrar may require that this Certificate be duly endorsed by,
or accompanied by a written instrument of transfer in form satisfactory to the
Trustee and the Certificate Registrar duly executed by, the Holder hereof or
such Holder's attorney duly authorized in writing. Thereupon, one or more new
Certificates of a like aggregate Percentage Interest in the same Class of
authorized denominations will be executed and authenticated by the Trustee and
delivered by the Certificate Registrar to the designated transferee or
transferees.
Prior to due presentation of this Certificate for registration of
transfer, the Depositor, the Master Servicer, the Special Servicer, the
Subservicer, the Trustee, the Certificate Registrar and any agent of any of them
may treat the Person in whose name this Certificate is registered as the owner
hereof for all purposes, and none of the Depositor, Master Servicer, the Special
Servicer, the Subservicer, the Trustee, the Certificate Registrar or any agent
of any of them shall be affected by notice to the contrary.
As provided in the Agreement and subject to certain limitations herein
set forth, this Certificate is exchangeable for other Certificates of the same
Class of authorized denominations of like aggregate Percentage Interests, as
requested by the Holder surrendering the same.
No service charge will be made to a Certificateholder for any such
registration of transfer or exchange, but the Certificate Registrar may require
payment of a sum sufficient to cover any tax or other governmental charge
payable in connection therewith.
The Agreement permits, with certain exceptions therein provided, the
amendment of the Agreement and the modification of the rights of the
Certificateholders under the Agreement at any time by the Depositor, the Master
Servicer, the Special Servicer and the Trustee with the consent of the Holders
of Class A, Class B, Class C, Class D, Class E, Class F, Class R, Class LR,
Class X-1 and Class X-2 Certificates representing not less than 66-2/3% of the
Voting Rights allocated to each such Class of the Certificates affected by the
amendment. Any such consent by the Holder of this Certificate shall be
conclusive and binding on such Holder and upon all future Holders of this
Certificate and of any Certificates issued upon the transfer hereof or in
exchange herefor or in lieu hereof whether or not notation of such consent is
made upon this Certificate. The Agreement also permits the amendment thereof in
certain circumstances without the consent of
A-5-6
<PAGE>
the Holders of any of the Certificates, provided that such amendment would not
adversely affect in any material respect the interests of any Certificateholder.
Each of the Master Servicer, any Holder of a Class LR Certificate and,
if all the Mortgage Loans are then Specially Serviced Mortgage Loans, the
Special Servicer, may at its option, upon not less than 30 days' prior notice
given to the Trustee, repurchase the Mortgage Loans and thereby effect an early
termination of the Trust Fund on any Distribution Date after the date on which
the aggregate Certificate Principal Amount of the Certificates is reduced to
less than 10% of the initial aggregate Certificate Principal Amount of the
Certificates, all, but not less than all, of the Mortgage Loans then included in
the Trust Fund, and all property acquired in respect of any Mortgage Loans, may
be repurchased at a purchase price, payable in cash, equal to not less than the
greater of:
(i) the sum of (without duplication of any amount in clauses (A)
through (E) below):
(A) 100% of the unpaid principal balance of each Mortgage Loan
included in the Trust Fund as of the Early Termination Determination
Date;
(B) all unpaid interest accrued on such principal balance of
each such Mortgage Loan at the related Mortgage Interest Rate Interest
Rate to such Early Termination Determination Date; and
(C) the fair market value of all other property included in the
Trust Fund as of such Early Termination Determination Date; and
(D) all unreimbursed P&I Advances, unreimbursed Servicing
Advances and interest thereon at the Advance Rate; and
(E) all unreimbursed Servicing Fees, Special Servicing Fees and
Trustee Fees; and
(ii) the aggregate fair market value (determined in accordance with
Section 9.01(d)(ii)(B) of the Agreement) of the Mortgage Loans, and all
other property acquired in respect of any Mortgage Loan in the Trust Fund,
as of the date of purchase.
The obligations created by the Agreement shall terminate upon the
earliest to occur of (i) the repurchase of all Mortgage Loans by the Master
Servicer, any Holder of a Class LR Certificate or the Special Servicer as
described above; (ii) the
A-5-7
<PAGE>
later of (a) the distribution to Certificateholders of final payment with
respect to the last outstanding Mortgage Loan or (b) the disposition of all
property acquired upon foreclosure or deed in lieu of foreclosure with respect
to the last outstanding Mortgage Loan and the remittance to the
Certificateholders of all funds due under the Agreement; or (iii) the sale of
assets of the Trust Fund after the Certificate Principal Amounts of all the
Certificates have been reduced to zero under circumstances set forth in the
Agreement. In no event, however, will the trust created by the Agreement
continue beyond the expiration of 21 years from the death of the last surviving
descendant of a certain individual named in the Agreement living on the date
thereof.
Unless the Certificate of Authentication on this Certificate has been
executed by or on behalf of the Trustee, by manual signature, this Certificate
shall not be entitled to any benefit under the Agreement or be valid for any
purpose.
IN WITNESS WHEREOF, the Authenticating Agent has caused this
Certificate to be duly executed.
BANKERS TRUST COMPANY,
As Authenticating Agent
By:__________________________________________
Authorized Signatory
Certificate of Authentication
This is one of the Class E Certificates referred to in the Agreement.
Dated: November 29, 1994
BANKERS TRUST COMPANY
as Authenticating Agent
By:__________________________________________
Authorized Officer
A-5-8
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned ("Assignor(s)") hereby sell(s),
assign(s) and transfer(s) unto ________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_________________________ (please print or typewrite name(s) and address(es),
including postal zip code(s) of assignee(s)) ("Assignee(s)") the entire
Percentage Interest represented by the Class E Certificate and hereby authorize
(i) the registration of transfer of such interest to Assignee(s) on the
Certificate Register of the Trust Fund.
I (we) further direct the Certificate Registrar to issue a new Class E
Certificate of the entire Percentage Interest represented by the within Class E
Certificates to the above-named Assignee(s) and to deliver such Class E
Certificate to the following address:
_______________________________________________________________________________
_______________________________________________________________________________
Date:_______________________ ____________________________
Signature by or on behalf
of Assignor(s)
____________________________
Taxpayer Identification Number
A-5-9
<PAGE>
DISTRIBUTION INSTRUCTIONS
The Assignee(s) should include the following for purposes of
distribution:
Address of the Assignee(s) for the purpose of receiving notices and
distributions:_________________________________________________________________
_______________________________________________________________________________
Distributions, if be made by wire transfer in immediately available funds to
_______________________________________________________________________________
_______________________________________________________________________________
for the account of_____________________________________________________________
account number_________________________________________________________________
This information is provided by _______________________________________________
the Assignee(s) named above, or _______________________________________________
as its (their) agent.
By____________________________________________________
______________________________________________________
[Please print or type name(s))
______________________________________________________
Title
______________________________________________________
Taxpayer Identification Number
A-5-10
<PAGE>
EXHIBIT A-6
[FORM OF CLASS F CERTIFICATE]
PRINCIPAL PAYMENTS ON THIS CERTIFICATE ARE PAYABLE IN INSTALLMENTS AS SET FORTH
HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS CERTIFICATE AT
ANY TIME MAY BE LESS THAN THE INITIAL CERTIFICATE PRINCIPAL AMOUNT SET FORTH
BELOW.
THE RIGHTS OF HOLDERS OF THE CLASS F CERTIFICATES TO RECEIVE DISTRIBUTIONS OF
PRINCIPAL AND INTEREST IN RESPECT OF THE MORTGAGE LOANS WILL BE SUBORDINATED TO
THE RIGHTS OF HOLDERS OF THE CLASS A, CLASS B, CLASS C, CLASS D, CLASS E, CLASS
R AND CLASS LR CERTIFICATES TO RECEIVE DISTRIBUTIONS OF INTEREST AND PRINCIPAL.
THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "1933 ACT") OR THE SECURITIES LAWS OF ANY STATE OF
THE UNITED STATES ("BLUE SKY LAWS"), AND SUCH CERTIFICATES MAY NOT BE OFFERED,
RESOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A) BY THE INITIAL INVESTOR (1)
TO A PERSON THAT THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL
BUYER WITHIN THE MEANING OF RULE 144A PROMULGATED UNDER THE 1933 ACT IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A OR (2) PURSUANT TO AN
EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE 1933 ACT (IF
AVAILABLE) AND (B) BY SUBSEQUENT INVESTORS AS SET FORTH IN (A) ABOVE AND, IN
ADDITION, TO AN INSTITUTIONAL ACCREDITED INVESTOR AS DEFINED IN RULE 501(A)(1),
(2), (3) OR (7) OF REGULATION D PROMULGATED UNDER THE 1933 ACT IN A TRANSACTION
EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE 1933 ACT AND DELIVERY OF
OPINION OF COUNSEL, IF REQUIRED BY THE TRUSTEE, THE CERTIFICATE REGISTRAR OR
THE SELLER, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF
ANY STATE OF THE UNITED STATES.
NOTWITHSTANDING THE ABOVE, THIS CERTIFICATE MAY NOT BE PURCHASED BY OR PLEDGED,
SOLD OR OTHERWISE TRANSFERRED TO ANY PERSON WHICH IS AN EMPLOYEE BENEFIT PLAN
SUBJECT TO THE FIDUCIARY RESPONSIBILITY PROVISIONS OF THE EMPLOYEE RETIREMENT
INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR SECTION 4975 OF THE
INTERNAL REVENUE CODE OF 1986, OR ANY PERSON ACTING ON BEHALF OF ANY SUCH PLAN
OR USING THE ASSETS OF SUCH PLAN TO ACQUIRE THIS CERTIFICATE EXCEPT PURSUANT TO
AN APPLICABLE PROHIBITED TRANSACTION EXEMPTION ISSUED BY THE UNITED STATES
DEPARTMENT OF LABOR.
A-6-1
<PAGE>
LTC COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES,
SERIES 1994-1, CLASS F-1
evidencing a nonassessable, fully paid
percentage interest in a trust fund
which includes a pool of commercial mortgage loans
Pass-Through Rate: ____% No. F-1
Initial Certificate Principal
Amount: $19,148,788 First Distribution Date:
December 15, 1994
Original Class C Aggregate Final Scheduled
Certificate Principal Amount: Distribution Date:
$19,148,788 June 15, 2026
Cut-Off Date: November 1, 1994
A-6-2
<PAGE>
This certifies that LTC REMIC Corporation is the registered owner of
the Percentage Interest evidenced by this Certificate (obtained by dividing the
initial Certificate Principal Amount of this Certificate by the Original Class F
Aggregate Certificate Principal Amount, each as noted on the face hereof) in the
Trust Fund, including the distributions to be made with respect to the Class F
Certificates. The Trust Fund, described more fully below, consists primarily of
Mortgage Loans held in trust by the Trustee and serviced by the Master Servicer
and the Special Servicer, as applicable. The Trust Fund was created, and the
Mortgage Loans are to be serviced, pursuant to the Agreement (as defined below).
The Holder of this Certificate, by virtue of the acceptance hereof, assents to
the terms, provisions and conditions of the Agreement and is bound thereby.
Also issued under the Agreement are the Class A, Class B, Class C, Class D,
Class E, Class F, Class X-1, Class X-2, Class R and Class LR Certificates
(together with the Class F Certificates, the "Certificates") (the Holders of
Certificates issued under the Agreement are collectively referred to herein as
"Certificateholders").
This Certificate is issued pursuant to, and in accordance with, the
terms of a Pooling and Servicing Agreement dated as of November 1, 1994 (the
"Agreement") among LTC REMIC Corporation, as Depositor, Marine Midland Bank, as
Trustee, Bankers Trust Company, as Master Servicer and LTC Properties, Inc., as
Originator and Special Servicer. In addition, LTC will be subservicer for the
Mortgage Loans pursuant to a subservicing agreement to be dated as of November
1, 1994 with Bankers Trust Company (in such capacity the "Subservicer"). To the
extent not defined herein, capitalized terms used herein shall have the meanings
assigned thereto in the Agreement.
THIS CERTIFICATE DOES NOT REPRESENT AN INTEREST IN OR A DEPOSIT OR
OBLIGATION OF THE DEPOSITOR, THE ORIGINATOR, THE MASTER SERVICER, THE SPECIAL
SERVICER, THE SUBSERVICER OR THE TRUSTEE, OR ANY OF THEIR AFFILIATES. THIS
CERTIFICATE WILL NOT BE A SAVINGS ACCOUNT OR DEPOSIT AND IS NOT INSURED OR
GUARANTEED BY ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY OR BY ANY PRIVATE
ENTITY.
This Certificate represents a "regular interest" in a "real estate
mortgage investment conduit," as those terms are defined, respectively, in
Sections 860G(a)(1) and 860D of the Internal Revenue Code of 1986 (the "Code").
Each Holder of this Certificate, by acceptance hereof, agrees to treat, and to
take no action inconsistent with the treatment of, this Certificate in
accordance with the preceding sentence for purposes of federal income taxes,
state and local income and franchise taxes and other taxes imposed on or
measured by income.
The Trustee makes no representation or warranty as to
A-6-3
<PAGE>
any of the statements contained herein or the validity or sufficiency of the
Certificates or the Mortgage Loans and has caused to be executed and
authenticated this Certificate in its limited capacity as Trustee under the
Agreement.
Pursuant to the terms of the Agreement, the Paying Agent will
distribute, on the fifteenth day of each month or if any such fifteenth day is
not a Business Day, on the next succeeding Business Day (each such date, a
"Distribution Date"), commencing in December 1994, to the Person in whose name
this Certificate is registered as of the related Record Date, an amount equal to
such Person's pro rata share (based on the Percentage Interest represented by
this Certificate) of that portion of the aggregate amount of principal and
interest then distributable, if any, allocable to the Class F Certificates for
such Distribution Date, all as more fully described in the Agreement. The
amount of interest which accrues on this Certificate during an Interest Accrual
Period will be subject to reduction with respect to any Net Prepayment Interest
Shortfall allocated to the Class F Certificates, as described in the Agreement.
Interest will accrue on the outstanding Certificate Principal Amount
of this Certificate at the Pass-Through Rate specified on the face of this
Certificate. Interest will be calculated on the basis of a 360-day year of
twelve 30-day months. Interest accrued on this Certificate during an Interest
Accrual Period, plus the Outstanding Class Interest Shortfall with respect to
this Certificate, if any, will be payable on the related Distribution Date to
the extent provided in the Agreement. The "Interest Accrual Period" relating
to any Distribution Date is the one-month period from and including the first
day of the month preceding the month in which such Distribution Date occurs to
and including the last day of such month, commencing in November 1994.
With the exception of the final distribution in respect of this
Certificate, distributions on this Certificate will be made by the Paying Agent
without the presentation or surrender of this Certificate or the making of any
notation hereon, by check mailed by first-class mail to the address of the
Holder set forth in the Certificate Register, or, provided the Holder holds
Certificates the aggregate initial Certificate Principal Amount of which exceeds
$5,000,000 and has provided the Paying Agent with wire instructions in writing
at least five Business Days before the related Record Date, by wire transfer of
immediately available funds to the account of such Holder at a bank or other
entity located in the United States and having appropriate facilities therefor.
The final distribution on this Certificate will be made in like manner after
notice by the Trustee of the pendency of such distribution and only upon
presentation and
A-6-4
<PAGE>
surrender of this Certificate at the Corporate Trust Office or such other
location specified in the notice to Holders of such final distribution.
This Certificate is one of a duly authorized issue of Certificates
designated as LTC Commercial Mortgage Pass-Through Certificates, Series 1994-1
and represents a fractional undivided interest in a Trust Fund. As more fully
described in and subject to the limitations of the Agreement, the Trust Fund
will consist primarily of (i) such Mortgage Loans as from time to time are
subject to the Agreement, together with the Mortgage Files relating thereto;
(ii) all payments due on or collections in respect of the Mortgage Loans due
after the Cut-Off Date; (iii) any REO Property; (iv) all revenues received in
respect of any REO Property; (v) the rights of the Trustee, Master Servicer and
Special Servicer under the insurance policies with respect to the Mortgage Loans
required to be maintained pursuant to this Agreement and any proceeds thereof;
(vi) any Assignments of Leases, Rents and Profits; (vii) any guaranties given as
additional security for any Mortgage Loans; (viii) all assets deposited in the
Collection Account, the Distribution Account, the Upper-Tier Distribution
Account and the REO Account including reinvestment income; and (ix) the proceeds
of any of the foregoing.
This Certificate is limited in right of payment to, among other
things, certain collections and recoveries in respect of the Mortgage Loans, as
more specifically set forth herein and in the Agreement.
As provided in the Agreement, withdrawals from the Collection Account
may be made by the Master Servicer from time to time for purposes other than
distributions to Certificateholders, such purposes including, among other
things, reimbursement or payment to the Master Servicer, the Special Servicer,
the Subservicer or the Trustee of certain expenses incurred or certain fees
earned by the Master Servicer, the Special Servicer or the Trustee, including,
without limitation, certain Nonrecoverable Advances.
This Certificate does not purport to summarize the Agreement, and
reference is made to the Agreement for the interests, rights, benefits,
obligations and duties evidenced hereby, and the limitations thereon, and the
rights, duties and immunities of the Trustee. This Certificate is issued under
and is subject to the terms, provisions and conditions of the Agreement, to
which Agreement, as amended from time to time, the holder of this Certificate by
virtue of the acceptance hereof assents and by which the holder of this
Certificate is bound.
As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate
A-6-5
<PAGE>
is registrable in the Certificate Register only upon surrender of this
Certificate for registration of transfer at the office of the Certificate
Registrar or at the office of its agent in the City of New York. The Trustee or
the Certificate Registrar may require that this Certificate be duly endorsed by,
or accompanied by a written instrument of transfer in form satisfactory to the
Trustee and the Certificate Registrar duly executed by, the Holder hereof or
such Holder's attorney duly authorized in writing. Thereupon, one or more new
Certificates of a like aggregate Percentage Interest in the same Class of
authorized denominations will be executed and authenticated by the Trustee and
delivered by the Certificate Registrar to the designated transferee or
transferees.
Prior to due presentation of this Certificate for registration of
transfer, the Depositor, the Master Servicer, the Special Servicer, the
Subservicer, the Trustee, the Certificate Registrar and any agent of any of them
may treat the Person in whose name this Certificate is registered as the owner
hereof for all purposes, and none of the Depositor, Master Servicer, the Special
Servicer, the Subservicer, the Trustee, the Certificate Registrar or any agent
of any of them shall be affected by notice to the contrary.
As provided in the Agreement and subject to certain limitations herein
set forth, this Certificate is exchangeable for other Certificates of the same
Class of authorized denominations of like aggregate Percentage Interests, as
requested by the Holder surrendering the same.
No service charge will be made to a Certificateholder for any such
registration of transfer or exchange, but the Certificate Registrar may require
payment of a sum sufficient to cover any tax or other governmental charge
payable in connection therewith.
The Agreement permits, with certain exceptions therein provided, the
amendment of the Agreement and the modification of the rights of the
Certificateholders under the Agreement at any time by the Depositor, the Master
Servicer, the Special Servicer and the Trustee with the consent of the Holders
of Class A, Class B, Class C, Class D, Class E, Class F, Class R, Class LR,
Class X-1 and Class X-2 Certificates representing not less than 66-2/3% of the
Voting Rights allocated to each such Class of the Certificates affected by the
amendment. Any such consent by the Holder of this Certificate shall be
conclusive and binding on such Holder and upon all future Holders of this
Certificate and of any Certificates issued upon the transfer hereof or in
exchange herefor or in lieu hereof whether or not notation of such consent is
made upon this Certificate. The Agreement also permits the amendment thereof in
certain circumstances without the consent of
A-6-7
<PAGE>
the Holders of any of the Certificates, provided that such amendment would not
adversely affect in any material respect the interests of any Certificateholder.
Each of the Master Servicer, any Holder of a Class LR Certificate and,
if all the Mortgage Loans are then Specially Serviced Mortgage Loans, the
Special Servicer, may at its option, upon not less than 30 days' prior notice
given to the Trustee, repurchase the Mortgage Loans and thereby effect an early
termination of the Trust Fund on any Distribution Date after the date on which
the aggregate Certificate Principal Amount of the Certificates is reduced to
less than 10% of the initial aggregate Certificate Principal Amount of the
Certificates, all, but not less than all, of the Mortgage Loans then included in
the Trust Fund, and all property acquired in respect of any Mortgage Loans, may
be repurchased at a purchase price, payable in cash, equal to not less than the
greater of:
(i) the sum of (without duplication of any amount in clauses (A)
through (E) below):
(A) 100% of the unpaid principal balance of each Mortgage Loan
included in the Trust Fund as of the Early Termination Determination
Date;
(B) all unpaid interest accrued on such principal balance of
each such Mortgage Loan at the related Mort gage Interest Rate
Interest Rate to such Early Termination Determination Date; and
(C) the fair market value of all other property included in the
Trust Fund as of such Early Termination Determination Date; and
(D) all unreimbursed P&I Advances, unreimbursed Servicing
Advances and interest thereon at the Advance Rate; and
(E) all unreimbursed Servicing Fees, Special Servicing Fees and
Trustee Fees; and
(ii) the aggregate fair market value (determined in accordance with
Section 9.01(d)(ii)(B) of the Agreement) of the Mortgage Loans, and all
other property acquired in respect of any Mortgage Loan in the Trust Fund,
as of the date of purchase.
The obligations created by the Agreement shall terminate upon the
earliest to occur of (i) the repurchase of all Mortgage Loans by the Master
Servicer, any Holder of a Class LR Certificate or the Special Servicer as
described above; (ii) the
A-6-7
<PAGE>
later of (a) the distribution to Certificateholders of final payment with
respect to the last outstanding Mortgage Loan or (b) the disposition of all
property acquired upon foreclosure or deed in lieu of foreclosure with respect
to the last outstanding Mortgage Loan and the remittance to the
Certificateholders of all funds due under the Agreement; or (iii) the sale of
assets of the Trust Fund after the Certificate Principal Amounts of all the
Certificates have been reduced to zero under circumstances set forth in the
Agreement. In no event, however, will the trust created by the Agreement
continue beyond the expiration of 21 years from the death of the last surviving
descendant of a certain individual named in the Agreement living on the date
thereof.
Unless the Certificate of Authentication on this Certificate has been
executed by or on behalf of the Trustee, by manual signature, this Certificate
shall not be entitled to any benefit under the Agreement or be valid for any
purpose.
IN WITNESS WHEREOF, the Authenticating Agent has caused this
Certificate to be duly executed.
BANKERS TRUST COMPANY,
As Authenticating Agent
By:__________________________________________
Authorized Signatory
Certificate of Authentication
This is one of the Class F Certificates referred to in the Agreement.
Dated: November 29, 1994
BANKERS TRUST COMPANY,
as Authenticating Agent
By:__________________________________________
Authorized Officer
A-6-8
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned ("Assignor(s)") hereby sell(s),
assign(s) and transfer(s) unto _________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(please print or typewrite name(s) and address(es), including postal zip code(s)
of assignee(s)) ("Assignee(s)") the entire Percentage Interest represented by
Class A Certificate and hereby authorize(s) registration of transfer of such
interest to Assignee(s) the Certificate Register of the Trust Fund.
I (we) further direct the Certificate Registrar to issue a new Class A
Certificate of the entire Percentage Interest represented by the within Class A
Certificates to the above-named Assignee(s) and to deliver such Class A
Certificate to the following address:
________________________________________________________________________________
________________________________________________________________________________
Date:________________________ ___________________________
Signature by or on behalf
of Assignor(s)
___________________________
Taxpayer Identification Number
<PAGE>
DISTRIBUTION INSTRUCTIONS
The Assignee(s) should include the following for purposes of
distribution:
Address of the Assignee(s) for the purpose of receiving notices and
distributions:__________________________________________________________________
________________________________________________________________________________
Distributions, if be made by wire transfer in immediately available funds to
________________________________________________________________________________
________________________________________________________________________________
for the account of _____________________________________________________________
account number _________________________________________________________________
This information is provided by ________________________________________________
the Assignee(s) named above, or ________________________________________________
as its (their) agent.
By________________________________________________
__________________________________________________
[Please print or type name(s)]
__________________________________________________
Title
__________________________________________________
Taxpayer Identification Number
A-6-10
<PAGE>
EXHIBIT A-7
FORM OF CLASS X-1 CERTIFICATES
THE RIGHTS OF HOLDERS OF THE CLASS X-1 CERTIFICATES TO RECEIVE DISTRIBUTIONS OF
INTEREST IN RESPECT OF THE MORTGAGE LOANS WILL BE SUBORDINATED TO THE RIGHTS OF
HOLDERS OF THE CLASS A, CLASS B, CLASS C, CLASS D, CLASS E, CLASS R AND CLASS LR
CERTIFICATES TO RECEIVE DISTRIBUTIONS OF INTEREST AND PRINCIPAL.
THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "1933 ACT") OR THE SECURITIES LAWS OF ANY STATE OF
THE UNITED STATES ("BLUE SKY LAWS"), AND SUCH CERTIFICATES MAY NOT BE OFFERED,
RESOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A) BY THE INITIAL INVESTOR (1)
TO A PERSON THAT THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL
BUYER WITHIN THE MEANING OF RULE 144A PROMULGATED UNDER THE 1933 ACT IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A OR (2) PURSUANT TO AN
EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE 1933 ACT (IF
AVAILABLE) AND (B) BY SUBSEQUENT INVESTORS AS SET FORTH IN (A) ABOVE AND, IN
ADDITION, TO AN INSTITUTIONAL ACCREDITED INVESTOR AS DEFINED IN RULE 501(A)(1),
(2), (3) OR (7) OF REGULATION D PROMULGATED UNDER THE 1933 ACT IN A TRANSACTION
EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE 1933 ACT AND DELIVERY OF AN
OPINION OF COUNSEL, IF REQUIRED BY THE TRUSTEE, THE CERTIFICATE REGISTRAR OR THE
SELLER, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY
STATE OF THE UNITED STATES.
NOTWITHSTANDING THE ABOVE, THIS CERTIFICATE MAY NOT BE PURCHASED BY OR PLEDGED,
SOLD OR OTHERWISE TRANSFERRED TO ANY PERSON WHICH IS AN EMPLOYEE BENEFIT PLAN
SUBJECT TO THE FIDUCIARY RESPONSIBILITY PROVISIONS OF THE EMPLOYEE RETIREMENT
INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR SECTION 4975 OF THE
INTERNAL REVENUE CODE OF 1986, OR ANY PERSON ACTING ON BEHALF OF ANY SUCH PLAN
OR USING THE ASSETS OF SUCH PLAN TO ACQUIRE THIS CERTIFICATE EXCEPT PURSUANT TO
AN APPLICABLE PROHIBITED TRANSACTION EXEMPTION ISSUED BY THE UNITED STATES
DEPARTMENT OF LABOR.
A-7-1
<PAGE>
LTC COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES,
SERIES 1994-1, CLASS X-1
evidencing a nonassessable, fully paid
percentage interest in a trust fund
which includes a pool of commercial mortgage loans
No. X-1
Percentage Interest evidenced First Distribution Date
by this Certificate: 100%
December 15, 1994
Final Scheduled
Distribution Date:
June 15, 2026
Cut-Off Date: November 1, 1994
A-7-2
<PAGE>
This certifies that LTC REMIC Corporation, is the registered owner of
the Percentage Interest evidenced by this Certificate in monthly Distributions
to Holders of Class X-1 Certificates with respect to the Trust Fund. The Trust
Fund, described more fully below, consists primarily of Mortgage Loans held in
trust by the Trustee and serviced by the Master Servicer and the Special
Servicer, as applicable. The Trust Fund was created, and the Mortgage Loans are
to be serviced, pursuant to the Agreement (as defined below). The Holder of
this Certificate, by virtue of the acceptance hereof, assents to the terms,
provisions and conditions of the Agreement and is bound thereby. Also issued
under the Agreement are Class A, Class B, Class C, class D, Class E, Class F,
Class X-2, Class R and Class LR Certificates (together with the Class X-1
Certificates, the "Certificates") (the Holders of Certificates issued under the
Agreement are collectively referred to herein as "Certificateholders").
This Certificate is issued pursuant to, and in accordance with, the
terms of a Pooling and Servicing Agreement dated as of November 1, 1994 (the
"Agreement") among LTC REMIC Corporation, as Depositor, Marine Midland Bank, as
Trustee, Bankers Trust Company, as Master Servicer and LTC Properties, Inc., as
Originator and Special Servicer. In addition, LTC will be subservicer for the
Mortgage Loans pursuant to a subservicing agreement to be dated as of November
1, 1994 with Bankers Trust Company (in such capacity the "Subservicer"). To the
extent not defined herein, capitalized terms used herein shall have the meanings
assigned thereto in the Agreement.
THIS CERTIFICATE DOES NOT REPRESENT AN INTEREST IN OR A DEPOSIT OR
OBLIGATION OF THE DEPOSITOR, THE ORIGINATOR, THE MASTER SERVICER, THE SPECIAL
SERVICER THE SUBSERVICER OR THE TRUSTEE, OR ANY OF THEIR AFFILIATES. THIS
CERTIFICATE WILL NOT BE A SAVINGS ACCOUNT OR DEPOSIT AND IS NOT INSURED OR
GUARANTEED BY ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY OR BY ANY PRIVATE
ENTITY.
This Certificate represents a "regular interest" in a "real estate
mortgage investment conduit," as those terms are defined, respectively, in
Sections 860G(a)(1) and 860D of the Internal Revenue Code of 1986 (the "Code").
Each Holder of this Certificate, by acceptance hereof, agrees to treat, and to
take no action inconsistent with the treatment of, this Certificate in
accordance with the preceding sentence for purposes of federal income taxes,
state and local income and franchise taxes and other taxes imposed on or
measured by income.
The Trustee makes no representation or warranty as to any of the
statements contained herein or the validity or sufficiency of the Certificates
or the Mortgage Loans and has caused to be executed and authenticated this
Certificate in its limited
A-7-3
<PAGE>
capacity as Trustee under the Agreement.
Pursuant to the terms of the Agreement, the Paying Agent will
distribute, on the fifteenth day of each month or if any such fifteenth day is
not a Business Day, on the next succeeding Business Day (each such date, a
"Distribution Date"), commencing in December 1994, to the Person in whose name
this Certificate is registered as of the related Record Date, an amount equal to
such Person's pro rata share (based on the Percentage Interest represented by
this Certificate) of that portion of the aggregate amount of interest then
distributable, if any allocable to the Class X-1 Certificates for such
Distribution Date, all as more fully described in the Agreement. The Class X-1
Certificates are not entitled to receive distributions of principal. Interest
will accrue on the Class X-1 Certificates during each Interest Accrual Period in
an amount equal to a portion of the interest accrued on each Mortgage Loan
during the related Mortgage Loan Due Period equal to interest accrued on such
Mortgage Loan during such period at a rate per annum equal to the excess of the
Net Mortgage Interest Rate of such Mortgage Loan over 10.00%, calculated on the
basis of the actual number of days for which interest accrues on such Mortgage
Loan during the related Mortgage Loan Due Period according to the terms of such
Mortgage Loan and a 360-day year. The amount of interest which accrues on this
Certificate during an Interest Accrual Period will be subject to reduction with
respect to any Net Prepayment Interest Shortfall allocated to the Class X-1
Certificates, as described in the Agreement.
Interest will be calculated on the basis of a 360-day year of twelve
30-day months. Interest accrued on this Certificate during an Interest Accrual
Period, plus the Outstanding Class Interest Shortfall with respect to this
Certificate, if any, will be payable on the related Distribution Date to the
extent provided in the Agreement. The "Interest Accrual Period" relating to any
Distribution Date is the one-month period from and including the first day of
the month preceding the month in which such Distribution Date occurs to and
including the last day of such month, commencing in November 1994.
With the exception of the final distribution in respect of this
Certificate, distributions on this Certificate will be made by the Paying Agent
without the presentation or surrender of this Certificate or the making of any
notation hereon, by check mailed by first-class mail to the address of the
Holder set forth in the Certificate Register, or, provided the Holder holds
Certificates the aggregate initial Notional Amount of which exceeds $5,000,000
and has provided the Paying Agent with wire instructions in writing at least
five Business Days before the related Record Date, by wire transfer of
immediately available funds to the account of such Holder at a bank or other
entity
A-7-4
<PAGE>
located in the United States and having appropriate facilities therefor. The
final distribution on this Certificate will be made in like manner after notice
by the Trustee of the pendency of such distribution and only upon presentation
and surrender of this Certificate at the Corporate Trust Office or such other
location specified in the notice to Holders of such final distribution.
This Certificate is one of a duly authorized issue of Certificates
designated as LTC Commercial Mortgage Pass-Through Certificates, Series 1994-1
and represents a fractional undivided interest in a Trust Fund. As more fully
described in and subject to the limitations of the Agreement, the Trust Fund
will consist primarily of (i) such Mortgage Loans as from time to time are
subject to the Agreement, together with the Mortgage Files relating thereto;
(ii) all payments due on or collections in respect of the Mortgage Loans due
after the Cut-Off Date; (iii) any REO Property; (iv) all revenues received in
respect of any REO Property; (v) the rights of the Trustee, Master Servicer and
Special Servicer under the insurance policies with respect to the Mortgage Loans
required to be maintained pursuant to this Agreement and any proceeds thereof;
(vi) any Assignments of Leases, Rents and Profits; (vii) any guaranties given as
additional security for any Mortgage Loans; (viii) all assets deposited in the
Collection Account, the Distribution Account, the Upper-Tier Distribution
Account and the REO Account including reinvestment income; and (ix) the proceeds
of any of the foregoing.
This Certificate is limited in right of payment to, among other
things, certain collections and recoveries in respect of the Mortgage Loans, as
more specifically set forth herein and in the Agreement.
As provided in the Agreement, withdrawals from the Collection Account
may be made by the Master Servicer from time to time for purposes other than
distributions to Certificateholders, such purposes including, among other
things, reimbursement or payment to the Master Servicer, the Special Servicer,
the Subservicer or the Trustee of certain expenses incurred or certain fees
earned by the Master Servicer, the Special Servicer or the Trustee, including,
without limitation, certain Nonrecoverable Advances.
This Certificate does not purport to summarize the Agreement, and
reference is made to the Agreement for the interests, rights, benefits,
obligations and duties evidenced hereby, and the limitations thereon, and the
rights, duties and immunities of the Trustee. This Certificate is issued under
and is subject to the terms, provisions and conditions of the Agreement, to
which Agreement, as amended from time to time, the holder of this Certificate by
virtue of the acceptance hereof assents and
A-7-5
<PAGE>
by which the holder of this Certificate is bound.
As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Certificate Register only upon surrender of this Certificate for registration of
transfer at the office of the Certificate Registrar or at the office of its
agent in the City of New York. The Trustee or the Certificate Registrar may
require that this Certificate be duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Trustee and the Certificate
Registrar duly executed by, the Holder hereof or such Holder's attorney duly
authorized in writing. Thereupon, one or more new Certificates of a like
aggregate Percentage Interest in the same Class of authorized denominations will
be executed and authenticated by the Trustee and delivered by the Certificate
Registrar to the designated transferee or transferees.
Prior to due presentation of this Certificate for registration of
transfer, the Depositor, the Master Servicer, the Special Servicer, the
Subservicer, the Trustee, the Certificate Registrar and any agent of any of them
may treat the Person in whose name this Certificate is registered as the owner
hereof for all purposes, and none of the Depositor, Master Servicer, the Special
Servicer, the Subservicer, the Trustee, the Certificate Registrar, any Paying
Agent or any agent of any of them shall be affected by notice to the contrary.
As provided in the Agreement and subject to certain limitations herein
set forth, this Certificate is exchangeable for other Certificates of the same
Class of authorized denominations of like aggregate Percentage Interests, as
requested by the Holder surrendering the same.
No service charge will be made to a Certificateholder for any such
registration of transfer or exchange, but the Certificate Registrar may require
payment of a sum sufficient to cover any tax or other governmental charge
payable in connection therewith.
The Agreement permits, with certain exceptions therein provided, the
amendment of the Agreement and the modification of the rights of the
Certificateholders under the Agreement at any time by the Depositor, the Master
Servicer, the Special Servicer and the Trustee with the consent of the Holders
of Class A, Class B, Class C, Class D, Class E, Class F, Class R, Class LR,
Class X-1 and Class X-2 Certificates representing not less than 66-2/3% of the
Voting Rights allocated to each such Class of the Certificates affected by the
amendment. Any such consent by the Holder of this Certificate shall be
conclusive and binding on such Holder and upon all future Holders of this
Certificate and of any
A-7-7
<PAGE>
Certificates issued upon the transfer hereof or in exchange herefor or in lieu
hereof whether or not notation of such consent is made upon this Certificate.
The Agreement also permits the amendment thereof in certain circumstances
without the consent of the Holders of any of the Certificates, provided that
such amendment would not adversely affect in any material respect the interests
of any Certificateholder.
Each of the Master Servicer, any Holder of a Class LR Certificate and,
if all the Mortgage Loans are then Specially Serviced Mortgage Loans, the
Special Servicer, may at its option, upon not less than 30 days' prior notice
given to the Trustee, repurchase the Mortgage Loans and thereby effect an early
termination of the Trust Fund on any Distribution Date after the date on which
the aggregate Certificate Principal Amount of the Certificates is reduced to
less than 10% of the initial aggregate Certificate Principal Amount of the
Certificates. All, but not less than all, of the Mortgage Loans then included
in the Trust Fund, and all property acquired in respect of any Mortgage Loans
may be repurchased at a purchase price, payable in cash, equal to not less than
the greater of:
(i) the sum of (without duplication of any amount in clauses (A)
through (E) below):
(A) 100% of the unpaid principal balance of each Mortgage
Loan included in the Trust Fund as of the Early Termination
Determination Date;
(B) all unpaid interest accrued on such principal balance
of each such Mortgage Loan at the related Mortgage Interest Rate
Interest Rate to such Early Termination Determination Date; and
(C) the fair market value of all other property included in
the Trust Fund as of such Early Termination Determination Date; and
(D) all unreimbursed P&I Advances, unreimbursed Servicing
Advances and interest thereon at the Advance Rate; and
(E) all unreimbursed Servicing Fees, Special Servicing Fees
and Trustee Fees; and
(ii) the aggregate fair market value (determined in accordance with
Section 9.01(d)(ii)(B) of the Agreement) of the Mortgage Loans, and all
other property acquired in re spect of any Mortgage Loan or Underlying
Certificate in the Trust Fund, as of the date of purchase.
A-7-7
<PAGE>
The obligations created by the Agreement shall terminate upon the
earliest to occur of (i) the repurchase of all Mortgage Loans by the Master
Servicer, any Holder of a Class LR Certificate or the Special Servicer as
described above; (ii) the later of (a) the distribution to Certificateholders of
final payment with respect to the last outstanding Mortgage Loan or (b) the
disposition of all property acquired upon foreclosure or deed in lieu of
foreclosure with respect to the last outstanding Mortgage Loan and the
remittance to the Certificateholders of all funds due under the Agreement; or
(iii) the sale of assets of the Trust Fund after the Certificate Principal
Amounts of all the Certificates have been reduced to zero under circumstances
set forth in the Agreement. In no event, however, will the trust created by the
Agreement continue beyond the expiration of 21 years from the death of the last
surviving descendant of a certain individual named in the Agreement living on
the date thereof.
Unless the Certificate of Authentication on this Certificate has been
executed by or on behalf of the Trustee, by manual signature, this Certificate
shall not be entitled to any benefit under the Agreement or be valid for any
purpose.
A-7-8
<PAGE>
IN WITNESS WHEREOF, the Authenticating Agent has caused this
Certificate to be duly executed.
BANKERS TRUST COMPANY,
As Authenticating Agent
By:___________________________
Authorized Signatory
Certificate of Authentication
This is one of the Class X-1 Certificates referred to in the
Agreement.
Dated: November 29, 1994
BANKERS TRUST COMPANY,
as Authenticating Agent
By:____________________________
Authorized Officer
A-7-9
<PAGE>
DISTRIBUTION INSTRUCTIONS
The Assignee(s) should include the following for purposes of
distribution:
Address of the Assignee(s) for the purpose of receiving notices and
distributions:
________________________________________________________________________________
________________________________________________________________________________
Distributions, if be made by wire transfer in immediately available funds to____
________________________________________________________________________________
________________________________________________________________________________
or the account of ______________________________________________________________
account number _________________________________________________________________
This information is provided by ________________________ the Assignee(s) named
above, or _________________________ as its (their) agent.
By________________________________________
__________________________________________
[Please print or type name(s)]
__________________________________________
Title
__________________________________________
Taxpayer Identification Number
A-7-10
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned ("Assignor(s)" hereby sell(s),
assign(s) and transfer(s) unto _________________________________________________
________________________________________________________________________________
________________________________________________________________________________
__________________ (please print or typewrite name(s) and address(es), including
postal zip code(s) of assignee(s)) ("Assignee(s)") the entire Percentage
Interest represented by the Class X-1 Certificate and hereby authorize(s) the
registration of transfer of such interest to Assignee(s) on the Certificate
Register of the Trust Fund.
I (we) further direct the Certificate Registrar to issue a new Class
X-1 Certificate of the entire Percentage Interest represented by the within
Class X-1 Certificates to the above-named Assignee(s) and to deliver such Class
X-1 Certificate to the following address:
________________________________________________________________________________
________________________________________________________________________________
Date:________________________ _______________________________
Signature by or on behalf of
Assignor(s)
_______________________________
Taxpayer Identification Number
A-7-11
<PAGE>
EXHIBIT A-8
FORM OF CLASS X-2 CERTIFICATE
THE RIGHTS OF HOLDERS OF THE CLASS X-2 CERTIFICATES TO RECEIVE DISTRIBUTIONS OF
INTEREST IN RESPECT OF THE MORTGAGE LOANS WILL BE SUBORDINATED TO THE RIGHTS OF
HOLDERS OF THE CLASS A, CLASS B, CLASS C, CLASS D, CLASS E, CLASS R AND CLASS LR
CERTIFICATES TO RECEIVE DISTRIBUTIONS OF INTEREST AND PRINCIPAL.
THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "1933 ACT") OR THE SECURITIES LAWS OF ANY STATE OF
THE UNITED STATES ("BLUE SKY LAWS"), AND SUCH CERTIFICATES MAY NOT BE OFFERED,
RESOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A) BY THE INITIAL INVESTOR (1)
TO A PERSON THAT THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL
BUYER WITHIN THE MEANING OF RULE 144A PROMULGATED UNDER THE 1933 ACT IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A OR (2) PURSUANT TO AN
EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE 1933 ACT (IF
AVAILABLE) AND (B) BY SUBSEQUENT INVESTORS AS SET FORTH IN (A) ABOVE AND IN
ADDITION, TO AN INSTITUTIONAL ACCREDITED INVESTOR AS DEFINED IN RULE 501(A)(1),
(2), (3) OR (7) OF REGULATION D PROMULGATED UNDER THE 1933 ACT IN A TRANSACTION
EXEMPT FROM THE REGISTRATION REQUIRE MENTS OF THE 1933 ACT AND DELIVERY OF AN
OPINION OF COUNSEL, IF REQUIRED BY THE TRUSTEE, THE CERTIFICATE REGISTRAR OR THE
SELLER, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY
STATE OF THE UNITED STATES.
NOTWITHSTANDING THE ABOVE, THIS CERTIFICATE MAY NOT BE PURCHASED BY OR PLEDGED,
SOLD OR OTHERWISE TRANSFERRED TO ANY PERSON WHICH IS AN EMPLOYEE BENEFIT PLAN
SUBJECT TO THE FIDUCIARY RESPONSIBILITY PROVISIONS OF THE EMPLOYEE RETIREMENT
INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR SECTION 4975 OF THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED, OR ANY PERSON ACTING ON BEHALF OF ANY
SUCH PLAN OR USING THE ASSETS OF SUCH PLAN TO ACQUIRE THIS CERTIFICATE EXCEPT
PURSUANT TO AN APPLICABLE PROHIBITED TRANSACTION EXEMPTION ISSUED BY THE UNITED
STATES DEPARTMENT OF LABOR.
A-8-1
<PAGE>
LTC COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES,
SERIES 1994-1, CLASS X-2
evidencing a nonassessable, fully paid
percentage interest in a trust fund
which includes a pool of commercial mortgage loans
No. X-2
Percentage Interest evidenced First Distribution Date:
by this Certificate: 100% December 15, 1994
Final Scheduled
Distribution Date:
June 15, 2026
Cut-Off Date: November 1, 1994
A-8-2
<PAGE>
This certifies that LTC REMIC Corporation, is the registered owner of
the Percentage Interest evidenced by this Certificate in monthly Distributions
to Holders of Class X-2 Certificates with respect to the Trust Fund. The Trust
Fund, described more fully below, consists primarily of Mortgage Loans held in
trust by the Trustee and serviced by the Master Servicer and the Special
Servicer, as applicable. The Trust Fund was created, and the Mortgage Loans are
to be serviced, pursuant to the Agreement (as defined below). The Holder of this
Certificate, by virtue of the acceptance hereof, assents to the terms,
provisions and conditions of the Agreement and is bound thereby. Also issued
under the Agreement are Class A, Class B, Class C, Class D, Class E, Class F,
Class X-1, Class R and Class LR Certificates (together with the Class X-2
Certificates, the "Certificates") (the Holders of Certificates issued under the
Agreement are collectively referred to herein as "Certificateholders").
This Certificate is issued pursuant to, and in accordance with, the
terms of a Pooling and Servicing Agreement dated as of November 1, 1994 (the
"Agreement") among LTC REMIC Corporation, as Depositor, Marine Midland Bank, as
Trustee, Bankers Trust Company, as Master Servicer and LTC Properties, Inc., as
Originator and Special Servicer. In addition, LTC will be subservicer for the
Mortgage Loans pursuant to a subservicing agreement to be dated as of November
1, 1994 with Bankers Trust Company (in such capacity the "Subservicer"). To the
extent not defined herein, capitalized terms used herein shall have the meanings
assigned thereto in the Agreement.
THIS CERTIFICATE DOES NOT REPRESENT AN INTEREST IN OR A DEPOSIT OR
OBLIGATION OF THE DEPOSITOR, THE ORIGINATOR, THE MASTER SERVICER, THE SPECIAL
SERVICER THE SUBSERVICER OR THE TRUSTEE, OR ANY OF THEIR AFFILIATES. THIS
CERTIFICATE WILL NOT BE A SAVINGS ACCOUNT OR DEPOSIT AND IS NOT INSURED OR
GUARANTEED BY ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY OR BY ANY PRIVATE
ENTITY.
This Certificate represents a "regular interest" in a "real estate
mortgage investment conduit," as those terms are defined, respectively, in
Sections 860G(a)(1) and 860D of the Internal Revenue Code of 1986 (the "Code").
Each Holder of this Certificate, by acceptance hereof, agrees to treat, and to
take no action inconsistent with the treatment of, this Certificate in
accordance with the preceding sentence for purposes of federal income taxes,
state and local income and franchise taxes and other taxes imposed on or
measured by income.
The Trustee makes no representation or warranty as to any of the
statements contained herein or the validity or sufficiency of the Certificates,
the Mortgage Loans and has caused to
A-8-3
<PAGE>
be executed and authenticated this Certificate in its limited capacity as
Trustee under the Agreement.
Pursuant to the terms of the Agreement, the Paying Agent will
distribute, on the fifteenth day of each month or if any such fifteenth day is
not a Business Day, on the next succeeding Business Day (each such date, a
"Distribution Date"), commencing in December 1994, to the Person in whose name
this Certificate is registered as of the related Record Date, an amount equal to
such Person's pro rata share (based on the Percentage Interest represented by
this Certificate) of that portion of the aggregate amount of interest then
distributable, if any allocable to the Class X-2 Certificates for such
Distribution Date, all as more fully described in the Agreement. The Class X-2
Certificates are not entitled to receive distributions of principal. Interest
will accrue on the Class X-2 Certificates during each Interest Accrual Period in
an amount equal to the aggregate of the interest accrued (on the basis of a 360-
day year consisting of twelve 30-day months) on the Certificate Principal Amount
of the Class AL Interest at the Class A Spread Rate, on the Certificate
Principal Amount of the Class AR-L Interest at the Class R Spread Rate, on the
Certificates Principal Amount of the Class BL Interest at the Class B Spread
Rate, on the Certificate Principal Amount of the Class CL Interest at the Class
C Spread Rate on the Certificate Principal Amount of the Class DL Interest at
the Class D Spread Rate, on the Certificate Principal Amount of the Class EL
Interest at the Class E Spread Rate and on the Certificate Principal Amount of
the Class FL Interest at the Class F Spread Rate. The amount of interest which
accrues on this Certificate during an Interest Accrual Period will be subject to
reduction with respect to any Net Prepayment Interest Shortfall allocated to the
Class X-2 Certificates, as described in the Agreement.
Interest will be calculated on the basis of a 360-day year of twelve
30-day months. Interest accrued on this Certificate during an Interest Accrual
Period, plus the Outstanding Class Interest Shortfall with respect to this
Certificate, if any, will be payable on the related Distribution Date to the
extent provided in the Agreement. The "Interest Accrual Period" relating to any
Distribution Date is the one-month period from and including the first day of
the month preceding the month in which such Distribution Date occurs to and
including the last day of such month, commencing in November 1994.
With the exception of the final distribution in respect of this
Certificate, distributions on this Certificate will be made by the Paying Agent
without the presentation or surrender of this Certificate or the making of any
notation hereon, by check mailed by first-class mail to the address of the
Holder set forth in the Certificate Register, or, provided the Holder holds
A-8-4
<PAGE>
Certificates the aggregate initial Notional Amount of which exceeds $5,000,000
and has provided the Paying Agent with wire instructions in writing at least
five Business Days before the related Record Date, by wire transfer of
immediately available funds to the account of such Holder at a bank or other
entity located in the United States and having appropriate facilities therefor.
The final distribution on this Certificate will be made in like manner after
notice by the Trustee of the pendency of such distribution and only upon
presentation and surrender of this Certificate at the Corporate Trust Office or
such other location specified in the notice to Holders of such final
distribution.
This Certificate is one of a duly authorized issue of Certificates
designated as LTC Commercial Mortgage Pass-Through Certificates, Series 1994-1
and represents a fractional undivided interest in a Trust Fund. As more fully
described in and subject to the limitations of the Agreement, the Trust Fund
will consist primarily of (i) such Mortgage Loans as from time to time are
subject to the Agreement, together with the Mortgage Files relating thereto;
(ii) all payments due on or collections in respect of the Mortgage Loans due
after the Cut-Off Date; (iii) any REO Property; (iv) all revenues received in
respect of any REO Property; (v) the rights of the Trustee, Master Servicer and
Special Servicer under the insurance policies with respect to the Mortgage Loans
required to be maintained pursuant to this Agreement and any proceeds thereof;
(vi) any Assignments of Leases, Rents and Profits; (vii) any guaranties given as
additional security for any Mortgage Loans; (viii) all assets deposited in the
Collection Account, the Distribution Account, the Upper-Tier Distribution
Account and the REO Account including reinvestment income; and (ix) the proceeds
of any of the foregoing.
This Certificate is limited in right of payment to, among other
things, certain collections and recoveries in respect of the Mortgage Loans, as
more specifically set forth herein and in the Agreement.
As provided in the Agreement, withdrawals from the Collection Account
may be made by the Master Servicer from time to time for purposes other than
distributions to Certificateholders, such purposes including, among other
things, reimbursement or payment to the Master Servicer, the Special Servicer,
the Subservicer or the Trustee of certain expenses incurred or certain fees
earned by the Master Servicer, the Special Servicer or the Trustee, including,
without limitation, certain Nonrecoverable Advances.
This Certificate does not purport to summarize the Agreement, and
reference is made to the Agreement for the interests, rights, benefits,
obligations and duties evidenced hereby,
A-8-5
<PAGE>
and the limitations thereon, and the rights, duties and immunities of the
Trustee. This Certificate is issued under and is subject to the terms,
provisions and conditions of the Agreement, to which Agreement, as amended from
time to time, the holder of this Certificate by virtue of the acceptance hereof
assents and by which the holder of this Certificate is bound.
As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Certificate Register only upon surrender of this Certificate for registration of
transfer at the office of the Certificate Registrar or at the office of its
agent in the City of New York. The Trustee or the Certificate Registrar may
require that this Certificate be duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Trustee and the Certificate
Registrar duly executed by, the Holder hereof or such Holder's attorney duly
authorized in writing. Thereupon, one or more new Certificates of a like
aggregate Percentage Interest in the same Class of authorized denominations will
be executed and authenticated by the Trustee and delivered by the Certificate
Registrar to the designated transferee or transferees.
Prior to due presentation of this Certificate for registration of
transfer, the Depositor, the Master Servicer, the Special Servicer, the
Subservicer, the Trustee, the Certificate Registrar and any agent of any of them
may treat the Person in whose name this Certificate is registered as the owner
hereof for all purposes, and none of the Depositor, Master Servicer, the Special
Servicer, the Subservicer, the Trustee, the Certificate Registrar, any Paying
Agent or any agent of any of them shall be affected by notice to the contrary.
As provided in the Agreement and subject to certain limitations herein
set forth, this Certificate is exchangeable for other Certificates of the same
Class of authorized denominations of like aggregate Percentage Interests, as
requested by the Holder surrendering the same.
No service charge will be made to a Certificateholder for any such
registration of transfer or exchange, but the Certificate Registrar may require
payment of a sum sufficient to cover any tax or other governmental charge
payable in connection therewith.
The Agreement permits, with certain exceptions therein provided, the
amendment of the Agreement and the modification of the rights of the
Certificateholders under the Agreement at any time by the Depositor, the Master
Servicer, the Special Servicer and the Trustee with the consent of the Holders
of Class A-2, Class B, Class C, Class D, Class E, Class F, Class R, Class LR,
A-8-7
<PAGE>
Class X-1 and Class X-2 Certificates representing not less than 66-2/3% of the
Voting Rights allocated to each such Class of the Certificates affected by the
amendment. Any such consent by the Holder of this Certificate shall be
conclusive and binding on such Holder and upon all future Holders of this
Certificate and of any Certificates issued upon the transfer hereof or in
exchange herefor or in lieu hereof whether or not notation of such consent is
made upon this Certificate. The Agreement also permits the amendment thereof in
certain circumstances without the consent of the Holders of any of the
Certificates, provided that such amendment would not adversely affect in any
material respect the interests of any Certificateholder.
Each of the Master Servicer, any Holder of a Class LR Certificate and,
if all the Mortgage Loans are then Specially Serviced Mortgage Loans, the
Special Servicer, may at its option, upon not less than 30 days' prior notice
given to the Trustee, repurchase the Mortgage Loans and thereby effect an early
termination of the Trust Fund on any Distribution Date after the date on which
the aggregate Certificate Principal Amount of the Certificates is reduced to
less than 10% of the initial aggregate Certificate Principal Amount of the
Certificates. All, but not less than all, of the Mortgage Loans then included in
the Trust Fund, and all property acquired in respect of any Mortgage Loans may
be repurchased at a purchase price, payable in cash, equal to not less than the
greater of:
(i) the sum of (without duplication of any amount in clauses (A)
through (E) below):
(A) 100% of the unpaid principal balance of each Mortgage
Loan included in the Trust Fund as of the Early Termination
Determination Date;
(B) all unpaid interest accrued on such principal balance
of each such Mortgage Loan at the related Mortgage Interest Rate
Interest Rate to such Early Termination Determination Date; and
(C) the fair market value of all other property included in
the Trust Fund as of such Early Termination Determination Date; and
(D) all unreimbursed P&I Advances, unreimbursed Servicing
Advances and interest thereon at the Advance Rate; and
(E) all unreimbursed Servicing Fees, Special Servicing Fees
and Trustee Fees; and
(ii) the aggregate fair market value (determined in
A-8-7
<PAGE>
accordance with Section 9.01(d)(ii)(B) of the Agreement) of the Mortgage
Loans, and all other property acquired in respect of any Mortgage Loan in
the Trust Fund, as of the date of purchase.
The obligations created by the Agreement shall terminate upon the
earliest to occur of (i) the repurchase of all Mortgage Loans by the Master
Servicer, any Holder of a Class LR Certificate or the Special Servicer as
described above; (ii) the later of (a) the distribution to Certificateholders of
final payment with respect to the last outstanding Mortgage Loan or (b) the
disposition of all property acquired upon foreclosure or deed in lieu of
foreclosure with respect to the last outstanding Mortgage Loan and the
remittance to the Certificateholders of all funds due under the Agreement; or
(iii) the sale of assets of the Trust Fund after the Certificate Principal
Amounts of all the Certificates have been reduced to zero under circumstances
set forth in the Agreement. In no event, however, will the trust created by the
Agreement continue beyond the expiration of 21 years from the death of the last
surviving descendant of a certain individual named in the Agreement living on
the date thereof.
Unless the Certificate of Authentication on this Certificate has been
executed by or on behalf of the Trustee, by manual signature, this Certificate
shall not be entitled to any benefit under the Agreement or be valid for any
purpose.
A-8-8
<PAGE>
IN WITNESS WHEREOF, the Authenticating Agent has caused this
Certificate to be duly executed.
BANKERS TRUST COMPANY,
As Authenticating Agent
By:___________________________
Authorized Signatory
Certificate of Authentication
This is one of the Class X-2 Certificates referred to in the
Agreement.
Dated: November 29, 1994
BANKERS TRUST COMPANY
as Authenticating Agent
By:____________________________
Authorized Officer
A-8-9
<PAGE>
DISTRIBUTION INSTRUCTIONS
The Assignee(s) should include the following for purposes of
distribution:
Address of the Assignee(s) for the purpose of receiving notices and
distributions:
________________________________________________________________________________
________________________________________________________________________________
Distributions, if be made by wire transfer in immediately available funds to
________________________________________________________________________________
________________________________________________________________________________
or the account of ______________________________________________________________
account number _________________________________________________________________
This information is provided by __________________________ the Assignee(s) named
above, or _________________________ as its (their) agent.
By________________________________________
__________________________________________
[Please print or type name(s)]
__________________________________________
Title
__________________________________________
Taxpayer Identification Number
A-8-10
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned ("Assignor(s)" hereby sell(s),
assign(s) and transfer(s) unto _________________________________________________
________________________________________________________________________________
________________________________________________________________________________
______________ (please print or typewrite name(s) and address(es), including
postal zip code(s) of assignee(s)) ("Assignee(s)") the entire Percentage
Interest represented by the Class X-2 Certificate and hereby authorize(s) the
registration of transfer of such interest to Assignee(s) on the Certificate
Register of the Trust Fund.
I (we) further direct the Certificate Registrar to issue a new Class
X-2 Certificate of the entire Percentage Interest represented by the within
Class X-2 Certificates to the above-named Assignee(s) and to deliver such Class
X-2 Certificate to the following address:
________________________________________________________________________________
________________________________________________________________________________
Date:________________ ________________________________
Signature by or on behalf of
Assignor(s)
________________________________
Taxpayer Identification Number
A-8-11
<PAGE>
EXHIBIT D
FORM OF CUSTODIAL AGREEMENT
THIS CUSTODIAL AGREEMENT, dated as of [ ] by and among [NAME OF
CUSTODIAN], as Custodian (the "Custodian"), Bankers Trust Company, as Master
Servicer (the "Master Servicer "), and Marine Midland Bank, as Trustee (the
"Trustee").
W I T N E S S E T H :
WHEREAS, the Master Servicer and the Trustee are parties to a Pooling
and Servicing Agreement (the "Pooling and Servicing Agreement"), dated as of
November 1, 1994, among LTC REMIC Corporation, as Depositor, the Master
Servicer, LTC Properties Inc. as Special Servicer and Originator and the
Trustee, relating to Commercial Mortgage Pass-Through Certificates, Series 1994-
1 (capitalized terms used but not defined herein having the meaning assigned
thereto in the Pooling and Servicing Agreement);
WHEREAS, the parties hereto desire the Custodian to take possession of
the documents specified in Section 2.1 of the Pooling and Servicing Agreement,
as custodian for the Trustee, in accordance with the terms hereof;
NOW, THEREFORE, in consideration of the mutual undertakings herein
expressed, the parties hereto hereby agree as follows:
1. The Trustee hereby certifies that it has caused to be delivered
and released to the Custodian and the Custodian hereby acknowledges receipt of
the documents specified in Section 2.1 of the Pooling and Servicing Agreement
pertaining to each of the Mortgage Loans identified in the Mortgage Loan
Schedule attached to the Pooling and Servicing Agreement as Exhibit B. From
time to time, the Master Servicer shall forward to the Custodian additional
original documents evidencing an assumption or modification of a Mortgage Loan
approved by the Master Servicer. All Mortgage Loan documents held by the
Custodian as to each Mortgage Loan are referred to herein as the "Custodian's
Mortgage File." The Custodian hereby agrees to review each of the Custodian's
Mortgage Files and perform such other obligations of the Custodian as such
obligations are set forth in the Pooling and Servicing Agreement (including
Sections 2.1 and 2.2 thereof).
2. With respect to each Note, each Mortgage, each Assignment of
Mortgage and each other document constituting each Custodian's Mortgage File
which is delivered to the Custodian or which at any time comes into the
possession of the Custodian, the Custodian is exclusively the custodian for and
the bailee of the
<PAGE>
Trustee or the Master Servicer. The Custodian shall hold all documents
constituting each Custodian's Mortgage File received by it for the exclusive use
and benefit of the Trustee, and shall make disposition thereof only in
accordance with the instructions furnished by the Master Servicer. The Custodian
shall segregate and maintain continuous custody of all documents constituting
the Custodian's Mortgage File received in secure and fire resistant facilities
located in the State of New York in accordance with customary standards for such
custody. In the event the Custodian discovers any defect with respect to any
Custodian's Mortgage File, the Custodian shall give written specification of
such defect to the Master Servicer and the Trustee.
3. From time to time and as appropriate for the foreclosure or
servicing of any of the Mortgage Loans, the Custodian is hereby directed, upon
written request and receipt from the Master Servicer (a copy of which shall be
forwarded to the Trustee), to release to the Master Servicer the related
Custodian's Mortgage File or the documents set forth in such receipt to the
Master Servicer. All documents so released to the Master Servicer shall be held
by it in trust for the benefit of the Trustee. The Master Servicer shall return
to the Custodian the Custodian's Mortgage File or such documents when the Master
Servicer 's need therefor in connection with such foreclosure or servicing no
longer exists, unless the Mortgage Loan shall be liquidated, in which case, upon
receipt of a certification to this effect from the Master Servicer to the
Custodian, the Master Servicer 's receipt shall be released by the Custodian to
the Master Servicer.
4. Upon the re-purchase of any Mortgage Loan pursuant to the terms of
the Pooling and Servicing Agreement or the payment in full of any Mortgage Loan,
and upon receipt by the Custodian of the Master Servicer 's request for release,
receipt and certification (which certification shall include a statement to the
effect that all amounts received in connection with such payment or repurchase
have been credited to the Collection Account or Distribution Account as
provided in the Pooling and Servicing Agreement), the Custodian shall promptly
release the related Custodian's Mortgage File to the Master Servicer.
5. It is understood that the Custodian will charge such fees for its
services under this Agreement as set forth in a separate agreement between the
Custodian and the Master Servicer , the payment of which, together with the
Custodian's expenses in connection therewith, shall be solely the obligation of
the Master Servicer.
6. The Trustee may upon 30 days written notice (with a copy to the
Master Servicer ) remove and discharge the Custodian
D-2
<PAGE>
or any successor Custodian thereafter appointed from the performance of its
duties under this Custodial Agreement. Simultaneously, the Trustee shall
appoint a successor Custodian to act on its behalf by written instrument, one
original counterpart of which instrument shall be delivered to each Rating
Agency, one copy to the Master Servicer and one copy to the successor Custodian.
In the event of any such removal, the Custodian shall promptly transfer to the
successor Custodian, as directed, all Custodian's Mortgage Files being
administered under this Custodial Agreement. Notwithstanding the foregoing, so
long as Bankers Trust Company is Master Servicer , the Trustee shall not have a
right to remove the Custodian.
7. Upon reasonable prior written notice to the Custodian, the
Trustee and its agents, accountants, attorneys and auditors will be permitted
during normal business hours to examine the Custodian's Mortgage Files,
documents, records and other papers in the possession of or under the control of
the Custodian relating to any or all of the Mortgage Loans.
8. If the Custodian is furnished with written notice from the Trustee
or the Master Servicer that the Pooling and Servicing Agreement has been
terminated as to any or all of the Mortgage Loans, it shall upon written request
of the Trustee or the Master Servicer release to such persons as the Trustee or
the Master Servicer shall designate the Custodian's Mortgage Files relating to
such Mortgage Loans as the Trustee or the Master Servicer shall request and
shall complete the Assignments of Mortgage and endorse the Notes only as, and
if, the Trustee or the Master Servicer shall request. The person making such
written request shall send notice of such request to all other parties to the
Pooling and Servicing Agreement.
9. The Custodian shall, at its own expense, maintain at all times
during the existence of this Custodial Agreement and keep in full force and
effect (a) fidelity insurance, (b) theft of documents insurance, (c) forgery
insurance and (d) errors and omissions insurance. All such insurance shall be in
amounts, with standard coverage and subject to deductibles, as are customary
for insurance typically maintained by banks which act as custodian in similar
transactions provided, however, that so long as the Custodian is rated at least
"A" no such insurance shall be required.
10. This Custodial Agreement may be executed simultaneously in any
number of counterparts, each of which counterparts shall be deemed to be an
original, and such counterparts shall constitute and be one and the same
instrument.
11. Within 10 days of each anniversary of the date of
D-3
<PAGE>
this Custodial Agreement, or upon the request of the Trustee or the Master
Servicer at any other time, the Custodian shall provide to the Trustee and the
Master Servicer a list of all the Mortgage Loans for which the Custodian holds a
Custodian's Mortgage File pursuant to this Custodial Agreement. Such list may be
in the form of a copy of the Mortgage Loan Schedule with manual deletions to
specifically denote any Mortgage Loans paid off, liquidated or repurchased since
the date of this Custodial Agreement.
12. THIS CUSTODIAL AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF
THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
13. By execution of this Custodial Agreement, the Custodian warrants
that it currently does not hold and during the existence of this Custodial
Agreement shall not hold any adverse interest, by way of security or otherwise,
in any Mortgage Loan, and hereby waives and releases any such interest which it
may have in any Mortgage Loan as of the date hereof.
14. The Custodian may terminate its obligations under this Custodial
Agreement upon at least 60 days notice to the Trustee and the Master Servicer ,
provided that so long as Bankers Trust Company is the Master Servicer, Bankers
Trust Company will not resign from its duties hereunder. In the event of such
termination, the Trustee shall appoint a successor Custodian. Upon such
appointment, the Custodian shall promptly transfer to the successor Custodian,
as directed, all Custodian's Mortgage Files being administered under this
Custodial Agreement.
15. This Custodial Agreement shall terminate upon the final payment
or other liquidation (or advance with respect thereto) of the last Mortgage Loan
or the disposition of all property acquired upon foreclosure or deed in lieu of
foreclosure of any Mortgage Loan, and the final remittance of all funds due the
Certificateholders under the Pooling and Servicing Agreement. In such event, all
documents remaining the Custodian's Mortgage Files shall be forwarded to the
Trustee.
16. All demands, notices and communications hereunder shall be in
writing and shall be deemed to have been duly given when received by the
addressee. Any such demand, notice or communication hereunder shall be deemed to
have been received on the date delivered to or received at the premises of the
addressee (as evidenced, in the case of registered or certified mail, by the
date noted on the return receipt).
17. The Master Servicer shall indemnify, defend, and
D-4
<PAGE>
hold harmless the Custodian for any actions taken by the Custodian at its
written request.
D-5
<PAGE>
IN WITNESS WHEREOF, the Custodian, the Master Servicer and the Trustee
have caused their names to be signed hereto by their respective officers
thereunto duly authorized, all as of the date first written above.
BANKERS TRUST COMPANY
as Custodian
By:____________________________
Name: Kellie R. Rodriguez
Title: Assistant Vice President
BANKERS TRUST COMPANY,
as Master Servicer
By:____________________________
Name: Kellie R. Rodriguez
Title: Assistant Vice President
MARINE MIDLAND BANK,
as Trustee
By:____________________________
Name: BarbaraJean McCauley
Title: Assistant Vice President
D-6
<PAGE>
EXHIBIT A
Notes Not in the Possession of the Custodian
--------------------------------------------
Loan Number
-----------
--------
-----*
* Seller claims that the original Note was transmitted by it to the Custodian
but the Custodian cannot confirm that the original Note is in its possession.
D-7
<PAGE>
EXHIBIT E
FORM OF SUBSERVICING AGREEMENT
E-1
<PAGE>
SUBSERVICING AGREEMENT
----------------------
THIS SUBSERVICING AGREEMENT (the "Agreement") is made as of this [____] day
of [_______________, ___], by and between [_____________________] and
[___________________], as subservicer in such capacity (the "Subservicer").
RECITALS
--------
A. Pursuant to that certain Pooling and Servicing Agreement dated as of
November 1, 1994 (the "Pooling and Servicing Agreement") among LTC REMIC
Corporation, as Depositor (the "Depositor"), Marine Midland Bank, as Trustee
(the "Trustee"), Bankers Trust Company as Master Servicer (the "Master
Servicer") and LTC Properties, Inc., as Special Servicer and originator ("LTC"),
the Depositor transferred the entire beneficial ownership in certain mortgage
loans (the "Mortgage Loans") to the extent described in the Pooling and
Servicing Agreement in exchange for certain pass-through certificates issued in
multiple classes. Capitalized terms used herein and not otherwise defined shall
have the respective meanings set forth in the Pooling and Servicing Agreement.
B. Pursuant to the Pooling and Servicing Agreement, the Master
Servicer has agreed to service the Mortgage Loans and to perform certain other
duties as more fully described in the Pooling and Servicing Agreement.
C. The Master Servicer and the Subservicer desire to enter into this
Agreement for the purpose of transferring from the Master Servicer to the
Subservicer certain of the Master Servicer's rights and obligations under the
Pooling and Servicing Agreement, as more fully set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants, agreements,
representations and warranties set forth herein, the parties hereto do hereby
agree as follows:
1. Representations, Warranties and Covenants of Subservicer. The
--------------------------------------------------------
Subservicer hereby represents and warrants to and covenants with the Master
Servicer that as of the date hereof and at all times during the term hereof:
1.1 Organization. The Subservicer is a corporation duly organized,
------------
validly existing and in good standing under the laws of the State of [______ ]
and is or will be in compliance with the laws of each state in which any
Mortgaged Property is located to the extent necessary to ensure the
enforceability of
E-2
<PAGE>
each Mortgage Loan by the Subservicer in accordance with the terms of this
Agreement.
1.2 No Breach. The execution and delivery of this Agreement by the
---------
Subservicer and its performance of and compliance with the terms of this
Agreement will not violate the Subservicer's articles of incorporation or by-
laws or constitute a default (or an event which, with notice or the lapse of
time or both, would constitute a default) under, or result in the breach of, any
material contract, agreement or other instrument to which the Subservicer is a
party or which may be applicable to the Subservicer or any of its assets.
1.3 Authority. This Agreement, assuming due authorization,
---------
execution and delivery by the Master Servicer, constitutes a valid, legal and
binding obligation of the Subservicer, enforce able against it in accordance
with the terms hereof, except as such enforcement may be limited by applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, receivership,
moratorium and similar laws affecting the rights and remedies of creditors
generally and by general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing (regardless of whether
such enforcement is sought in a proceeding in equity or at law).
1.4 No Violation. The Subservicer is not in violation of, and the
------------
execution and delivery of this Agreement by the Subservicer and its performance
and compliance with the terms of this Agreement will not constitute a violation
with respect to, any law or regulation applicable to the Subservicer, any order
or decree of any court or of any federal, state, municipal or governmental
agency having jurisdiction, which violation could reasonably be expected to
materially affect the performance of its duties hereunder.
1.5 No Litigation. No litigation is pending or, to the best
-------------
knowledge of the Subservicer, threatened, against the Subservicer which would
prohibit its entering into or performing its obligations under this Agreement.
2. Subservicing of Mortgage Loans.
------------------------------
2.1 General Duties. The Subservicer shall perform for the Master
--------------
Servicer all services and duties described herein and in the Schedule of Duties
to be performed by the Subservicer attached to this Agreement as Exhibit A, in
each case in accordance with the terms of the Pooling and Servicing Agreement
and of applicable law. In performing its duties hereunder, the Subservicer shall
have the status of and shall act as an independent contractor. Nothing herein
shall be construed to create a
E-3
<PAGE>
partnership or joint venture between the Master Servicer and the Subservicer.
Nothing contained in this Agreement shall prohibit the Master Servicer from
taking any action, including the payment of advances or other amounts, which it
deems necessary to assure the fulfillment of any of its duties under the Pooling
and Servicing Agreement or any related document, agreement or instrument,
whether or not the Subservicer is also required to fulfill such duty pursuant to
this Agreement.
2.2 Remittance Reports and Accounting. In addition to the other
---------------------------------
reports and information that the Subservicer is required to provide to the
Master Servicer pursuant to this Agreement, the Subservicer shall provide to
the Master Servicer in each month during the term hereof, no later than the
Determination Date, (i) the information described in Exhibit B attached hereto
and (ii) with respect to any Subservicing Account (as defined below) or other
fund or account maintained by the Subservicer hereunder, a statement prepared by
the Subservicer setting forth the status of the applicable fund or account as of
the close of business on such Determination Date and detailing, for the period
covered by such statement, each category of deposit into and withdrawal from and
earnings on such fund or account (clauses (i) and (ii) together, "Servicing
Information"); provided, however, that the Subservicer shall obtain and provide
-------- -------
the Master Servicer with as much Servicing Information as is available on the
[ ] day of the month in which the related Determination Date occurs and shall
continuously update such Servicing Information through such Determination Date.
In addition, on or before April 30 of each year, beginning with April
30, 1995, the Subservicer at its expense shall cause to be prepared and
delivered to the Master Servicer, a statement in the form, and prepared by a
firm of Independent public accountants satisfying the criteria described in
Section 3.15 of the Pooling and Servicing Agreement, except that such statement
shall relate to the Subservicer's subservicing activities hereunder.
Notwithstanding any other provision contained herein, any required
statements, certifications, elections, notices, reports, plans or responses to
direction from any Person which are required by the Pooling and Servicing
Agreement to be in the name of or to be otherwise provided by the Master
Servicer and which are delegated to the Subservicer hereunder shall be prepared
by the Subservicer at its expense in the form required by the Pooling and
Servicing Agreement and shall be delivered, no later than the second Business
Day prior to the day such item is required from the Master Servicer under the
Pooling and Servicing Agreement, to the Master Servicer for its execution as
Master Servicer and its distribution in accordance with the Pooling and
Servicing Agreement.
E-4
<PAGE>
2.3 Fidelity Bond and Insurance. The Subservicer, at no expense to
---------------------------
the Master Servicer, shall keep in force during the term of this Agreement, for
the benefit of the Trustee and the Master Servicer, a policy or policies of
insurance covering errors and omissions for failure in the performance of the
Subservicer's obligations under this Agreement, which policy or policies shall
be in such form and amount that would meet the servicing requirements of prudent
institutional commercial mortgage lenders and loan servicers. The Subservicer
shall also maintain a fidelity bond in the form and amount that would meet the
servicing requirements of prudent institutional commercial mortgage lenders and
loan servicers. The Subservicer shall be deemed to have complied with this
provision if an affiliate of the Subservicer has such errors and omissions and
fidelity bond coverage and, by the terms of such insurance policy or fidelity
bond, the coverage afforded thereunder extends to the Subservicer. Each such
fidelity bond and errors and omissions policy shall be issued by an insurer
having a claims-paying ability of at least "A" by S&P and "A" by Fitch or
otherwise acceptable to the Rating Agencies; provided, however, that so long as
-------- -------
the long term debt or deposit obligations of the Subservicer are rated at least
"A" by S&P and Fitch, the Subservicer shall be allowed to provide self-insurance
with respect to an errors and omissions insurance policy; provided further that
if such long term debt or deposit obligation is at the time of such investment
not rated by Fitch, such long term debt or deposit need only be rated by S&P.
Any such errors and omissions policy and fidelity bond shall not be canceled
without 10 days' prior written notice to the Trustee and the Master Servicer.
2.4 Documents Received After Termination. The Subservicer shall
------------------------------------
promptly deliver and remit to the Master Servicer any Mortgage Files and any and
all bills, invoices, insurance policies, letters, documents and all other
correspondence or communications relating to the Mortgage Loans (collectively,
"Loan Documents") that are received by the Subservicer after termination of this
Agreement. The Subservicer's obligations under this Section 2.4 with respect to
such documents, correspondence and communications shall be those of a trustee or
other fiduciary.
2.5 Establishment of Accounts. The Subservicer shall establish and
-------------------------
maintain one or more accounts, referred to collectively as the "Subservicing
Account," in accordance with Section 3.1(b)(l) of the Pooling and Servicing
Agreement. The Subservicer shall deposit into the Subservicing Account not later
than the first Business Day after receipt thereof all proceeds of Mortgage Loans
received by the Subservicer in accordance with
E-5
<PAGE>
Section 3.1(b)(2) of the Pooling and Servicing Agreement, without any deduction
for the Subservicer's servicing compensation, and the Subservicer shall deliver
all Principal Prepayments and Balloon Payments to the Master Servicer in
accordance with Section 3.1(b)(3) of the Pooling and Servicing Agreement not
later than one Business Day after receipt thereof. If the Subservicer fails to
remit to the Master Servicer any amounts required to be remitted pursuant to
this section, the Subservicer shall pay interest at the Advance Rate on amounts
not remitted.
2.6 Statements as to Compliance. On or before April 15 of each
---------------------------
year, beginning April 30, 1995, the Subservicer will deliver to the Master
Servicer, the Trustee and the Depositor an Officers' Certificate stating, as to
the signatory thereof, that (i) a review of the activities of the Subservicer
during the preceding calendar year (or such longer period from the Closing Date
to the end of the related calendar year) and of its performance under this
Agreement has been made under such officer's supervision, (ii) to the best of
such officer's knowledge, based on such review, the Subservicer has fulfilled
all of its obligations under this Agreement in all material respects throughout
such year (or such longer period), or, if there has been a default in the
fulfillment of any such obligation in any material respect, specifying each such
default known to such officer, the nature and status thereof and what action the
Subservicer proposes to take with respect thereto and (iii) whether it has
received any notice regarding qualification, or challenging the status, of
either of the Upper-Tier REMIC or the Lower-Tier REMIC as a REMIC from the
Internal Revenue Service or any other governmental agency or body.
2.7 Purchase of All Outstanding Mortgage Loans. The Subservicer shall
------------------------------------------
be assigned, the right of the Master Servicer during the term of this Agreement
to exercise the option contained in Section 9.1(c) of the Pooling and Servicing
Agreement to purchase all of the Mortgage Loans then included in the Trust Fund,
all property acquired in respect of any Mortgage Loan and any assets conveyed to
the Trust Fund.
If the Subservicer elects to exercise such option, it shall notify the
Master Servicer and the Trustee of such election no later than 30 days prior to
the Early Termination Determination Date, as provided in Section 9.1 of the
Pooling and Servicing Agreement.
Upon payment by the Subservicer to the Master Servicer for deposit
into the Collection Account in accordance with the Pooling and Servicing
Agreement of the amount required by Section 9.1 thereof in connection with the
exercise of such option, the Master Servicer shall release or cause to be
released to the
E-6
<PAGE>
Subservicer, promptly upon its receipt thereof, the Mortgage Files for the
remaining Mortgage Loans and REO Properties, and shall execute and deliver such
instruments of transfer or assignment, in each case without recourse, as shall
be necessary to vest in the Subservicer title to such Mortgage Loans and REO
Properties.
2.8 Filing and Recording Fees. All costs and fees incurred in
-------------------------
connection with the filing of any UCC-2 or UCC-3 filings or the recording of any
assignments or reassignments of leases, rents and profits pursuant to Section
2.01 of the Pooling and Servicing Agreement shall be brone by LTC REMIC
Corporation.
3. Compensation to the Subservicer.
-------------------------------
3.1 Subservicing Fee. As compensation for the activities of the
----------------
Subservicer hereunder, the Master Servicer shall, no later than the first
Business Day following each Distribution Date, remit to the Subservicer the
Subservicing Fee, as described below, with respect to each Mortgage Loan,
payable from amounts in the Collection Account paid to the Master Servicer. The
Subservicing Fee, with respect to each Mortgage Loan and for each Due Period,
shall be an amount equal to thirty days' interest (or, in the event of any
payment of interest which accompanies a Principal Prepayment in full made by the
related Borrower during such Due Period, interest for the number of day covered
by such payment of interest) at a rate equal to .0015 per annum on the Scheduled
Principal Balance of such Mortgage Loan; provided however, that the Sub-
servicer's right to receive the Subservicng Fee shall be subject to the
requirement that the Subservicing Fee be applied to cover any excess of
Prepayment Interest Shortfalls over prepayment Interest Excess for such Due
Period. The right to receive the Subservicing Fee may not be transferred in
whole or in part except in connection with the transfer of all of the
Subservicer's responsibilities and obligations under this Agreement.
3.2 Reimbursements. The Master Servicer shall remit to the
--------------
Subservicer, solely from funds available to the Master Servicer pursuant to the
Pooling and Servicing Agreement, amounts sufficient to indemnify the Subservicer
for any loss, liability or expense incurred by the Subservicer for which
indemnity from the Trust Fund is received by the Master Servicer pursuant to
Section 6.3 of the Pooling and Servicing Agreement if and when funds are
available for withdrawal in respect thereof by the Master Servicer pursuant to
the Pooling and Servicing Agreement, subject to the Master Servicer's recovery
of its loss, liability or expenses from such monies.
3.3 Other Expenses. The Subservicer shall be
--------------
E-7
<PAGE>
required to pay all expenses incurred by it in connection with its subservicing
activities hereunder, including payment of premiums for the fidelity bond and
insurance required by Section 2.3 hereof. Except as otherwise provided herein,
the Master Servicer shall not be responsible to reimburse the Subservicer for
any expenses incurred by the Subservicer or any disbursements or advances
required to be made by the Subservicer in the performance of the Subservicer's
duties hereunder and under the Pooling and Servicing Agreement. It is hereby
understood that the Subservicing Fee and the reimbursement payments payable
under Section 3.2 hereof represent the sole compensation payable by the Master
Servicer to the Subservicer hereunder.
3.4 Expenses of the Master Servicer. The Subservicer covenants and
-------------------------------
agrees to pay or reimburse the Master Servicer, upon request, for all reasonable
expenses, disbursements, and advances, if any, incurred or made by the Master
Servicer in accordance with any of the provisions of the Pooling and Servicing
Agreement (including the reasonable compensation and the expenses and
disbursements of its counsel and of all Persons not regularly in its employ,
whether or not such expenses are incurred in connection with any Opinion of
Counsel required or permitted to be obtained by the Master Servicer), including,
without limitation, any costs of enforcing this Agreement and any insurance
premiums paid pursuant to Section 3.8 of the Pooling and Servicing Agreement
(other than any fees and expenses of independent public accountants incurred
pursuant to Section 3.15 of the Pooling and Servicing Agreement on behalf of the
Master Servicer and any premiums for errors and omissions insurance with respect
to the Master Servicer, for which the Master Servicer shall be solely
responsible); provided, however, that the Subservicer shall have no obligation
-------- -------
to pay or reimburse the Master Servicer for any such expense, disbursement or
advance as may arise solely and directly from the Master Servicer's negligence,
intentional misconduct or bad faith.
3.5 Master Servicer Obligations. The Master Servicer agrees to
---------------------------
request payment and/or reimbursement as contemplated by Sections 3.1 and 3.2
hereof when and as permitted by, and in accordance with, the Pooling and
Servicing Agreement. In addition, the Master Servicer shall furnish the
Subservicer with copies of all notices received by the Master Servicer under the
Pooling and Servicing Agreement (other than such notices furnished by the
Subservicer) as soon as is practicable following the Master Servicer's receipt
of the same.
4. Term. Except in the event that this Agreement is terminated
----
pursuant to Section 5.1, 5.2 or 5.3 hereof, this Agreement shall continue in
effect until the termination of the obligations and responsibilities of the
parties to the Pooling
E-8
<PAGE>
and Servicing Agreement under the Pooling and Servicing Agreement pursuant to
Article IX thereof.
5. Termination.
-----------
5.1 Termination for Cause. The occurrence of any of the following
---------------------
events shall constitute a "Subservicer Default:"
(a) If the Subservicer shall fail to pay to the Master Servicer any
amount due to the Master Servicer pursuant to Section 3.4 or 7.1 hereunder
and such failure shall continue for a period of 50 days after written
notice thereof has been delivered to the Subservicer by the Master
Servicer;
(b) If the Subservicer shall fail to make any payment, other than as
described in (a) above, when due hereunder;
(c) If the Subservicer shall materially breach any other term of
this Agreement or any term of the Pooling and Servicing Agreement specified
in Exhibit A hereto and such breach shall not be cured within 50 days after
written notice thereof has been delivered to the Subservicer by the Master
Servicer;
(d) If a decree or order for relief of a court or agency or
supervisory authority having jurisdiction in the premises in an involuntary
case under any present or future federal or state bankruptcy, insolvency or
similar law or the appointment of a conservator or receiver or liquidator
in any insolvency, readjustment of debt, marshalling of assets and
liabilities or similar proceeding, or for the winding-up or liquidation of
its affairs, shall have been entered against the Subservicer and such
decree or order shall have remained in force undischarged or unstayed for a
period of 60 days; or the Subservicer shall consent to the appointment of a
conservator or receiver or liquidator in any insolvency, readjustment of
debt, marshalling of assets and liabilities or similar proceedings of or
relating to the Subservicer or of or relating to all or substantially all
of its property; or the Subservicer shall admit in writing its inability to
pay its debts generally as they become due, file a petition to take
advantage of any applicable bankruptcy, insolvency or reorganization
statute, make an assignment for the benefit of its creditors, voluntarily
suspend payment of its obligations; or
(e) If the Subservicer shall assign or attempt to assign its
interest under this Agreement or delegate or attempt to delegate any
portion of its rights, duties or
E-9
<PAGE>
obligations hereunder without the written consent of the Master Servicer;
provided, however, that delegation of the Subservicer's duties and
obligations shall not constitute a default hereunder so long as the
Subservicer remains primarily liable to the Master Servicer for the duties
or obligations so delegated.
In each and every case, so long as a Subservicer Default shall not have
been remedied, the Master Servicer may, by notice in writing to the Subservicer,
terminate all of the rights and obligations of the Subservicer as subservicer
under this Agreement. On or after the receipt by the Subservicer of such
written notice, all of its authority and power under this Agreement shall pass
to and be vested in the Master Servicer pursuant to and under this Section.
5.2 Termination by Trustee or Other Successor Master Servicer.
---------------------------------------------------------
Notwithstanding anything to the contrary contained herein, in the event that the
Master Servicer shall, for any reason (including, without limitation,
termination of the Master Servicer pursuant to Article VII of the Pooling and
Servicing Agreement) no longer be the Master Servicer under the Pooling and
Servicing Agreement, the Trustee or any successor Master Servicer under the
Pooling and Servicing Agreement shall, pursuant to Section 9 hereof, assume the
rights and obligations of the Master Servicer under this Agreement. The Trustee
or such successor Master Servicer shall be entitled to terminate this Agreement
without cause upon 10 days' prior written notice to the Subservicer.
5.3 Rights Upon Termination. Upon termination of this Agreement
------------------------
pursuant to Section 5.1 hereof, the Subservicer shall deliver to the Master
Servicer all documents relating to the Mortgage Loans in its possession not
previously delivered to the Master Servicer, together with all funds held with
respect to the Mortgage Loans. In addition, the Subservicer shall cooperate with
the Master Servicer and use its reasonable best efforts to assist the Master
Servicer in the transfer of the servicing rights to the Master Servicer or the
Master Servicer's nominee. Upon termination of this Agreement pursuant to
Section 5.2 hereof, the Subservicer shall deliver to the Trustee, as successor
to the rights and obligations of the Master Servicer hereunder, all documents
relating to the Mortgage Loans in its possession not previously delivered to
the Master Servicer, together with all funds held with respect to the Mortgage
Loans, and shall cooperate with and assist the Trustee to the same extent as it
would the Master Servicer pursuant to the preceding sentence. The Master
Servicer and the Subservicer each covenants and agrees to comply with all laws,
rules and regulations of any federal, state or local government authority
applicable to the termination
E-10
<PAGE>
of this Agreement and the transfer of the servicing rights to the Master
Servicer or the Trustee, as applicable.
5.4 Limitation on Resignation of the Subservicer. The Subservicer
--------------------------------------------
shall not resign from the obligations and duties hereby imposed on it except (a)
by mutual consent of the Master Servicer and the Subservicer, or (b) upon
determination that its duties hereunder are no longer permissible under
applicable law. Any such determination pursuant to the foregoing clauses shall
be evidenced by an Opinion of Counsel to such effect delivered to the Master
Servicer.
6. Additional Rights of the Master Servicer.
----------------------------------------
6.1 Ownership of Documentation. Subject to the rights of the
--------------------------
Trustee and the Certificateholders under the Pooling and Servicing Agreement,
all Mortgage Files held or received by the Subservicer in connection with the
subservicing of the Mortgage Loans, whether or not prepared, developed or
originated by the Subservicer, shall be and remain at all times the property of
the Master Servicer, it being expressly understood that any Mortgage Files in
the possession of the Subservicer are retained in a custodial capacity only in
order, and during only such time as is necessary, to permit the performance of
the Subservicer's obligations hereunder. Subject to the last sentence of this
Section 6.1, the Subservicer shall not acquire any vested rights with respect to
the Mortgage Files and shall not have the right to possession of them except as
may be necessary to permit the Subservicer to fulfill its obligations hereunder.
Subsequent to the termination of this Agreement, the Subservicer shall promptly
deliver all such Mortgage Files to the Master Servicer or the Trustee, as
applicable. Such delivery shall be accompanied by a list identifying the
Mortgage File for each Mortgage Loan, the Master Servicer's loan number
(provided that the Master Servicer previously has furnished its loan numbers to
the Subservicer) and such other information as is reasonably requested by the
Master Servicer or the Trustee to identify the Mortgage Loans so delivered.
Notwithstanding anything contained in this Section 6.1 to the contrary, copies
of Mortgage Files maintained by the Subservicer shall remain the property of the
Subservicer and may be retained by the Subservicer after the termination of this
Agreement.
6.2 Inspection of Mortgage Records. The Master Servicer and its
------------------------------
representatives, agents, consultants, examiners and other Persons authorized by
the Master Servicer shall have the right to inspect the documents and records
maintained by the Subservicer with respect to the Mortgage Loans during the
Subservicer's regular business hours upon reasonable notice, and the Subservicer
shall make such documents and records available to
E-11
<PAGE>
the Master Servicer for inspection. The Subservicer shall afford the Depositor
and the Trustee access to records in accordance with Section 6.5 of the Pooling
and Servicing Agreement.
7. Indemnification.
---------------
7.1 General. The Subservicer agrees to pay, and shall indemnify,
-------
defend and hold harmless, the Master Servicer and the Master Servicer's
directors, officers, employees and agents (collectively, "Indemnitee"), from
and against any loss, liability, penalty, fine or expense incurred in connection
with any action or claim (including the reasonable compensation and the expenses
and disbursements of its counsel) incurred in defending any claim or action or
enforcing this indemnity that may result from, relate to or arise out of the
Subservicer's acting as subservicer under, breach of or failure to act under,
this Agreement or any payment contemplated under, or transaction contemplated
by, this Agreement; provided, however, that the indemnity obligation of the
-------- -------
Subservicer shall not apply to any loss, liability or expense arising or
resulting from (a) the negligence, intentional misconduct or bad faith of such
Indemnitee, (b) the failure of the Master Servicer to perform its obligations
hereunder, (c) the breach of the Master Servicer's representations and
warranties in Section 2.5 of the Pooling and Servicing Agreement or (d) actions
taken, or omitted to be taken, by the Subservicer specifically in accordance
with instructions furnished by the Master Servicer pursuant to or in connection
with this Agreement; and provided, further, that upon full payment of the
-------- -------
indemnity provided herein, the Subservicer shall be subrogated to all rights and
remedies of the Indemnitee so indemnified, in respect of the matter against
which indemnity has been paid.
7.2 Survival. All indemnities, obligations, adjustments and payments
--------
provided for in this Section 7 shall survive, and remain in full force and
effect, notwithstanding the expiration or other termination of this Agreement or
of the Pooling and Servicing Agreement. The obligations of the Subservicer in
respect of all such indemnities, obligations, adjustments and payments are
expressly made for the benefit of, and shall be enforceable by, the Indemnitee
entitled thereto, without declaring any breach of or default under the Pooling
and Servicing Agreement or taking any other action thereunder, and
notwithstanding any provision of the Pooling and Servicing Agreement.
8. Notices. Any notices and communications hereunder shall be given and
-------
deemed given as provided for in Section 10.4 of the Pooling and Servicing
Agreement.
9. Right of Assumption by Trustee. In the event that the
------------------------------
E-12
<PAGE>
Master Servicer shall, for any reason, no longer be the Master Servicer under
the Pooling and Servicing Agreement, including without limitation termination of
the Master Servicer in accordance with Article VII thereof, the Trustee, as
successor to the Master Servicer in its capacity as the Master Servicer under
the Pooling and Servicing Agreement or any successor Master Servicer, shall
succeed to all of the rights, title and interest of the Master Servicer and
assume all of the obligations, duties and liabilities of the Master Servicer
under this Agreement without any further act. In such event, the Trustee or the
successor Master Servicer appointed pursuant to the Pooling and Servicing
Agreement shall be deemed to have replaced the Master Servicer as a party to
this Agreement to the same extent as if this Agreement had been assigned to the
assuming party. Notwithstanding the foregoing, the Master Servicer shall not
thereby be relieved of any obligations, duties or liabilities under this
Agreement with regard to events occurring prior to the date the Master Servicer
ceased to be the Master Servicer under the Pooling and Servicing Agreement.
Following the assumption of the rights and obligations of the Master Servicer
pursuant to this Section, the Subservicer at the expense of the Master Servicer
shall, upon the request of the Trustee or such successor Master Servicer,
deliver to the assuming party all documents and records relating to this
Agreement and the Mortgage Loans then being serviced and an accounting of
amounts collected and held by it and otherwise use its reasonable best efforts
to effect the orderly and efficient transfer of this Agreement to the assuming
party.
10. Miscellaneous.
-------------
10.1 Entire Agreement; Amendments. This Agreement together with the
----------------------------
other written agreements referred to herein is intended by the parties to be the
final expression of their agreement with respect to the subject matter hereof,
and is intended as the complete and exclusive statement of the terms of the
agreement between the parties. As such, this Agreement supersedes any prior
understanding between the parties, whether oral or written. Notwithstanding the
foregoing, in the event that the provisions of this Agreement are inconsistent
with the provisions of the Pooling and Servicing Agreement, the provisions of
the Pooling and Servicing Agreement shall prevail. Any amendments to this
Agreement shall be in writing and shall be signed by all parties hereto.
10.2 Invalidity. To the extent permitted by law, the invalidity of any
----------
portion of this Agreement shall in no way affect the remaining portions hereof.
10.3 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
-------------
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
E-13
<PAGE>
YORK.
10.4 Agreement Binding. This Agreement shall be binding upon and
-----------------
inure to the benefit of the parties hereto and their respective successors and
permitted assigns.
10.5 Counterparts. This Agreement may be executed in any number of
------------
counterparts. Each counterpart so executed shall be deemed an original, but all
such counterparts shall together constitute one and the same instrument.
10.6 Assignment. Neither party shall assign this Agreement or any
----------
rights hereunder (including but not limited to the right to receive compensation
or money due hereunder) without the prior written consent of the other party
hereto; provided, however, that any assumption of the Master Servicer's rights
-------- -------
pursuant to Section 9 hereof shall not require the consent of either party
hereto.
10.7 Disputes. In the event of any dispute between the parties to
--------
this Agreement, the prevailing party shall be entitled to immediate payment of
all costs incurred by such party in such dispute, including but not limited to
court costs and reasonable attorneys's fees.
10.8 Section Headings. Section headings of this Agreement are
----------------
inserted for convenience only and do not in any manner limit or expand this
Agreement and do not constitute a part of this Agreement.
10.9 Further Assurances. To the extent permitted by law, each of the
------------------
Master Servicer and the Subservicer agree that it will, from time to time,
execute, acknowledge and deliver, or cause to be executed, acknowledged and
delivered, such further instruments as either party hereto or the Trustee may
reasonably request to effectuate the intention of or facilitate the performance
of this Agreement or the Pooling and Servicing Agreement.
10.10 Exercise of Rights. No failure or delay on the part of either
------------------
party to exercise any right, power or privilege under this Agreement and no
course of dealing between the Master Servicer and the Subservicer shall operate
as a waiver thereof, nor shall any single or partial exercise of any right,
power or privilege under this Agreement preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein expressly provided are cumulative and not exclusive of any
rights or remedies which a party would otherwise have pursuant to law or equity.
No notice to or demand on any party in any case shall entitle such party to
E-14
<PAGE>
any other or further notice or demand in similar or other circumstances, or
constitute a waiver of the right of the other party to any other or further
action in any circumstances without notice or demand.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first set forth above.
[_____________________________]
By:_____________________________
Name:
Title:
[_______________________________]
By:_____________________________
Name:
Title:
E-15
<PAGE>
EXHIBIT A
Schedule of Duties
to be Performed by the Subservicer
In addition to the duties otherwise contained in the Subservicing
Agreement, the Subservicer shall be obligated to perform the following, in each
case at the time and in the manner required under the terms of the Pooling and
Servicing Agreement (capitalized terms used in this Exhibit A have the meanings
assigned thereto in the Subservicing Agreement or the Pooling and Servicing
Agreement, as the case may be):
1. To provide the Trustee and the Master Servicer with the list of
servicing officers of the Subservicer as defined in the definition of "Servicing
Officer" in Article I of the Pooling and Servicing Agreement.
2. Upon discovery by the Subservicer of the existence in any material
respect of a repurchase or substitution event as set forth in Section 3.2 of the
Transfer and Repurchase Agreement in respect of any Mortgage Loan, to give
prompt notice to the Trustee, the Master Servicer and the Special Master
Servicer as required of the Master Servicer in Section 2.3 of the Pooling and
Servicing Agreement.
3. To give the notices required of the Master Servicer by Section 2.3(c)
of the Pooling and Servicing Agreement.
4. To give the notices required of the Master Servicer by Section 2.5(b)
of the Pooling and Servicing Agreement.
5. To give the notices required of the Master Servicer by Section 2.6(b)
of the Pooling and Servicing Agreement.
6. To (a) perform the duties of the Master Servicer set forth in
Subsection 3.1(a) of the Pooling and Servicing Agreement, (b) indemnify the
Master Servicer, the Trustee and the Depositor, as specified in the Pooling and
Servicing Agreement, to the extent the Subservicer breaches its obligations in
the Subservicing Agreement, (c) comply with all statutory or regulatory
requirements with regard to the manner in which it conducts its activities
pursuant to this item and the Subservicing Agreement, Agreement, and (d)
cooperate with the Master Servicer in its performance of the Master Servicer's
duties in Section 3.1(a) of the Pooling and Servicing Agreement. The indemnities
of the Subservicer pursuant to this item shall survive the termination or
discharge of the Subservicing Agreement or the Pooling and Servicing Agreement.
E-16
<PAGE>
7. To perform the duties of the Master Servicer set forth in Section 3.3
of the Pooling and Servicing Agreement.
8. To perform the duties of the Master Servicer set forth in Section 3.4
of the Pooling and Servicing Agreement.
9. To perform the duties of the Master Servicer set forth in Sections 3.8
through 3.10 of the Pooling and Servicing Agreement.
10. To provide information reasonably requested by the Master Servicer to
enable the Master Servicer to deliver the statements required by Section 3.13 of
the Pooling and Servicing Agreement.
11. To deliver to the Master Servicer (i) an Officer's Certificate of the
Subservicer, containing substantially the information required pursuant to
Section 3.14 of the Pooling and Servicing Agreement, but referring to the
Subservicer's obligations under the Subservicing Agreement, and (ii) such other
information, certified by a responsible officer of the Subservicer, regarding
the Subservicer's organization, activities and personnel as the Master Servicer
or the Trustee may reasonably request from time to time.
12. To perform the inspections required of the Master Servicer in Section
3.19 of the Pooling and Servicing Agreement.
13. To perform the duties of the Master Servicer set forth in Section 6.5
of the Pooling and Servicing Agreement.
E-17
<PAGE>
EXHIBIT B
REMITTANCE REPORT
E-18
<PAGE>
EXHIBIT B
- ---------
REMITTANCE TO BANKERS TRUST FOR PERIOD ENDING
<TABLE>
<CAPTION>
Facility # Beginning Principal Monthly Principal Interest Scheduled Mortgage Servicing Net
Balance Prepymts Payment Ending Interest Fees Mortgage
Balance Rate Interest
Rate
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
<CAPTION>
Paid Liquidation Liquidation Loan Payment
Through Date Amount Status Retension
Date Account
Indicate
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
</TABLE>
E-19
<PAGE>
0.00 0.00 0.00 0.00 0.00
- --------- ------- --------- -------- ---------
E-20
<PAGE>
EXHIBIT 10.30
_______________________________________________________
LTC COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1996-1
______________________________
PURCHASE AGREEMENT
Dated March 27, 1996
______________________________
_______________________________________________________
<PAGE>
LTC COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1996-1
PURCHASE AGREEMENT
------------------
March 27, 1996
Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
Ladies and Gentlemen:
LTC REMIC Corporation, a Delaware corporation (the "Company") and LTC
Properties, Inc., a Maryland corporation, as originator ("LTC"), hereby agree
with Goldman Sachs & Co., a New York limited partnership (the "Purchaser"), as
follows:
1. The Certificates. The Company expects to enter into a Transfer and
----------------
Repurchase Agreement to be dated as of March 1, 1996 (the "Transfer Agreement"),
which will provide for the transfer by LTC to the Company of all of the right,
title and interest of LTC in a pool of mortgage loans (the "Mortgage Loans")
secured by first and second mortgage liens on properties that provide healthcare
and/or long-term nursing care (the "Mortgaged Properties"), together with
certain related assets. The Company, in its capacity as depositor, expects to
enter into a Pooling and Servicing Agreement, to be dated as of March 1, 1996
(the "Pooling Agreement"), with LaSalle National Bank, as trustee (the
"Trustee"), ABN AMRO Bank N.V., as fiscal agent (the "Fiscal Agent"), GMAC
Commercial Mortgage Corporation, as master servicer (the "Master Servicer") and
LTC, as special servicer and originator. In addition, LTC will enter into a
subservicing agreement to be dated as of March 1, 1996 with GMAC Commercial
Mortgage Corporation (the "Subservicing Agreement"). The Pooling Agreement will
provide for the issuance of pass-through certificates (the "Certificates") that
evidence undivided interests in a trust (the "Trust
<PAGE>
Fund") whose assets will consist of the Mortgage Loans and other related assets.
The Mortgage Loans have an aggregate unpaid principal balance of approximately
$112,487,255 as of the close of business on March 1, 1996 (the "Cut-Off Date"),
after giving effect to payments of principal due on or before the Cut-Off Date.
Unless otherwise specifically defined herein, all capitalized terms shall have
the meanings ascribed to them in the Pooling Agreement or the Offering Circular.
The Pooling Agreement, the Transfer Agreement, the Subservicing Agreement, this
Agreement and each Assignment (as defined in the Transfer Agreement) relating to
a Mortgage Loan are hereinafter referred to collectively as the "Agreements."
2. Representations and Warranties of the Company and LTC.
-----------------------------------------------------
(a) Each of the Company and LTC represents and warrants,
jointly and severally, to the Purchaser as of the date hereof, with respect to
itself, as follows:
(i) A preliminary offering circular dated March 15, 1996 (the
"Preliminary Offering Circular") and a final offering circular dated March
27, 1996 (the "Final Offering Circular" and, together with the Preliminary
Offering Circular, the "Offering Circular") has been prepared in connection
with the offering of the Offered Certificates (as defined herein). The
Preliminary Offering Circular and the Offering Circular and any amendments
or supplements thereto will not, as of the date thereof, contain any untrue
statement of a material fact or omit to state a material fact necessary in
order to make the statements therein, in light of the circumstances under
which they were made, not misleading. There are no facts known to it
which, individually or in the aggregate, may impair its ability to perform
its obligations under any of the Agreements;
(ii) Each of the Agreements to which it is or will be a party
has or will have been duly authorized, executed and delivered by such party
at the time of closing and, assuming due execution and delivery by the
other parties thereto, constitutes or will constitute a legal, valid and
binding agree-
2
<PAGE>
ment of such party, enforceable against such party in accordance with its
terms. The Certificates and the Agreements will conform to the description
thereof in the Offering Circular;
(iii) The issuance and sale of the Offered Certificates and the
compliance by it with all of the provisions of the Certificates and the
Agreements, and the consummation of the transactions herein and therein
contemplated will not conflict with or result in a breach or violation of
any of the terms or provisions of, or constitute a default under, any
indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument to which it is a party or by which it is bound or to which any
of its property or assets is subject, nor will such action result in any
violation of the provisions of its Charter or By-laws or other similar
documents or any statute or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over it or any of its
properties; and no consent, approval, authorization, order, registration or
qualification of or with any such court or governmental agency or body is
required for the issue and sale of the Offered Certificates or consummation
by it of the transactions contemplated by any of the Agreements, except
such consents, approvals, authorizations, registrations or qualifications
as may be required under the securities or Blue Sky laws of the United
States or any state in connection with the purchase and resale of the
Offered Certificates by the Purchaser and except for recordation of
assignments of the Mortgage Loans which will be effected following the
Closing. It is not in breach or violation of any indenture or other
material agreement or instrument to which it is a party or by which it is
bound, or in violation of any applicable statute or regulation or any order
of any court, regulatory body, administrative agency or governmental body
having jurisdiction over it, which breach or violation would have
material adverse effect on the ability of such party to perform its
obligations under any of the Agreements to which it is a party;
(iv) Any taxes, fees and other governmental charges in
connection with the execution and
3
<PAGE>
delivery of the Agreements, the transfer of the Mortgage Loans to the
Trust Fund and the execution, authentication, issuance and delivery of
the Offered Certificates have been or will be paid at or prior to the
Closing Date;
(v) There is no action, suit or proceeding against, or
investigation of, such party pending or to its knowledge threatened,
before any court, administrative agency or other tribunal which,
either individually or in the aggregate, (A) asserts the invalidity of
any of the Agreements or the Certificates, (B) seeks to prevent the
issuance of the Certificates or the consummation of any of the
transactions contemplated by any of the Agreements, (C) could either
individually or in the aggregate, materially and adversely affect the
performance by it of its obligations under, or the validity or
enforceability of, any of the Agreements or the Certificates or (D)
seeks to affect the federal income tax or ERISA attributes of the
Certificates described in the Offering Circular;
(vi) Neither it, nor any of its Affiliates, nor any person
authorized or employed by it has, directly or indirectly, sold or
offered for sale or disposed of, or attempted or offered to sell or
dispose of, any Offered Certificate or similar security other than the
Certificates that are not Offered Certificates, or solicited offers
to buy any Offered Certificate or similar security other than the
Certificates that are not Offered Certificates from, or otherwise
approached or negotiated with respect thereto, any person or persons
other than the Purchaser. Neither it, nor any of its Affiliates will,
directly or indirectly, offer or sell any Certificate or similar
security in a manner which would render the issuance and sale of the
Certificates a violation of Section 5 of the Securities Act of 1933,
as amended (the "1933 Act"), or require registration pursuant thereto,
nor will it authorize any person to act in such manner;
(vii) (A) It is not an open-end investment company, unit
investment trust or face-amount certificate company that is or is
required to be registered under Section 8 of the United States
4
<PAGE>
Investment Company Act of 1940, as amended (the "1940 Act"), and (B)
neither it, nor any person acting on its behalf, other than the Purchaser,
has offered or sold the Certificates by means of any general solicitation
or general advertising within the meaning of Rule 502(c) under the 1933
Act;
(viii) It has been duly incorporated or created and is validly
existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, and, as applicable, has elected to be
treated as a real estate investment trust under Section 856(c) of the Code,
with the power and authority (corporate and other) to own its properties
and conduct its business as described in the Offering Circular, with
respect to it, and to enter into the Agreements to which it is party and
has been duly qualified as a foreign corporation for the transaction of
business and is in good standing under the laws of each other jurisdiction
in which it owns its properties or conducts any such business as to require
such qualification, except where failure to obtain such qualification would
not have a material adverse effect on the condition (financial or
otherwise), assets, business or results of operations of the Company and
LTC taken as a whole provided, however, that in no event shall LTC or the
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Company be obligated to qualify to do business in any jurisdiction where it
is not now so qualified or to take any action which would subject it to
service of process in suits, other than those arising out of the offering
or sale of the Offered Certificates, in any jurisdiction where it is not so
subject;
(ix) It is not in violation of its Charter or By-laws or in
default in the performance or observance of any material obligation,
covenant or condition contained in any indenture, mortgage, deed of trust,
loan agreement, lease or other material agreement or instrument to which it
is respectively a party or by which it or any of its properties may be
bound;
(x) It is not under any obligation to pay any broker's fee or
any commission in connection with the transactions contemplated by this
Agreement, other than the purchase discount and other
5
<PAGE>
amounts payable to the Purchaser set forth in Schedule I hereto;
----------
(xi) For federal income tax purposes, the Upper-Tier REMIC and
the Lower-Tier REMIC will each qualify as a REMIC pursuant to Section 860D
of the Internal Revenue Code of 1986 (the "Code"). Each Class of
Certificates other than the Class R Certificates and the Class LR
Certificates, will qualify as "regular interests" in the Upper-Tier REMIC,
each class of Lower-Tier Interests will qualify as "regular interests" in
the Lower-Tier REMIC, and the Class R and Class LR Certificates will be the
"residual interest" in the Upper-Tier REMIC and the Lower-Tier REMIC,
respectively, within the meaning of the Code; and
(xii) The offering and sale of the Offered Certificates are
exempt from the registration requirements of the 1933 Act. The Pooling
Agreement is not required to be qualified under the Trust Indenture Act of
1939, as amended.
(b) LTC represents and warrants to the Purchaser as of the
date hereof as follows:
(i) Immediately prior to the transfer of the Mortgage Loans
to the Company pursuant to the Transfer Agreement, LTC will own full legal
and equitable title to each Mortgage Loan free and clear of any lien,
mortgage, pledge, charge, encumbrance, adverse claim or other security
interest. The transfer of the Mortgage Loans to the Company pursuant to the
Transfer Agreement will be effective to convey to the Company all of LTC's
right, title and interest in and to the Mortgage Loans; and
(ii) The transactions contemplated by the Transfer Agreement
do not involve all or substantially all of the assets of LTC. The
transfer, assignment and conveyance of the Mortgage Loans and related
assets by LTC pursuant to the Transfer Agreement is not subject to bulk
transfer laws or any similar statutory provisions in effect in any
applicable jurisdiction.
(c) The Company represents and warrants to the Purchaser as
of the date hereof as follows:
(i) Immediately prior to the transfer of the Mortgage Loans
to the Trust Fund pursuant to the Pooling Agreement, the Company will own
full legal
6
<PAGE>
and equitable title to each Mortgage Loan free and clear of any lien,
mortgage, pledge, charge, encumbrance, adverse claim or other
security interest. The transfer of the Mortgage Loans to the Trust
Fund pursuant to the Pooling Agreement, either (A) will be effective
to transfer to the Trust Fund all of the Company's right, title and
interest in and to the Mortgage Loans or (B) will be effective to
create a valid and perfected first priority security interest (other
than any lien granted pursuant to Article II of the Transfer
Agreement) in the Mortgage Loans in favor of the Trustee for the
benefit of the Certificateholders;
(ii) When the Offered Certificates are issued and
delivered pursuant to the Pooling Agreement and this Agreement, such
Certificates will not be of the same class (within the meaning of Rule
144A under the 1933 Act) as securities which are listed on a national
securities exchange registered under Section 6 of the Securities
Exchange Act of 1934, as amended (the "1934 Act"), or quoted in a
U.S. automated inter-dealer quotation system;
(iii) The transfer, assignment and conveyance of the
Mortgage Loans and related assets by the Company pursuant to the
Pooling Agreement is not subject to bulk transfer laws or any similar
statutory provisions in effect in any applicable jurisdiction; and
(iv) All of the issued shares of capital stock of the
Company have been duly and validly authorized and issued and are fully
paid and non-assessable.
3. Representations and Warranties of the Purchaser. The
-----------------------------------------------
Purchaser represents to the Company as follows:
(a) The Purchaser agrees not to solicit any offer to buy
any Offered Certificates from, or offer to sell any Offered Certificates to,
any person in the United States unless (i) the Purchaser reasonably believes
that at such time such person and each other person for whom such person is
acting are "qualified institutional buyers" within the meaning of Rule 144A
7
<PAGE>
under the 1933 Act or pursuant to an exemption from registration provided by
Rule 144 under the 1933 Act, and (ii) the Purchaser reasonably believes that any
purchase of Offered Certificates by such person will be for such person's own
account or for one or more accounts as to each of which such person exercises
sole investment discretion and not with a view to any distribution, as such
term is interpreted under the 1933 Act; provided, however, that if the purchase
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is of a class of Certificates other than the Class A Certificates, then the
person shall not be a person that is an employee benefit plan subject to the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or
Section 4975 of the Code, or any person acting on behalf of such plan or using
the assets of any such plan in such transfer unless an exemption from the Plan
Assets Rule thereunder is applicable. The Purchaser understands that any such
employee benefit plan subject to the fiduciary responsibility provisions of
ERISA or Section 4975 of the Code, any governmental plan, as defined in Section
3(32) of ERISA, and any such person acting on behalf of or using the assets of
any such plan, are prohibited from acquiring the Class X-1, Class X-2, Class R,
Class LR, Class B, Class C, Class D, Class E, Class F or Class G Certificates,
and that disqualified organizations (as defined in the Code) are prohibited from
acquiring the Class R and Class LR Certificates unless such an exemption
applies.
(b) The Purchaser is an accredited investor within the
meaning of Rule 501(a) (1) under the 1933 Act.
(c) The Purchaser is not an employee benefit plan subject
to ERISA or a disqualified organization (as defined in the Code) prohibited from
acquiring the Class R and Class LR Certificates.
(d) The Purchaser has not offered or sold and will not
offer or sell the Offered Certificates by means of any general solicitation or
general advertising within the meaning of Rule 502(c) under the 1933 Act.
4. Purchase and Sale of the Certificates. In reliance upon the
-------------------------------------
representations and warranties contained in the Agreements and subject to the
terms and conditions set forth herein, the Company agrees to sell to the
Purchaser, and the Purchaser agrees to purchase
8
<PAGE>
from the Company, (i) $69,177,000 aggregate principal amount of 7.06% Class A
Certificates (the Class A Certificates"), (ii) $8,718,000 aggregate principal
amount of 7.44% Class B Certificates (the "Class B Certificates"), (iii)
$7,593,000 aggregate principal amount of 7.56% Class C Certificates (the "Class
C Certificates"), (iv) $5,062,000 aggregate principal amount of 7.97% Class D
Certificates (the "Class D Certificates"), (v) $1,000 aggregate principal amount
of 9.16% Class R Certificates (the "Class R Certificates") and (vi) $1,000
aggregate principal amount of 9.16% Class LR Certificates (the "Class LR
Certificates" and, together with the Class A, Class B, Class C, Class D and
Class R Certificates, the "Offered Certificates") at an aggregate price (the
"Purchase Price") equal to the amount described in Schedule I hereto.
----------
The Purchase Price shall be payable to the Company by wire transfer to
an account at a bank in New York City specified by the Company, in immediately
available funds, or by such other method as the Purchaser and the Company may
agree upon in writing.
5. The Closing; Delivery of the Certificates. The purchase and sale
-----------------------------------------
of the Offered Certificates pursuant hereto (the "Closing") shall be held on or
prior to March 29, 1996, or on such other date as shall be mutually acceptable
to the Company and the Purchaser (the "Closing Date"). The Closing shall take
place at the offices of Skadden, Arps, Slate, Meagher & Flom, 919 Third Avenue,
New York, New York 10022 at 10:00 a.m. (New York City time) on the Closing Date
or at such other time and place in New York City as the Purchaser and the
Company may agree upon in writing. Not later than 1:00 p.m. (New York City Time)
on the Business Day prior to the Closing Date the Company shall deliver through,
and place in the custody of, the facilities of The Depository Trust Company
("DTC), against payment of the Purchase Price, one global certificate for the
Class A Certificates in the denomination of $69,177,000, one global certificate
for the Class B Certificates in the denomination of $8,718,000, one global
certificate for the Class C Certificates in the denomination of $7,593,000 and
one global certificate for the Class D Certificates in the denomination of
$5,062,000, each registered in the name of Cede & Co., as nominee of DTC. At the
Closing, the Company will deliver to the Purchaser against payment of
9
<PAGE>
the Purchase Price, one Class R Certificate in the denomination of $1,000 and
one Class LR Certificate in the denomination of $1,000 in all cases registered
in the Purchaser's name or in the name of its nominee and delivered to the
Purchaser in definitive certificated form; provided, however, that if the
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Purchaser requests the Company in writing not less than forty-eight hours prior
to the Closing Date to issue to the Purchaser Offered Certificates in other
denominations (authorized pursuant to Section 5.1 of the Pooling Agreement)
that equal in the aggregate the denominations mentioned in this sentence for the
relevant Class, the Company will comply with such request. The Certificates will
be made available for checking and delivery at least twenty-four hours prior to
the Closing at the offices of Skadden, Arps, Slate, Meagher & Flom, 919 Third
Avenue, New York, New York 10022.
6. Covenants of the Company and LTC. Each of the Company and LTC
--------------------------------
jointly and severally, agree with the Purchaser:
(a) To prepare the Offering Circular in a form approved by the
Purchaser and to make no further amendment or any supplement to the Offering
Circular to which the Purchaser objects promptly after reasonable notice
thereof; and to advise the Purchaser promptly of any such amendment or
supplement after such Closing and to furnish the Purchaser with copies thereof;
(b) Promptly from time to time to take such action as the
Purchaser may reasonably request to qualify the Offered Certificates for
offering and sale under the securities laws of such jurisdictions in the United
States as the Purchaser may request and to comply with such laws so as to permit
the continuance of sales and dealings therein in such jurisdictions for as long
as may be necessary to complete the distribution of the Offered Certificates;
provided, that in connection therewith neither the Company nor LTC shall be
- --------
required to qualify as a foreign corporation or to file a general consent to
service of process in any jurisdiction;
(c) To furnish the Purchaser with such number of copies as the
Purchaser may reasonably request of the Offering Circular and each amendment or
supplement thereto and additional copies in such quantities as the
10
<PAGE>
Purchaser may from time to time reasonably request, and, if at any time prior to
the expiration of six months after the date hereof for such Offered
Certificates, any event shall have occurred as a result of which the Offering
Circular as then amended or supplemented would include an untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made
when such Offering Circular was delivered, not misleading, or, if for any other
reason it shall be necessary or desirable during such same period to amend or
supplement the Offering Circular, to notify the Purchaser and upon its request
to prepare and furnish without charge to the Purchaser as many copies as the
Purchaser may from time to time reasonably request of an amended Offering
Circular or a supplement to the Offering Circular which will correct such
statement or omission or effect such compliance;
(d) If at any time after the period referred to in Section
6(c) the Purchaser shall be required to deliver an Offering Circular in
connection with the offering or sale of Certificates, to promptly provide, at
the expense of the Purchaser, as many copies of an appropriately updated
Offering Circular as the Purchaser shall reasonably request;
(e) During the period beginning from the date hereof and
continuing until the expiration of six months after the Closing, not to offer,
sell, contract to sell or otherwise dispose of any securities which are
substantially similar to the Offered Certificates, without the prior written
consent of the Purchaser; and
(f) Not to offer, sell, contract to sell or otherwise
dispose of any of the Certificates, or any securities that are substantially
similar to the Certificates, in any manner that would cause the offering and
sale of the Offered Certificates pursuant to this Agreement to fail to qualify
for the exemption from registration afforded by Section 4(2) of the Act;
provided, however, that if the purchase is of a class of Certificates other than
- -------- -------
the Class A, Class X-1 or Class X-2 Certificates, then the person shall not be a
person that is an employee benefit plan subject to the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), or Section 4975 of the Code,
or any person
11
<PAGE>
acting on behalf of such plan or using the assets of any such plan.
7. Expenses. The Company and LTC jointly and severally covenant and
--------
agree with the Purchaser that, whether or not the transactions contemplated
hereby shall be consummated, it will pay, cause to be paid, or reimburse the
Purchaser upon demand for, all reasonable expenses (including, without
limitation, all reasonable out-of-pocket expenses which the Purchaser, in its
sole discretion, may incur) in connection with any of the Agreements, the
Certificates and the transactions contemplated thereby, including, without
limitation, (i) the fees, disbursements and expenses of the Company's counsel
and accountants in connection with the issuance of the Certificates, the
preparation and printing of the Offering Circular and amendments and supplements
thereto and the mailing and delivering of copies thereof to the Purchaser; (ii)
the cost of printing or producing this Agreement and any other Agreements, the
blue sky and legal investment memoranda and any other documents in connection
with the offering, purchase, sale and delivery of the Certificates; (iii) all
expenses in connection with the qualification of the Certificates for offering
and sale under state securities laws as provided in Section 6(b) hereof,
including the fees and disbursements of counsel for the Purchaser in connection
with such qualification and in connection with the Blue Sky and legal investment
surveys; (iv) any fees charged by securities rating services for rating the
Certificates; (v) the cost of preparing the Certificates, obtaining a private
placement number for the Certificates and delivering the Certificates to the
Purchaser; (vi) the fees and expenses of the Trustee and any agent of the
Trustee and the fees and disbursements of counsel for the Trustee in connection
with any of the Agreements and the Certificates; (vii) the legal fees, expenses
and disbursements of counsel to the Purchaser; and (viii) all other costs and
expenses incident to the performance by either of the Company or LTC of its
obligations hereunder which are not otherwise specifically provided for in this
Section.
8. Conditions of the Purchaser's Obligation. The obligation of the
----------------------------------------
Purchaser set forth in Section 4 to purchase the Offered Certificates on the
Closing Date shall be subject to the accuracy of the representations and
warranties as of the date hereof and as of the Clos-
12
<PAGE>
ing Date that are made on the part of either or both of the Company and LTC
and contained in this Agreement, the accuracy of the statements made by
either or both of the Company or LTC in any certificates furnished pursuant
to the provisions hereof and the following additional conditions:
(i) Each of the Company and LTC shall have complied with
all the agreements and satisfied all the obligations on its part to be
performed or satisfied at or prior to the Closing Date under any of
the Agreements;
(ii) The Purchaser shall have completed a review of such
documentation relating to the Mortgage Loans as the Purchaser may deem
appropriate and, on the basis of such review, nothing shall have come
to the attention of the Purchaser that causes it to conclude that
there is any breach of or inaccuracy in the representations and
warranties of either the Company or LTC set forth in this Agreement;
(iii) On or prior to the date hereof and on or prior to the
Closing Date, the Purchaser shall have received a letter, dated as of
each such date, of Coopers and Lybrand, certified public accountants,
to which the Purchaser has previously agreed and otherwise in form and
substance satisfactory to the Purchaser and to counsel to the
Purchaser;
(iv) The Purchaser shall have received an option from Weil,
Gotshal & Manges, LLP, counsel to the Company and LTC, dated the
Closing Date in form and substance satisfactory to the Purchaser to
the effect that:
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Delaware and has all requisite corporate power and authority to
own, lease and operate its properties and to carry on its
business as now being conducted. The Company is duly qualified
to transact business and is in good standing as a foreign
corporation in each jurisdiction where the character of its
activities requires such qualifica-
13
<PAGE>
tion, except where the failure of the Company to be so qualified would not
have a material adverse effect on the business, operations or financial
condition of the Company;
(b) The Company has all requisite corporate power and
authority to execute and deliver the Agreements and the Assignments and to
perform its obligations thereunder. The execution, delivery and performance
of the Agreements and the Assignments by the Company and the consummation
by the Company of the transactions contemplated thereby have been duly
authorized by all necessary corporate action on the part of the Company.
The Agreements and the Assignments have been duly and validly executed and
delivered by the Company and the Agreements (assuming the due
authorization, execution and delivery thereof by LTC, the Trustee and the
Master Servicer) constitute the legal, valid and binding obligations of the
Company and LTC, to the extent a party thereto, enforceable against them in
accordance with their respective terms, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and similar
laws affecting creditors' rights and remedies generally, and subject, as to
enforceability, to general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing (regardless of
whether enforcement is sought in a proceeding at law or in equity) and
except that (A) rights to indemnification thereunder may be limited by
federal or state securities laws or public policy relating thereto and (B)
certain remedial provisions of the Agreements are or may be unenforceable
in whole or in part under the laws of the State of New York, but the
inclusion of such provisions does not affect the validity of the
Agreements, and the Agreements contain adequate provisions for the
practical realization of the rights and benefits afforded thereby. No
opinion shall be expressed in this paragraph as to the perfection or
priority of any liens granted pursuant to the Pooling Agreement;
14
<PAGE>
(c) Neither the issuance or sale of the Certificates nor the
execution and delivery of the Agreements, the consummation of the
transactions contemplated thereby and compliance by the Company with
any of the provisions thereof will conflict with, constitute a default
under or violate (i) any of the terms, conditions or provisions of
the certificate of incorporation or by-laws of the Company, (ii) any
of the terms, conditions or provisions of any material agreement or
other instrument to which the Company is a party or by which it is
bound of which such counsel is aware, (iii) any New York, Delaware
corporate or federal law or regulation (other than federal and state
securities or Blue Sky laws, as to which such counsel may express no
opinion except as set forth in paragraph (g) below), or (iv) any
judgement, writ, injunction, decree, order or ruling of any court or
governmental authority binding on the Company of which such counsel is
aware;
(d) No consent, approval, waiver, license or authorization or
other action by or filing with any New York, Delaware corporate or
federal governmental authority is required in connection with the
execution and delivery by the Company of the Agreements, the issuance
of the Certificates of the offer, sale or delivery of the Certificates
in the manner and under the circumstances contemplated by this
Agreement or the consummation by the Company of the transactions
contemplated thereby, except for federal and state securities or Blue
Sky laws, as to which such counsel may express no opinion except as
set forth in paragraph (g) below;
(e) To such counsel's knowledge, there is no litigation,
proceeding or governmental investigation pending or overtly threatened
against the Company that relates to any of the transactions
contemplated by any of the Agreements;
(f) Each Certificate, when executed and authenticated by the
Trustee in accordance with the Pooling Agreement and delivered and
paid
15
<PAGE>
for by the Purchaser in accordance with this Agreement, will be
validly issued and outstanding and entitled to the benefits of
the Pooling Agreement, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and
similar laws affecting creditors' rights and remedies generally,
and subject, as to enforceability, to general principles of
equity, including principles of commercial reasonableness, good
faith and fair dealing (regardless of whether enforcement is
sought in a proceeding at law or in equity) and except that (A)
rights to indemnification thereunder may be limited by federal or
state securities laws or public policy relating thereto and (B)
certain remedial provisions of the Pooling Agreement are or may
be unenforceable in whole or in part under the laws of the State
of New York, but the inclusion of such provisions does not affect
the validity of the Pooling Agreement, and the Pooling Agreement
contains adequate provisions for the practical realization of the
rights and benefits afforded thereby. No opinion shall be
expressed in this paragraph as to the perfection or priority of
any liens granted pursuant to the Pooling Agreement;
(g) Assuming the accuracy of the representations and
warranties of the Company in Section 2 of this Agreement and of
the Purchaser in Section 3 of this Agreement, the offer,
issuance, sale and delivery of the Class A, Class B, Class C,
Class D, Class R and Class LR Certificates to the Purchaser and
the reoffer, resale and delivery of the Class A, Class B, Class
C, Class D, Class R and Class LR Certificates by the Purchaser in
compliance with the applicable provisions of this Agreement and
the Pooling Agreement does not require registration under the
1933 Act. The Pooling Agreement is not required to be qualified
under the Trust Indenture Act of 1939, as amended;
(h) The statements contained in the Offering Circular under
the headings "Certain Federal Income Tax Consequences," "ERISA
Con-
16
<PAGE>
siderations" and "Certain Legal Aspects of the Mortgage Loans," to the
extent that they constitute matters of law or legal conclusions with
respect thereto, are a fair and accurate summary of the matters
addressed therein under existing law and the assumptions stated
therein;
(i) The Trust Fund is not required to be registered as an
"investment company" under the Investment Company Act of 1940, as
amended (the "1940 Act");
(j) The Pooling Agreement provides and the Company and the
Trustee state therein that they intend, that the transfer of the
Mortgage Loans to the Trustee constitutes a sale. If, however, a court
were to find that such transfer did not constitute a sale then
assuming (i) delivery and continued possession in New York by the
Custodian of the Notes, endorsed in the name of the Trustee or in
blank, and (ii) that the Custodian was without notice of any adverse
claim (as such term is used in Section 8-302 of the New York Uniform
Commercial Code (the ("UCC")) with respect to the Notes, the execution
and delivery of the Pooling Agreement are effective to create a valid
and duly perfected lien on and security interest in the Notes, as
security for the obligations of the Company to the Trustee pursuant to
the Pooling Agreement, which is subject to no prior lien or security
interest. The opinion set forth in this paragraph is subject to
standard exceptions; and
(k) Such counsel have participated in conferences with
officers and other representatives of the Company, Stern, Neubauer,
Greenwald & Pauly, LTC's California real estate counsel, the Purchaser
and the Purchaser's counsel in connection with the preparation of the
Offering Circular and although such counsel have not independently
verified and are not passing upon and assume no responsibility for the
accuracy, completeness or fairness of the statements contained in the
Offering Circular no facts have come to such counsel's attention
17
<PAGE>
which lead such counsel to believe that the Offering
Circular, at any time from the date thereof through the date
of such opinion, contained any untrue statement of a
material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements
contained therein, in light of the circumstances under which
they were made, not misleading (it being understood that
such counsel may express no view with respect to the
financial, statistical and accounting data included in or
appended as exhibits to the Offering Circular).
(v) The Purchaser shall have received an opinion of
counsel from Weil, Gotshal & Manges, LLP counsel to the Company
and LTC, dated the Closing Date, in form and substance
satisfactory to the Purchaser to the effect that:
(a) the Trust Fund will qualify for treatment for
Federal income tax purposes as two separate real estate
mortgage investment conduits, as defined in Section 860D of
the Code (the "Upper-Tier REMIC" and the "Lower-Tier
REMIC");
(b) the Class A Certificates, Class B Certificates,
Class C Certificates, Class D Certificates, Class E
Certificates, Class F Certificates, Class G Certificates,
Class X-1 Certificates and Class X-2 Certificates will
constitute "regular interests" in the Upper-Tier REMIC and
the Class R Certificates will constitute the single class of
"residual interests" in the Upper-Tier REMIC within the
meaning of the Code; and
(c) The Class AL Interest, the Class BL Interest, the
Class CL Interest; the Class DL Interest, the Class EL
Interest, the Class FL Interest, Class GL Interest, and the
Class X-1L Interest will constitute "regular interests" in
the Lower-Tier REMIC and the Class LR Ceritifcates will
constitute the single class of "residual interests" in the
Lower-Tier REMIC within the meaning of the Code.
18
<PAGE>
(vi) The Purchaser shall have received an opinion from Ballard
Spahr Andrews & Ingersoll, Maryland local counsel to LTC, dated the Closing
Date in form and substance satisfactory to the Purchaser to the effect
that:
(a) LTC has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Maryland;
(b) LTC possesses the corporate power and authority to own its
current properties and to conduct its business as now being conducted
and as described in the Offering Circular and to execute and deliver,
and perform its obligations under, the Agreements. LTC has all
requisite corporate power and authority to convey to the Company,
the Mortgage Loans (as defined in the Transfer Agreement) as
contemplated by the Transfer Agreement;
(c) All necessary corporate action has been taken to
authorize the execution and delivery by LTC of the Agreements and the
performance by LTC of its obligations thereunder; and the Agreements,
have been duly executed and delivered on behalf of LTC;
(d) The execution and delivery by LTC of the Agreements and
compliance by LTC with the provisions thereof: (i) does not, and
will not, conflict with or violate any of the terms and provisions of
LTC's Charter or By-Laws or the Maryland General Corporation Law (the
"MGCL"); (ii) will not conflict with, result in a breach or violation
of or the acceleration of indebtedness under or constitute a default
under the terms of any indenture or other agreement or instrument known
to us and to which LTC is a party or by which it is bound; and (iii)
does not, and will not, require any consent, approval, authorization
or, registration or filing with, or notice to, any governmental or
regulatory authority, agency, department, commission, board, bureau,
body or instrumentality of the State of Maryland pursuant to any
provision of the MGCL; and
19
<PAGE>
(e) Based solely upon an officer's certificate and to such
counsel's knowledge, there is no action, suit or proceeding
against, or governmental investigation of LTC, pending or
threatened before any Maryland court or Maryland administrative
agency which (i) seeks to prevent the performance by LTC of its
obligations under the Agreements, (ii) might materially and
adversely affect the performance by LTC of its obligations
under, or the validity of, the Agreements or (iii) might
materially and adversely affect the rights of LTC with regard to
any Mortgaged Property except as disclosed in the applicable
title insurance policies and related documentation delivered at
Closing.
(vii) the Purchaser shall have received an opinion from
Latham & Watkins, California Counsel to LTC dated Closing Date in form
and substance satisfactory to the Purchaser to the effect that:
(a) LTC is qualified to do business in the State of
California;
(b) The execution and delivery of the Transfer Agreement
and Pooling Agreement by LTC and the performance of the
obligations of LTC under the Transfer Agreement and Pooling
Agreement do not (i) violate any California statute or regulation
applicable to LTC, (ii) require any consents, approvals,
authorizations, registrations, declarations or filing by LTC
under and California statute or regulation applicable to LTC
(except for any filings with respect to any UCC financing
statement for the transfer of the Mortgage Loans, as to which we
express no opinion), (iii) result in the creation or imposition
of any lien, charge or encumbrance upon the Mortgage Loans, the
Certificates or any property or assets of LTC, except such liens,
charges or encumbrances, if any, that may arise as a result of
the Transfer Agreement and Pooling Agreement, or (iv) violate any
judgement, writ, injunction, decree, order or ruling of any court
or governmental authority binding on LTC of which we are aware.
No opinion is ex-
20
<PAGE>
pressed in this paragraph (b) as to the appli-
cation of any antifraud laws or securities or
Blue Sky laws (not including the California
Real Property Securities Dealers law);
(c) The transfer, assignment and convey-
ance of the Mortgage Loans by LTC to the Compa-
ny pursuant to the Transfer Agreement are not
subject to the Bulk Sales Law of Division 6 of
the California Commercial Code;
(d) A federal or state court sitting in
California would honor the parties' choice of
law of New York as the law applicable to the
Transfer Agreement and Pooling Agreement sub-
ject to the qualification that a court in Cali-
fornia might not apply the laws of New York
respecting (a) the procedural rules governing
or affecting any action in California to en-
force the Transfer Agreement and Pooling Agree-
ment or (b) any provision or practice condoned
or permitted by New York law which is deter-
mined to be against a strong public policy of
the State of California;
(e) the Lower-Tier REMIC and the Upper-
Tier REMIC will each qualify as a REMIC for
purposes of the California Revenue and Taxation
Code;
(f) As a result of the qualification of
the Lower-Tier REMIC and the Upper-Tier REMIC
as REMICs for purposes of the California Taxa-
tion Code, the Lower-Tier REMIC and the Upper-
Tier REMIC will not be subject to California
income or franchise taxes, except as provided
below. The Lower-Tier REMIC and the Upper-Tier
REMIC may be subject to California income or
franchise tax in certain circumstances where
Federal income tax is also imposed, such as in
the case of net income from foreclosure proper-
ty. In addition, the Lower-Tier REMIC and the
Upper-Tier REMIC may be subject to the minimum
California franchise tax under section 23153 of
the California Revenue and Taxation Code. The
minimum California franchise tax is currently
$800.00 for each income year; and
21
<PAGE>
(g) We are unaware of any other California taxes that might be
imposed on the Lower-Tier REMIC and the Upper-Tier REMIC, except for
(i) local taxes, such as real property taxes and documentary transfer
taxes, that might apply to the acquisition, holding or disposition of
real property as the result of foreclosure of one more of the Mortgage
Loans and (ii) local business license taxes that might be imposed by
various jurisdictions within California.
(viii) The Purchaser shall have received an opinion of counsel
to the Trustee, dated the Closing Date and in form and substance
satisfactory to the Purchaser;
(ix) The Purchaser shall have received an opinion of its
counsel, dated the Closing Date and in form and substance satisfactory to
the Purchaser;
(x) The Purchaser shall have received an opinion of counsel
to GMAC Commercial Mortgage Corporation, as Master Servicer, dated the
Closing Date and in form and substance satisfactory to the Purchaser;
(xi) The Purchaser shall have received all opinions required by
each of Standard & Poor's Ratings Group and Fitch Investors Service, Inc.
in order to obtain the required ratings on the Offered Certificates;
(xii) The Company shall have furnished or caused to be furnished
to the Purchaser on the Closing Date certificates of officers of the
Company satisfactory to the Purchaser as to the accuracy of the
representations and warranties of the Company herein at and as of the
Closing Date, as to the performance by the Company of all of its
obligations hereunder to be performed at or prior to such Closing Date and
as to such matters as the Purchaser may reasonably request;
(xiii) LTC shall have furnished or caused to be furnished to the
Purchaser at the Closing Date certificates of officers of LTC satisfactory
to the
22
<PAGE>
Purchaser as to the accuracy of the representations and warranties of LTC
herein at and as such Closing Date, as to the performance by LTC of all of
its obligations hereunder to be performed at or prior to such Closing Date
as to such matters as the Purchaser may reasonably request;
(xiv) The Class A Certificates shall have been rated not less
than "AAA," by each of Standard & Poor's Ratings Services and Fitch
Investors Service, L.P.;
(xv) All other opinions, certificates and other documents
incident to, and all proceedings in connection with the transactions
contemplated by any of the Agreements shall be reasonably satisfactory in
form and substance to the Purchaser and its counsel. The Purchaser and its
counsel shall have received copies of all documents and other information
as they may reasonably request, in form and substance satisfactory to the
Purchaser and its counsel, with respect to such transactions and the taking
of all proceedings in connection therewith;
(xvi) On or after the date hereof there shall not have occurred
any of the following: (i) a suspension or material limitation in trading in
securities generally on the New York Stock Exchange; (ii) a suspension or
material limitation in trading in LTC securities on the New York Stock
Exchange; (iii) a general moratorium on commercial banking activities in
New York declared by either Federal or New York State authorities; or (iv)
the outbreak or escalation of hostilities involving the United States or
the declaration by the United States of a national emergency or war if the
effect of any such event specified in this clause (iv) in the Purchser's
judgement makes it impracticable or inadvisable to proceed with the
offering or the delivery of, on the terms and in the manner contemplated by
this Agreement and the Offering Circular; and
(xvii) Subsequent to the date hereof, there shall not have been
any change, or any development involving a prospective change, in or
affecting the business or properties of the Company or LTC
23
<PAGE>
singly or in the aggregate, which the Purchaser concludes in its judgment,
materially impairs the investment quality of the Offered Certificates so as
to make it impractical or inadvisable to market the Offered Certificates as
contemplated by the Offering Circular.
If any of the conditions specified in this Section 8 shall not have
been fulfilled when and as provided by this Agreement, or if any of the opinions
and certificates mentioned above or elsewhere in this Agreement shall not be
satisfactory in form and substance to the Purchaser and counsel to the
Purchaser, this Agreement and all obligations of the Purchaser hereunder may be
cancelled at, or at any time prior to, the Closing Date by the Purchaser. Notice
of such cancellation shall be given to the Company in writing, or by telephone
confirmed in writing. Such cancellation shall be without prejudice to any
rights, claims or remedies that the Purchaser may have pursuant to this
Agreement or otherwise against any of the Company or LTC or any other person by
reason of such cancellation.
9. Indemnification and Contribution. (a) The Company and LTC will,
--------------------------------
jointly and severally, indemnify and hold harmless the Purchaser, the partners,
officers, employees and agents of the Purchaser and each person who controls the
Purchaser within the meaning of either the 1933 Act or the 1934 Act or
otherwise, against any losses, claims, damages or liabilities, joint or several,
to which they or any of them may become subject, under the 1933 Act, the 1934
Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon an untrue statement
alleged untrue statement of a material fact contained in the Offering Circular,
any amendment or supplement thereto, or any information provided to any holder
or prospective purchaser of Offered Certificates pursuant to Section 6(d)
herein, or any ABS Term Sheets, Structured Term Sheets or Collateral Term Sheets
(as such terms are defined in the no action letter dated February 17,1995,
issued by the Securities and Exchange Commission to the Public Securities
Association), or arise out of or are based upon the omission or alleged omission
to state therein a material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, and will
reimburse
24
<PAGE>
each such indemnified party for any legal or other expenses reasonably incurred
by it in connection with investigating or defending any such action or claim as
such expenses are incurred; provided, however, that the Company and LTC will not
-------- -------
be liable in any such case to the extent that any loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in the Offering Circular or any
such amendment or supplement in reliance upon and in conformity with the
information hereto furnished to the Company and LTC by the Purchaser expressly
for use therein.
(b) The Purchaser agrees to indemnify and hold harmless each
of the Company and LTC and their respective directors, officers, employees and
agents and each person who controls the Company or LTC within the meaning of
either the 1993 Act or the 1934 Act or otherwise, against any losses, claims,
damages or liabilities, joint or several, to which they or any of them may
become subject, under the 1933 Act, the 1934 Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in the Offering Circular or any amendment or supplement
thereto, or any ABS Term Sheets, Structured Term Sheets or Collateral Term
Sheets (as such terms are defined in the no action letter dated February 17,
1995, issued by the Securities and Exchange Commission to the Public Securities
Association), or arise out of or are based upon the omission or alleged omission
to state therein a material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, in each
case to the extent, but only to the extent, that such statement or alleged
untrue statement or omission or alleged omission was made in the Offering
Circular or any such amendment or supplement in reliance upon and in conformity
with the information hereto furnished to the Company or LTC expressly for use
therein, and will reimburse each such indemnified party for any legal or other
expenses reasonably incurred by it in connection with investigating or defending
any such action or claim as such expenses are incurred. This indemnity agreement
shall be in addition to any liability which the Purchaser may otherwise have
25
<PAGE>
(c) Promptly after receipt by an indemnified party under
subsection (a) or (b) above of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made against an
indemnifying party under such subsection, notify the indemnifying party or
parties in writing of the commencement thereof, but the omission so to notify
the indemnifying party or parties shall not relieve the indemnifying party or
parties form any liability which it or they may have to any indemnified party
otherwise than under such subsection. In case any such action shall be brought
against any indemnified party, it shall notify the indemnifying party or parties
of the commencement thereof, and the indemnifying party or parties shall be
entitled to participate therein and, to the extent that it or they shall wish,
jointly with any other indemnifying party similarly notified, to assume the
defense thereof, with counsel satisfactory to such indemnified party (who shall
not, except with the consent of the indemnified party, be counsel to the
indemnifying party or parties), and, after notice from the indemnifying party or
parties to such indemnified party of its or their election so to assume the
defense thereof, the indemnifying party or parties shall not be liable to such
indemnified party under such subsection for any legal expense of other counsel
or any other expenses, in each case subsequently incurred by such indemnified
party, in connection with the defense thereof other than reasonable costs or
investigation. No indemnifying party shall, without the written consent of the
indemnified party, effect the settlement or compromise of, or consent to the
entry of any judgment with respect to, any pending or threatened action or claim
in respect of which indemnification or contribution may be sought hereunder
(whether or not the indemnified party is an actual or potential party to such
action or claim) unless such settlement, compromise or judgment (i) includes an
unconditional release of the indemnified party from all liability arising out of
such action or claim and (ii) does not include a statement as to or an admission
of fault, culpability or a failure to act, by or on behalf of any indemnified
party.
(d) If the indemnification provided for in this Section 9 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above in respect of any losses, claims, damages or
26
<PAGE>
liabilities (or actions in respect thereof), then the Company and LTC on the one
hand and the Purchaser on the other shall contribute to the amount paid or
payable as a result of such losses, claims, damages or liabilities (or actions
in respect thereof) in such proportion as is appropriate to reflect the relative
benefits received by the Company and LTC on the one hand and the Purchaser on
the other from the offering of the Offered Certificates. If, however, the
allocation provided by the immediately preceding sentence is not permitted by
applicable law or if the indemnified party failed to give the notice required
under subsection (c) above, then each indemnifying party shall contribute to
such amount paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Company and LTC on the one hand and the Purchaser on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities (or actions in respect thereof) as well as any
other relevant equitable considerations. The relative benefits received by the
Company and LTC on the one hand and the Purchaser on the other shall be deemed
to be in the same proportion as the total net proceeds from the offering (before
deducting expenses) received by the Company bear to the total purchase discounts
and commissions received by the Purchaser. The relative fault shall be
determined by reference to, among other things, the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statements or omissions. The amount paid or payable by a party as a result of
the losses, claims, damages or liabilities (or actions in respect thereof)
referred to above shall be deemed to include any legal or other fees or expenses
incurred by such party in connection with investigating or defending any such
claim. The Company and LTC and the Purchaser agree that it would not be just and
equitable if contribution were determined by pro rata allocation or any other
--- ----
method of allocation which does not take account of the equitable considerations
referred to above. Notwithstanding the provisions of this subsection (d), no
person guilty of fraudulent misrepresentation (within the meaning of Section 11
(f) of the 1933 Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.
27
<PAGE>
(e) The obligations of the Company under this Section 9 shall be in
addition to any liability which the Company may otherwise have and shall extend,
upon the same terms and conditions, to each person, if any, who controls the
Purchaser within the meaning of the 1933 Act; and the obligations of the
Purchaser under this Section 9 shall be in addition to any liability which the
Purchaser may otherwise have and shall extend, upon the same terms and
conditions, to each officer and director of the Company and to each person, if
any, who controls the Company within the meaning of the 1933 Act.
10. Survival. The respective indemnities, agreements,
--------
representations, warranties and other statements of the Company, LTC and the
Purchaser, as set forth in this Agreement or made by or on behalf of them,
respectively, pursuant to this Agreement, shall remain in full force and effect,
regardless of any investigation (or any statement as to the results thereof)
made by or on behalf of the Purchaser or any controlling person of the
Purchaser, the Company or LTC or any officer, director, employee, agent or
controlling person of the Company or LTC and shall survive delivery of and
payment for the offered Certificates.
11 Notices. All notices and other communications hereunder shall be
-------
in writing and shall be sent by mail, telex or facsimile transmission,
addressed (a) if to the Purchaser, to Goldman, Sachs & Co., 85 Broad Street, New
York, New York 10004, Attention: Steven Stuart, facsimile; (212) 357-5505, (b)
if to the Company, to LTC REMIC Corporation, 300 Esplanade Avenue, Suite 1260,
Oxnard, CA 93030, Attention: Andre Dimitriadis; and (c) if to the Originator or
LTC, to LTC Properties, Inc., 300 Esplanade Drive, Suite 1860, Oxnard, CA 93030
Attention: James Pieczynski, facsimile: (805) 981-8663. Any notice so given
shall take effect upon receipt thereof.
12. Miscellaneous. (A) THIS AGREEMENT SHALL BE CONSTRUED AND
-------------
ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK.
(b) The Headings in this Agreement are for purposes of reference only
and shall not limit or define the meaning hereof.
28
<PAGE>
(c) This Agreement shall be binding upon, and inure solely to the
benefit of, the Purchaser, LTC and the Company and, to the extent provided in
Sections 9 and 10 hereof, the partners, officers, employees and agents of the
Purchaser and the directors, officers, employees and agents of each of the
Company and LTC and each person who controls the Company and LTC or the
Purchaser, and their respective heirs, executors, administrators, successors and
assigns, and no other person shall acquire or have any right under or by virtue
of this Agreement. Except with respect to Section 6(e), no purchaser of any of
the Offered Certificates from the Purchaser shall be deemed a successor or
assign by reason merely of such purchase. No right duty under this Agreement may
be assigned or delegated by the Company or LTC without the written consent of
the Purchaser and any such assignment or delegation made without such consent
shall be null and void for all purposes.
(d) Except as otherwise provided in the final paragraph of Section 8,
this Agreement may be changed, waived, discharged or terminated only by an
instrument in writing signed by the party against which enforcement of such
change, waiver, discharge or termination is sought.
(e) This Agreement may be executed in any number of counterparts,
each of which counterparts shall be an original, but all of which shall
constitute one instrument.
29
<PAGE>
If the foregoing is in accordance with your understanding, please sign
and return to us two counterparts hereof, and upon the acceptance hereof by
the Purchaser, this letter and such acceptance hereof shall constitute a binding
agreement between the Purchaser, the Company and LTC.
Very truly yours,
LTC REMIC CORPORATION
By: /s/ Chris Ishikawa
------------------------------
Name: Chris Ishikawa
Title: Treasurer
LTC PROPERTIES, INC.
By: /s/ James J. Pieczynski
------------------------------
Name: James J. Pieczynski
Title: SUP & CFO
Accepted as of the date hereof:
GOLDMAN, SACHS & CO.
By /s/ Goldman Sachs & Co.
----------------------------
Name: Todd Eagle
Title: Associate
<PAGE>
If the foregoing is in accordance with your understanding, please sign
and return to us two counterparts hereof, and upon the acceptance hereof by the
Purchaser, this letter and such acceptance hereof shall constitute a binding
agreement between the Purchaser, the Company and LTC.
Very truly yours,
LTC REMIC CORPORATION
By: _________________________
Name:
Title:
LTC PROPERTIES, INC.
By: _________________________
Name:
Title:
Accepted as of the date hereof:
GOLDMAN, SACHS & CO.
By /s/ Goldman Sach & Co
----------------------------
Name: Todd Eagle
Title: Associate
<PAGE>
SCHEDULE I TO PURCHASE AGREEMENT
Title of Offered Certificates:
LTC Commercial Mortgage Pass-Through
Certificates, Series 1996-1
Aggregate principal amount:
$69,177,000 Class A Certificates
$ 8,718,000 Class B Certificates
$ 7,593,000 Class C Certificates
$ 5,062,000 Class D Certificates
$ 1,000 Class R Certificates
$ 1,000 Class LR Certificates
<TABLE>
<CAPTION>
Price to Investor* Purchase Price to Purchaser*
------------------ ----------------------------
As a % of As a % of
The Principal The Principal
Amt. of Offered Amt. of Offered
Certificates Certificates
Class Price Price % Price Price %
<S> <C> <C> <C> <C>
A $69,151,750 99.9635% $68,459,980 98.9635%
B $ 8,716,222 99.9796% $ 8,629,042 98.9796%
C $ 7,591,846 99.9848% $ 7,515,916 98.9848%
D $ 5,060,497 99.9703% $ 5,009,877 98.9703%
R** $ (300,000) -- $ (300,000) --
LR** $ (25,000) -- $ (25,000) --
------------ ------------ ------------ ------------
$90,195,314 99.6061% $89,289,814 99.6061%
</TABLE>
* Does not include accrued interest which will be paid from March 1, 1996 up
to the Closing Date.
** LTC will pay to the Purchaser an amount equal to the above stated price for
the Class R and LR Certificates.
Specified funds for payment of purchase price:
Immediately available funds
Pooling and Servicing Agreement:
Pooling and Servicing Agreement, to be dated as of March 1, 1996, among
LTC, as depositor, GMAC Commercial Mortgage Corporation, as Master Servicer
LaSalle National Bank, as Trustee, ABN AMRO Bank NV, as fiscal agent, LTC,
as special servicer and, as to
I-1
<PAGE>
certain provisions described therein, LTC, as originator.
Final Scheduled Distribution Date: April 15, 2028
Interest Rate:
7.06% Class A Certificates
7.44% Class B Certificates
7.56% Class C Certificates
7.97% Class D Certificates
9.16% Class R Certificates
9.16% Class LR Certificates
Interest Payment Dates:
The 15th day of each month, or if such day is not a Business Day, on the
next succeeding Business Day.
Time of Delivery: March 29, 1996
Closing Location: Skadden, Arps, Slate, Meagher & Flom 919 Third Avenue
New York, New York, 10022
Name and address of Purchaser:
Goldman, Sachs & Co.
85 Broad Street
New York, New York, 10004
Supplemental Documents, if any, to be delivered with the Final Offering
Circular:
None.
I-2
<PAGE>
[LETTERHEAD OF GOLDMAN, SACHS & CO.]
$90,552,000
LTC COMMERCIAL MORTGAGE PASS-THROUGH
CERTIFICATES, SERIES 1996-1
Class A,B,C,D,R,LR Certificates
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that Goldman, Sachs & Co. does hereby
make, constitute and appoint TODD EAGLE of 85 Broad Street, New York, New York
------------
its true and lawful attorney, to execute and deliver in its name and on its
behalf, whether Goldman, Sachs & Co. is acting individually or as representative
of others,
Purchase Agreement and other related closing documents
giving and granting unto said attorney-in-fact full power and authority to act
in the premises as fully and to all intents and purposes as Goldman, Sachs & Co.
might or could do if personally present by one of its partners, hereby ratifying
and confirming all that said attorney-in-fact shall lawfully do or cause to be
done by virtue hereof.
We hereby acknowledge and declare that the said TODD EAGLE as
------------
attorney-in-fact for said firm, constituted by these presents, is hereby
directed and authorized to sign such documents and any other instruments or
papers necessary or proper in connection with the exercise of the power
conferred on him/her by these presents with the signature only of Goldman, Sachs
& Co. and that the authorized signature of the name of our said firm, by our
said attorney-in-fact, is in the form and chirography as follows:
/s/ Goldman Sachs & Co
-----------------------
IN WITNESS WHEREOF, the undersigned has duly subscribed these presents this
21st day of March, 1996
/s/ Goldman Sachs
-----------------------
(Goldman, Sachs & Co.)
By: [SIGNATURE ILLEGIBLE]
----------------------
General Partner
<PAGE>
EXHIBIT 10.31
EXHIBIT A-5
[FORM OF CLASS E CERTIFICATE]
A-5-1
<PAGE>
PRINCIPAL PAYMENTS ON THIS CERTIFICATE ARE PAYABLE IN INSTALLMENTS AS SET FORTH
HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS CERTIFICATE AT
ANY TIME MAY BE LESS THAN THE INITIAL CERTIFICATE PRINCIPAL AMOUNT SET FORTH
BELOW.
THE RIGHTS OF HOLDERS OF THE CLASS E CERTIFICATES TO RECEIVE DISTRIBUTIONS OF
PRINCIPAL AND INTEREST IN RESPECT OF THE MORTGAGE LOANS WILL BE SUBORDINATED TO
THE RIGHTS OF HOLDERS OF THE CLASS A, CLASS B, CLASS C, CLASS D, CLASS R AND
CLASS LR CERTIFICATES TO RECEIVE DISTRIBUTIONS OF INTEREST AND PRINCIPAL.
THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY
STATE OF THE UNITED STATES ("BLUE SKY LAWS"), AND SUCH CERTIFICATE MAY NOT BE
OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A) BY AN INITIAL
INVESTOR (1) TO A PERSON THAT THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A PROMULGATED UNDER THE
SECURITIES ACT IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A OR (2)
PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE
SECURITIES ACT (IF AVAILABLE) AND DELIVERY OF AN OPINION OF COUNSEL, IF REQUIRED
BY THE TRUSTEE OR THE CERTIFICATE REGISTRAR AND (B) BY SUBSEQUENT INVESTORS, AS
SET FORTH IN (A) ABOVE AND, IN ADDITION, TO INSTITUTIONAL ACCREDITED INVESTORS
AS DEFINED IN RULE 501(A)(1), (2), (3) OR (7) OF REGULATION D PROMULGATED UNDER
THE SECURITIES ACT IN A TRANSACTION EXEMPT FROM REGISTRATION REQUIREMENTS UNDER
THE SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES
LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER JURISDICTION.
NOTWITHSTANDING THE ABOVE, THIS CERTIFICATE MAY NOT BE PURCHASED BY OR PLEDGED,
SOLD OR OTHERWISE TRANSFERRED TO ANY PERSON WHICH IS AN EMPLOYEE BENEFIT PLAN
SUBJECT TO THE FIDUCIARY RESPONSIBILITY PROVISIONS OF THE EMPLOYEE RETIREMENT
INCOME SECURITY ACT OF 1974, AS AMENDED, OR SECTION 4975 OF THE INTERNAL REVENUE
CODE OF 1986, AS AMENDED, OR ANY PERSON ACTING ON BEHALF OF ANY SUCH PLAN OR
USING THE ASSETS OF SUCH PLAN TO ACQUIRE THIS CERTIFICATE UNLESS THE DEPOSITOR,
THE CERTIFICATE REGISTRAR AND THE TRUSTEE ARE PROVIDED WITH AN OPINION OF
COUNSEL WHICH ESTABLISHES TO THEIR SATISFACTION THAT THE ACQUISITION AND
SUBSEQUENT HOLDING OF SUCH OFFERED CERTIFICATES WOULD NOT CONSTITUTE A NON-
EXEMPT PROHIBITED TRANSACTION UNDER ERISA OR THE CODE.
THIS SECURITY WAS ISSUED ON MARCH 29, 1996 AT A PRICE EQUAL TO 87.195200% OF ITS
ORIGINAL PRINCIPAL AMOUNT. BASED ON THAT ISSUE PRICE, THIS SECURITY WAS ISSUED
WITH ORIGINAL ISSUE DISCOUNT ("OID") FOR FEDERAL INCOME TAX PURPOSES IN AN
AMOUNT EQUAL TO
A-5-2
<PAGE>
12.8048% OF ITS ORIGINAL PRINCIPAL AMOUNT. THE MONTHLY YIELD TO MATURITY OF THIS
SECURITY EXPRESSED ON AN ANNUAL BASIS IS APPROXIMATELY 11.5092% AND THE AMOUNT
OF OID ALLOCABLE TO THE SHORT FIRST ACCRUAL PERIOD (MARCH 29, 1996 THROUGH APRIL
15, 1996) AS A PERCENTAGE OF THE ORIGINAL PRINCIPAL AMOUNT OF THE SECURITY IS
APPROXIMATELY 3.118106%. THE STATED INTEREST RATE ON THIS SECURITY IS 9.16% PER
ANNUM. IN COMPUTING THE MONTHLY YIELD TO MATURITY AND THE OID AMOUNTS SPECIFIED
ABOVE, THE FOLLOWING ASSUMPTIONS HAVE BEEN USED:_) A METHOD EMBODYING AN
ECONOMIC ACCRUAL OF INCOME,_) A CONSTANT ANNUAL PREPAYMENT RATE OF 3% ON THE
MORTGAGE COLLATERAL UNDERLYING THE CERTIFICATES, AND_) 30 DAYS PER MONTH/360
DAYS PER YEAR ACCOUNTING CONVENTION. THE ACTUAL YIELD TO MATURITY AND OID
AMOUNTS MAY DIFFER FROM THE PROJECTED AMOUNTS.
<PAGE>
LTC COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES,
SERIES 1996-1, CLASS E
evidencing a nonassessable, fully paid
percentage interest in a trust fund
which includes a pool of commercial mortgage loans
Pass-Through Rate: 9.16% No. E-1
Initial Certificate Principal
Amount: $11,811,000 First Distribution Date:
April 15, 1996
Original Class E Aggregate Final Scheduled
Certificate Principal Amount: Distribution Date:
$11,811,000 April 15, 2028
Cut-Off Date: March 1, 1996
A-5-4
<PAGE>
This certifies that LTC REMIC Corporation is the registered owner of
the Percentage Interest evidenced by this Certificate (obtained by dividing the
initial Certificate Principal Amount of this Certificate by the Aggregate
Certificate Principal Amount of all Certificates of such Class, each as noted
on the face hereof) in the Trust Fund, including the distributions to be made
with respect to the Class E Certificates. The Trust Fund, described more fully
below, consists primarily of Mortgage Loans held in trust by the Trustee and
serviced by the Master Servicer and the Special Servicer, as applicable. The
Trust Fund was created, and the Mortgage Loans are to be serviced, pursuant to
the Agreement (as defined below). The Holder of this Certificate, by virtue of
the acceptance hereof, assents to the terms, provisions and conditions of the
Agreement and is bound thereby. Also issued under the Agreement are the Class
A, Class B, Class C, Class D, Class F, Class G, Class X-1, Class X-2, Class R
and Class LR Certificates (together with the Class E Certificates, the
"Certificates") (the Holders of Certificates issued under the Agreement are
collectively referred to herein as "Certificateholders").
This Certificate is issued pursuant to, and in accordance with, the
terms of a Pooling and Servicing Agreement dated as of March 1, 1996 (the
"Agreement") among LTC REMIC Corporation, as Depositor, LaSalle National Bank,
as Trustee, ABN AMRO Bank N.V., as Fiscal Agent, GMAC Commercial Mortgage
Corporation, as Master Servicer and LTC Properties, Inc., as Originator and
Special Servicer. In addition, LTC will be subservicer for the Mortgage Loans
pursuant to a subservicing agreement to be dated as of March 1, 1996 with GMAC
Commercial Mortgage Corporation (in such capacity the "Subservicer"). To the
extent not defined herein, capitalized terms used herein shall have the
meanings assigned thereto in the Agreement.
THIS CERTIFICATE DOES NOT REPRESENT AN INTEREST IN OR A DEPOSIT OR
OBLIGATION OF THE DEPOSITOR, THE ORIGINATOR, THE MASTER SERVICER, THE SPECIAL
SERVICER, THE SUBSERVICER, THE TRUSTEE OR THE FISCAL AGENT, OR ANY OF THEIR
AFFILIATES. THIS CERTIFICATE WILL NOT BE A SAVINGS ACCOUNT OR DEPOSIT AND IS
NOT INSURED OR GUARANTEED BY ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY OR BY
ANY PRIVATE ENTITY.
A-5-5
<PAGE>
This Certificate represents a "regular interest" in a "real estate
mortgage investment conduit," as those terms are defined, respectively, in
Sections 860G(a)(1) and 860D of the Internal Revenue Code of 1986, as amended
(the "Code"). Each Holder of this Certificate, by acceptance hereof, agrees to
treat, and to take no action inconsistent with the treatment of, this
Certificate in accordance with the preceding sentence for purposes of federal
income taxes, state and local income and franchise taxes and other taxes imposed
on or measured by income.
The Trustee makes no representation or warranty as to any of the
statements contained herein or the validity or sufficiency of the Certificates
or the Mortgage Loans and has caused to be executed and authenticated this
Certificate in its limited capacity as Trustee under the Agreement.
Pursuant to the terms of the Agreement, the Paying Agent will
distribute, on the fifteenth day of each month or if any such fifteenth day is
not a Business Day, on the next succeeding Business Day (each such date, a
"Distribution Date"), commencing in April 1996, to the Person in whose name this
Certificate is registered as of the related Record Date, an amount equal to such
Person's pro rata share (based on the Percentage Interest represented by this
Certificate) of that portion of the aggregate amount of principal and interest
then distributable, if any, allocable to the Class E Certificates for such
Distribution Date, all as more fully described in the Agreement. The amount of
interest which accrues on this Certificate during an Interest Accrual Period
will be subject to reduction with respect to any Net Prepayment Interest
Shortfall allocated to the Class E Certificates, as described in the Agreement.
Interest will accrue on the outstanding Certificate Principal Amount
of this Certificate at the Pass-Through Rate specified on the face of this
Certificate. Interest will be calculated on the basis of a 360-day year of
twelve 30-day months. Interest accrued on this Certificate during an Interest
Accrual Period, plus the Outstanding Class Interest Shortfall with respect to
this Certificate, if any, will be payable on the related
A-5-6
<PAGE>
Distribution Date to the extent provided in the Agreement. The "Interest
Accrual Period" relating to any Distribution Date is the one-month period from
and including the first day of the month preceding the month in which such
Distribution Date occurs to and including the last day of such month, commencing
in March 1996.
With the exception of the final distribution in respect of this
Certificate, distributions on this Certificate will be made by the Paying Agent
without the presentation or surrender of this Certificate or the making of any
notation hereon, by check mailed by first-class mail to the address of the
Holder set forth in the Certificate Register, or, provided the Holder holds
Certificates the aggregate initial Certificate Principal Amount of which exceeds
$5,000,000 and has provided the Paying Agent with wire instructions in writing
at least five Business Days before the related Record Date, by wire transfer of
immediately available funds to the account of such Holder at a bank or other
entity located in the United States and having appropriate facilities therefor.
The final distribution on this Certificate will be made in like manner after
notice by the Trustee of the pendency of such distribution and only upon
presentation and surrender of this Certificate at the Corporate Trust Office or
such other location specified in the notice to Holders of such final
distribution.
This Certificate is one of a duly authorized issue of Certificates
designated as LTC Commercial Mortgage Pass-Through Certificates, Series 1996-1
and represents a fractional undivided interest in a Trust Fund. As more fully
described in and subject to the limitations of the Agreement, the Trust Fund
will consist primarily of (i) such Mortgage Loans as from time to time are
subject to the Agreement, together with the Mortgage Files relating thereto;
(ii) all payments due on or collections in respect of the Mortgage Loans due
after the Cut-Off Date; (iii) any REO Property; (iv) all revenues received in
respect of any REO Property; (v) the rights of the Trustee, Master Servicer and
Special Servicer under the insurance policies with respect to the Mortgage Loans
required to be maintained pursuant to this Agreement and any proceeds thereof;
(vi) any Assignments of Leases, Rents and Profits; (vii) any guaranties given as
additional security for any Mortgage Loans; (viii) all
A-5-7
<PAGE>
assets deposited in the Collection Account, the Distribution Account, the Upper-
Tier Distribution Account and the REO Account including reinvestment income; and
(ix) the proceeds of any of the foregoing.
This Certificate is limited in right of payment to, among other
things, certain collections and recoveries in respect of the Mortgage Loans, as
more specifically set forth herein and in the Agreement.
As provided in the Agreement, withdrawals from the Collection Account
may be made by the Master Servicer from time to time for purposes other than
distributions to Certificateholders, such purposes including, among other
things, reimbursement or payment to the Master Servicer, the Special Servicer,
the Subservicer, the Trustee or the Fiscal Agent of certain expenses incurred or
certain fees earned by the Master Servicer, the Special Servicer or the
Trustee, including, without limitation, certain Nonrecoverable Advances.
This Certificate does not purport to summarize the Agreement, and
reference is made to the Agreement for the interests, rights, benefits,
obligations and duties evidenced hereby, and the limitations thereon, and the
rights, duties and immunities of the Trustee. This Certificate is issued under
and is subject to the terms, provisions and conditions of the Agreement, to
which Agreement, as amended from time to time, the holder of this Certificate by
virtue of the acceptance hereof assents and by which the holder of this
Certificate is bound.
As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Certificate Register only upon surrender of this Certificate for registration
of transfer at the office of the Certificate Registrar or at the office of its
agent in the City of New York. The Trustee or the Certificate Registrar may
require that this Certificate be duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Trustee and the Certificate
Registrar duly executed by, the Holder hereof or such Holder's attorney duly
authorized in writing. Thereupon, one or more new Certificates of a like
aggregate Percentage
A-5-8
<PAGE>
Interest in the same Class of authorized denominations will be executed and
authenticated by the Trustee and delivered by the Certificate Registrar to the
designated transferee or transferees.
Prior to due presentation of this Certificate for registration of
transfer, the Depositor, the Master Servicer, the Special Servicer, the
Subservicer, the Trustee, the Certificate Registrar and any agent of any of them
may treat the Person in whose name this Certificate is registered as the owner
hereof for all purposes, and none of the Depositor, Master Servicer, the Special
Servicer, the Subservicer, the Trustee, the Certificate Registrar or any agent
of any of them shall be affected by notice to the contrary.
As provided in the Agreement and subject to certain limitations herein
set forth, this Certificate is exchangeable for other Certificates of the same
Class of authorized denominations of like aggregate Percentage Interests, as
requested by the Holder surrendering the same.
No service charge will be made to a Certificateholder for any such
registration of transfer or exchange, but the Certificate Registrar may require
payment of a sum sufficient to cover any tax or other governmental charge
payable in connection therewith.
The Agreement permits, with certain exceptions therein provided, the
amendment of the Agreement and the modification of the rights of the
Certificateholders under the Agreement at any time by the Depositor, the Master
Servicer, the Special Servicer and the Trustee with the consent of the Holders
of Class A, Class B, Class C, Class D, Class E, Class F, Class G, Class R, Class
LR, Class X-1 and Class X-2 Certificates representing not less than 66-2/3% of
the Voting Rights allocated to each such Class of the Certificates affected by
the amendment. Any such consent by the Holder of this Certificate shall be
conclusive and binding on such Holder and upon all future Holders of this
Certificate and of any Certificates issued upon the transfer hereof or in
exchange herefor or in lieu hereof whether or not notation of such consent is
made upon this Certificate. The Agreement also permits the amendment thereof in
certain
A-5-9
<PAGE>
circumstances without the consent of the Holders of any of the Certificates,
provided that such amendment would not adversely affect in any material respect
the interests of any Certificateholder.
Each of the Master Servicer, any Holder of a Class LR Certificate and
the Special Servicer, may at its option, upon not less than 30 days' prior
notice, given to the Trustee any time on or after the Early Termination Date
specifying the Anticipated Termination Date, purchase on the Early Termination
Date all, but not less than all, of the Mortgage Loans then included in the
Trust Fund, all property acquired in respect of any Mortgage Loans and any
assets conveyed to the Trust Fund, at a purchase price, payable in cash, equal
to not less than the greater of:
(i) the sum of (without duplication of any amount in clauses (A)
through (E) below):
(A) 100% of the unpaid principal balance of each Mortgage Loan
included in the Trust Fund as of the Early Termination Determination
Date; and
(B) all unpaid interest accrued on such principal balance of
each such Mortgage Loan at the related Mortgage Interest Rate to such
Early Termination Determination Date; and
(C) the fair market value of all other property included in the
Trust Fund as of such Early Termination Determination Date; and
(D) all unreimbursed P&I Advances, unreimbursed Servicing
Advances and interest thereon at the Advance Rate; and
(E) all unreimbursed Servicing Fees, Special Servicing Fees and
Trustee Fees; and
(ii) the aggregate fair market value (determined in accordance with
Section 9.01(d)(ii)(B) of the Agreement) of the Mortgage Loans, and all
other property acquired in respect of any Mortgage Loan in the Trust Fund,
as of the date of purchase.
A-5-10
<PAGE>
The obligations created by the Agreement shall terminate upon the
earliest to occur of (i) the repurchase of all Mortgage Loans by the Master
Servicer, any Holder of a Class LR Certificate or the Special Servicer as
described above; (ii) the later of (a) the distribution to Certificateholders
of final payment with respect to the last outstanding Mortgage Loan or (b) the
disposition of all property acquired upon foreclosure or deed in lieu of
foreclosure with respect to the last outstanding Mortgage Loan and the
remittance to the Certificateholders of all funds due under the Agreement; or
(iii) the sale of assets of the Trust Fund after the Certificate Principal
Amounts of all the Certificates have been reduced to zero under circumstances
set forth in the Agreement. In no event, however, will the trust created by the
Agreement continue beyond the expiration of 21 years from the death of the last
surviving descendant of a certain individual named in the Agreement living on
the date thereof.
Unless the Certificate of Authentication on this Certificate has been
executed by or on behalf of the Trustee, by manual signature, this Certificate
shall not be entitled to any benefit under the Agreement or be valid for any
purpose.
A-5-11
<PAGE>
IN WITNESS WHEREOF, the Authenticating Agent has caused this
Certificate to be duly executed.
LASALLE NATIONAL BANK
as Authenticating Agent
By:____________________________________
Authorized Signatory
Certificate of Authentication
This is one of the Class E Certificates referred to in the Agreement.
Dated: March 29, 1996
LASALLE NATIONAL BANK
as Authenticating Agent
By:____________________________________
Authorized Officer
A-5-12
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned ("Assignor(s)") hereby sell(s),
assign(s) and transfer(s) unto _________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
_____________________ (please print or typewrite name(s) and address(es),
including postal zip code(s) of assignee(s)) ("Assignee(s)") the entire
Percentage Interest represented by the Class E Certificate and hereby authorize
(i) the registration of transfer of such interest to Assignee(s) on the
Certificate Register of the Trust Fund.
I (we) further direct the Certificate Registrar to issue a new Class E
Certificate of the entire Percentage Interest represented by the within Class E
Certificates to the above-named Assignee(s) and to deliver such Class E
Certificate to the following address:
________________________________________________________________________________
________________________________________________________________________________
Date:_________________ ____________________________
Signature by or on behalf
of Assignor(s)
____________________________
Taxpayer Identification Number
A-5-13
<PAGE>
DISTRIBUTION INSTRUCTIONS
The Assignee(s) should include the following for purposes of
distribution:
Address of the Assignee(s) for the purpose of receiving notices and
distributions:__________________________________________________________________
________________________________________________________________________________
Distributions, if be made by wire transfer in immediately available funds to
________________________________________________________________________________
for the account of _____________________________________________________________
account number _________________________________________________________________
This information is provided by ________________________________________________
the Assignee(s) named above, or ________________________________________________
as its (their) agent.
By________________________________________________
__________________________________________________
[Please print or type name(s))
__________________________________________________
Title
__________________________________________________
Taxpayer Identification Number
A-5-14
<PAGE>
EXHIBIT A-6
[FORM OF CLASS F CERTIFICATE]
A-6-1
<PAGE>
PRINCIPAL PAYMENTS ON THIS CERTIFICATE ARE PAYABLE IN INSTALLMENTS AS SET FORTH
HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS CERTIFICATE AT
ANY TIME MAY BE LESS THAN THE INITIAL CERTIFICATE PRINCIPAL AMOUNT SET FORTH
BELOW.
THE RIGHTS OF HOLDERS OF THE CLASS F CERTIFICATES TO RECEIVE DISTRIBUTIONS OF
PRINCIPAL AND INTEREST IN RESPECT OF THE MORTGAGE LOANS WILL BE SUBORDINATED TO
THE RIGHTS OF HOLDERS OF THE CLASS A, CLASS B, CLASS C, CLASS D, CLASS E, CLASS
R AND CLASS LR CERTIFICATES TO RECEIVE DISTRIBUTIONS OF INTEREST AND PRINCIPAL.
THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY
STATE OF THE UNITED STATES ("BLUE SKY LAWS"), AND SUCH CERTIFICATE MAY NOT BE
OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A) BY AN INITIAL
INVESTOR (1) TO A PERSON THAT THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A PROMULGATED UNDER THE
SECURITIES ACT IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A OR (2)
PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE
SECURITIES ACT (IF AVAILABLE) AND DELIVERY OF AN OPINION OF COUNSEL, IF REQUIRED
BY THE TRUSTEE OR THE CERTIFICATE REGISTRAR AND (B) BY SUBSEQUENT INVESTORS, AS
SET FORTH IN (A) ABOVE AND, IN ADDITION, TO INSTITUTIONAL ACCREDITED INVESTORS
AS DEFINED IN RULE 501(A)(1), (2), (3) OR (7) OF REGULATION D PROMULGATED UNDER
THE SECURITIES ACT IN A TRANSACTION EXEMPT FROM REGISTRATION REQUIREMENTS UNDER
THE SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES
LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER JURISDICTION.
NOTWITHSTANDING THE ABOVE, THIS CERTIFICATE MAY NOT BE PURCHASED BY OR PLEDGED,
SOLD OR OTHERWISE TRANSFERRED TO ANY PERSON WHICH IS AN EMPLOYEE BENEFIT PLAN
SUBJECT TO THE FIDUCIARY RESPONSIBILITY PROVISIONS OF THE EMPLOYEE RETIREMENT
INCOME SECURITY ACT OF 1974, AS AMENDED, OR SECTION 4975 OF THE INTERNAL REVENUE
CODE OF 1986, AS AMENDED, OR ANY PERSON ACTING ON BEHALF OF ANY SUCH PLAN OR
USING THE ASSETS OF SUCH PLAN TO ACQUIRE THIS CERTIFICATE UNLESS THE DEPOSITOR,
THE CERTIFICATE REGISTRAR AND THE TRUSTEE ARE PROVIDED WITH AN OPINION OF
COUNSEL WHICH ESTABLISHES TO THEIR SATISFACTION THAT THE ACQUISITION AND
SUBSEQUENT HOLDING OF SUCH OFFERED CERTIFICATES WOULD NOT CONSTITUTE A NON-
EXEMPT PROHIBITED TRANSACTION UNDER ERISA OR THE CODE.
THIS SECURITY WAS ISSUED ON MARCH 29, 1996 AT A PRICE EQUAL TO 79.83333% OF ITS
ORIGINAL PRINCIPAL AMOUNT. BASED ON THAT ISSUE PRICE, THIS SECURITY WAS ISSUED
WITH ORIGINAL ISSUE DISCOUNT ("OID") FOR FEDERAL INCOME TAX PURPOSES IN AN
AMOUNT EQUAL TO 20.1667% OF ITS ORIGINAL PRINCIPAL AMOUNT. THE MONTHLY YIELD TO
A-6-2
<PAGE>
MATURITY OF THIS SECURITY EXPRESSED ON AN ANNUAL BASIS IS APPROXIMATELY
13.0092% AND THE AMOUNT OF OID ALLOCABLE TO THE SHORT FIRST ACCRUAL PERIOD
(MARCH 29, 1996 THROUGH APRIL 15, 1996) AS A PERCENTAGE OF THE ORIGINAL
PRINCIPAL AMOUNT OF THE SECURITY IS APPROXIMATELY 4.534045%. THE STATED INTEREST
RATE ON THIS SECURITY IS 9.16% PER ANNUM. IN COMPUTING THE MONTHLY YIELD TO
MATURITY AND THE OID AMOUNTS SPECIFIED ABOVE, THE FOLLOWING ASSUMPTIONS HAVE
BEEN USED: A METHOD EMBODYING AN ECONOMIC ACCRUAL OF INCOME, A CONSTANT ANNUAL
PREPAYMENT RATE OF 3% ON THE MORTGAGE COLLATERAL UNDERLYING THE CERTIFICATES,
AND A 30 DAYS PER MONTH/360 DAYS PER YEAR ACCOUNTING CONVENTION. THE ACTUAL
YIELD TO MATURITY AND OID AMOUNTS MAY DIFFER FROM THE PROJECTED AMOUNTS.
A-6-3
<PAGE>
LTC COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES,
SERIES 1996-1, CLASS F
evidencing a nonassessable, fully paid
percentage interest in a trust fund
which includes a pool of commercial mortgage loans
Pass-Through Rate: 9.16% No. F-1
Initial Certificate Principal
Amount: $4,500,000 First Distribution Date:
April 15, 1996
Original Class F Aggregate Final Scheduled
Certificate Principal Amount: Distribution Date:
$4,500,000 April 15, 2028
Cut-Off Date: March 1, 1996
A-6-4
<PAGE>
This certifies that LTC REMIC Corporation is the registered owner of
the Percentage Interest evidenced by this Certificate (obtained by dividing the
initial Certificate Principal Amount of this Certificate by the Aggregate
Certificate Principal Amount of all Certificates of such Class, each as noted
on the face hereof) in the Trust Fund, including the distributions to be made
with respect to the Class F Certificates. The Trust Fund, described more fully
below, consists primarily of Mortgage Loans held in trust by the Trustee and
serviced by the Master Servicer and the Special Servicer, as applicable. The
Trust Fund was created, and the Mortgage Loans are to be serviced, pursuant to
the Agreement (as defined below). The Holder of this Certificate, by virtue of
the acceptance hereof, assents to the terms, provisions and conditions of the
Agreement and is bound thereby. Also issued under the Agreement are the Class
A, Class B, Class C, Class D, Class E, Class G, Class X-1, Class X-2, Class R
and Class LR Certificates (together with the Class F Certificates, the
"Certificates") (the Holders of Certificates issued under the Agreement are
collectively referred to herein as "Certificateholders").
This Certificate is issued pursuant to, and in accordance with, the
terms of a Pooling and Servicing Agreement dated as of March 1, 1996 (the
"Agreement") among LTC REMIC Corporation, as Depositor, LaSalle National Bank,
as Trustee, ABN AMRO Bank, N.V., as Fiscal Agent, GMAC Commercial Mortgage
Corporation, as Master Servicer and LTC Properties, Inc., as Originator and
Special Servicer. In addition, LTC will be subservicer for the Mortgage Loans
pursuant to a subservicing agreement to be dated as of March 1, 1996 with GMAC
Commercial Mortgage Corporation (in such capacity the "Subservicer"). To the
extent not defined herein, capitalized terms used herein shall have the
meanings as signed thereto in the Agreement.
THIS CERTIFICATE DOES NOT REPRESENT AN INTEREST IN OR A DEPOSIT OR
OBLIGATION OF THE DEPOSITOR, THE ORIGINATOR, THE MASTER SERVICER, THE SPECIAL
SERVICER, THE SUBSERVICER, THE TRUSTEE OR THE FISCAL AGENT, OR ANY OF THEIR
AFFILIATES. THIS CERTIFICATE WILL NOT BE A SAVINGS ACCOUNT OR DEPOSIT AND IS
NOT INSURED OR GUARANTEED BY ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY OR BY
ANY PRIVATE ENTITY.
A-6-5
<PAGE>
This Certificate represents a "regular interest" in a "real estate
mortgage investment conduit," as those terms are defined, respectively, in
Sections 860G(a)(1) and 860D of the Internal Revenue Code of 1986, as amended
(the "Code"). Each Holder of this Certificate, by acceptance hereof, agrees to
treat, and to take no action inconsistent with the treatment of, this
Certificate in accordance with the preceding sentence for purposes of federal
income taxes, state and local income and franchise taxes and other taxes imposed
on or measured by income.
The Trustee makes no representation or warranty as to any of the
statements contained herein or the validity or sufficiency of the Certificates
or the Mortgage Loans and has caused to be executed and authenticated this
Certificate in its limited capacity as Trustee under the Agreement.
Pursuant to the terms of the Agreement, the Paying Agent will
distribute, on the fifteenth day of each month or if any such fifteenth day is
not a Business Day, on the next succeeding Business Day (each such date, a
"Distribution Date"), commencing in April 1996, to the Person in whose name this
Certificate is registered as of the related Record Date, an amount equal to such
Person's pro rata share (based on the Percentage Interest represented by this
Certificate) of that portion of the aggregate amount of principal and interest
then distributable, if any, allocable to the Class F Certificates for such
Distribution Date, all as more fully described in the Agreement. The amount of
interest which accrues on this Certificate during an Interest Accrual Period
will be subject to reduction with respect to any Net Prepayment Interest
Shortfall allocated to the Class F Certificates, as described in the Agreement.
Interest will accrue on the outstanding Certificate Principal Amount
of this Certificate at the Pass-Through Rate specified on the face of this
Certificate. Interest will be calculated on the basis of a 360-day year of
twelve 30-day months. Interest accrued on this Certificate during an Interest
Accrual Period, plus the Outstanding Class Interest Shortfall with respect to
this Certificate, if any, will be payable on the related
A-6-6
<PAGE>
Distribution Date to the extent provided in the Agreement. The "Interest
Accrual Period" relating to any Distribution Date is the one-month period from
and including the first day of the month preceding the month in which such
Distribution Date occurs to and including the last day of such month, commencing
in March 1996.
With the exception of the final distribution in respect of this
Certificate, distributions on this Certificate will be made by the Paying Agent
without the presentation or surrender of this Certificate or the making of any
notation hereon, by check mailed by first-class mail to the address of the
Holder set forth in the Certificate Register, or, provided the Holder holds
Certificates the aggregate initial Certificate Principal Amount of which exceeds
$5,000,000 and has provided the Paying Agent with wire instructions in writing
at least five Business Days before the related Record Date, by wire transfer of
immediately available funds to the account of such Holder at a bank or other
entity located in the United States and having appropriate facilities therefor.
The final distribution on this Certificate will be made in like manner after
notice by the Trustee of the pendency of such distribution and only upon
presentation and surrender of this Certificate at the Corporate Trust Office or
such other location specified in the notice to Holders of such final
distribution.
This Certificate is one of a duly authorized issue of Certificates
designated as LTC Commercial Mortgage Pass-Through Certificates, Series 1996-1
and represents a fractional undivided interest in a Trust Fund. As more fully
described in and subject to the limitations of the Agreement, the Trust Fund
will consist primarily of (i) such Mortgage Loans as from time to time are
subject to the Agreement, together with the Mortgage Files relating thereto;
(ii) all payments due on or collections in respect of the Mortgage Loans due
after the Cut-Off Date; (iii) any REO Property; (iv) all revenues received in
respect of any REO Property; (v) the rights of the Trustee, Master Servicer and
Special Servicer under the insurance policies with respect to the Mortgage Loans
required to be maintained pursuant to this Agreement and any proceeds thereof;
(vi) any Assignments of Leases, Rents and Profits; (vii) any guaranties given as
additional security for any Mortgage Loans; (viii) all
A-6-7
<PAGE>
assets deposited in the Collection Account, the Distribution Account, the Upper-
Tier Distribution Account and the REO Account including reinvestment income; and
(ix) the proceeds of any of the foregoing.
This Certificate is limited in right of payment to, among other
things, certain collections and recoveries in respect of the Mortgage Loans, as
more specifically set forth herein and in the Agreement.
As provided in the Agreement, withdrawals from the Collection Account
may be made by the Master Servicer from time to time for purposes other than
distributions to Certificateholders, such purposes including, among other
things, reimbursement or payment to the Master Servicer, the Special Servicer,
the Subservicer, the Trustee or the Fiscal Agent of certain expenses incurred or
certain fees earned by the Master Servicer, the Special Servicer or the
Trustee, including, without limitation, certain Nonrecoverable Advances.
This Certificate does not purport to summarize the Agreement, and
reference is made to the Agreement for the interests, rights, benefits,
obligations and duties evidenced hereby, and the limitations thereon, and the
rights, duties and immunities of the Trustee. This Certificate is issued under
and is subject to the terms, provisions and conditions of the Agreement, to
which Agreement, as amended from time to time, the holder of this Certificate by
virtue of the acceptance hereof assents and by which the holder of this
Certificate is bound.
As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Certificate Register only upon surrender of this Certificate for registration
of transfer at the office of the Certificate Registrar or at the office of its
agent in the City of New York. The Trustee or the Certificate Registrar may
require that this Certificate be duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Trustee and the Certificate
Registrar duly executed by, the Holder hereof or such Holder's attorney duly
authorized in writing. Thereupon, one or more new Certificates of a like
aggregate Percentage
A-6-8
<PAGE>
Interest in the same Class of authorized denominations will be executed and
authenticated by the Trustee and delivered by the Certificate Registrar to the
designated transferee or transferees.
Prior to due presentation of this Certificate for registration of
transfer, the Depositor, the Master Servicer, the Special Servicer, the
Subservicer, the Trustee, the Certificate Registrar and any agent of any of them
may treat the Person in whose name this Certificate is registered as the owner
hereof for all purposes, and none of the Depositor, Master Servicer, the Special
Servicer, the Subservicer, the Trustee, the Certificate Registrar or any agent
of any of them shall be affected by notice to the contrary.
As provided in the Agreement and subject to certain limitations herein
set forth, this Certificate is exchangeable for other Certificates of the same
Class of authorized denominations of like aggregate Percentage Interests, as
requested by the Holder surrendering the same.
No service charge will be made to a Certificateholder for any such
registration of transfer or exchange, but the Certificate Registrar may require
payment of a sum sufficient to cover any tax or other governmental charge
payable in connection therewith.
The Agreement permits, with certain exceptions therein provided, the
amendment of the Agreement and the modification of the rights of the
Certificateholders under the Agreement at any time by the Depositor, the Master
Servicer, the Special Servicer and the Trustee with the consent of the Holders
of Class A, Class B, Class C, Class D, Class E, Class F, Class G, Class R, Class
LR, Class X-1 and Class X-2 Certificates representing not less than 66-2/3% of
the Voting Rights allocated to each such Class of the Certificates affected by
the amendment. Any such consent by the Holder of this Certificate shall be
conclusive and binding on such Holder and upon all future Holders of this
Certificate and of any Certificates issued upon the transfer hereof or in
exchange herefor or in lieu hereof whether or not notation of such consent is
made upon this Certificate. The Agreement also permits the amendment thereof in
certain
A-6-9
<PAGE>
circumstances without the consent of the Holders of any of the Certificates,
provided that such amendment would not adversely affect in any material respect
the interests of any Certificateholder.
Each of the Master Servicer, any Holder of a Class LR Certificate and
the Special Servicer, may at its option, upon not less than 30 days' prior
notice, given to the Trustee any time on or after the Early Termination Date
specifying the Anticipated Termination Date, purchase on the Early Termination
Date all, but not less than all, of the Mortgage Loans then included in the
Trust Fund, all property acquired in respect of any Mortgage Loans and any
assets conveyed to the Trust Fund, at a purchase price, payable in cash, equal
to not less than the greater of:
(i) the sum of (without duplication of any amount in clauses (A)
through (E) below):
(A) 100% of the unpaid principal balance of each Mortgage Loan
included in the Trust Fund as of the Early Termination Determination
Date; and
(B) all unpaid interest accrued on such principal balance of
each such Mortgage Loan at the related Mortgage Interest Rate to such
Early Termination Determination Date; and
(C) the fair market value of all other property included in the
Trust Fund as of such Early Termination Determination Date; and
(D) all unreimbursed P&I Advances, unreimbursed Servicing
Advances and interest thereon at the Advance Rate; and
(E) all unreimbursed Servicing Fees, Special Servicing Fees and
Trustee Fees; and
(ii) the aggregate fair market value (determined in accordance with
Section 9.01(d)(ii)(B) of the Agreement) of the Mortgage Loans, and all
other property acquired in respect of any Mortgage Loan in the Trust Fund,
as of the date of purchase.
A-6-10
<PAGE>
The obligations created by the Agreement shall terminate upon the
earliest to occur of (i) the repurchase of all Mortgage Loans by the Master
Servicer, any Holder of a Class LR Certificate or the Special Servicer as
described above; (ii) the later of (a) the distribution to Certificateholders
of final payment with respect to the last outstanding Mortgage Loan or (b) the
disposition of all property acquired upon foreclosure or deed in lieu of
foreclosure with respect to the last outstanding Mortgage Loan and the
remittance to the Certificateholders of all funds due under the Agreement; or
(iii) the sale of assets of the Trust Fund after the Certificate Principal
Amounts of all the Certificates have been reduced to zero under circumstances
set forth in the Agreement. In no event, however, will the trust created by the
Agreement continue beyond the expiration of 21 years from the death of the last
surviving descendant of a certain individual named in the Agreement living on
the date thereof.
Unless the Certificate of Authentication on this Certificate has been
executed by or on behalf of the Trustee, by manual signature, this Certificate
shall not be entitled to any benefit under the Agreement or be valid for any
purpose.
A-6-11
<PAGE>
IN WITNESS WHEREOF, the Authenticating Agent has caused this
Certificate to be duly executed.
LASALLE NATIONAL BANK
as Authenticating Agent
By:__________________________________
Authorized Signatory
Certificate of Authentication
This is one of the Class F Certificates referred to in the Agreement.
Dated: March 29, 1996
LASALLE NATIONAL BANK
as Authenticating Agent
By:__________________________________
Authorized Officer
A-6-12
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned ("Assignor(s)") hereby sell(s),
assign(s) and transfer(s) unto _________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
_____________________ (please print or typewrite name(s) and address(es),
including postal zip code(s) of assignee(s)) ("Assignee(s)") the entire
Percentage Interest represented by the Class F Certificate and hereby authorize
(i) the registration of transfer of such interest to Assignee(s) on the
Certificate Register of the Trust Fund.
I (we) further direct the Certificate Registrar to issue a new Class F
Certificate of the entire Percentage Interest represented by the within Class F
Certificates to the above-named Assignee(s) and to deliver such Class F
Certificate to the following address:
________________________________________________________________________________
________________________________________________________________________________
Date:________________ ____________________________
Signature by or on behalf
of Assignor(s)
____________________________
Taxpayer Identification Number
A-6-13
<PAGE>
DISTRIBUTION INSTRUCTIONS
The Assignee(s) should include the following for purposes of
distribution:
Address of the Assignee(s) for the purpose of receiving notices and
distributions:__________________________________________________________________
________________________________________________________________________________
Distributions, if be made by wire transfer in immediately available funds to
________________________________________________________________________________
for the account of _____________________________________________________________
account number _________________________________________________________________
This information is provided by ________________________________________________
the Assignee(s) named above, or ________________________________________________
as its (their) agent.
By___________________________________________
_____________________________________________
(Please print or type name(s))
_____________________________________________
Title
_____________________________________________
Taxpayer Identification Number
A-6-14
<PAGE>
EXHIBIT A-7
[FORM OF CLASS G CERTIFICATE]
A-7-1
<PAGE>
PRINCIPAL PAYMENTS ON THIS CERTIFICATE ARE PAYABLE IN INSTALLMENTS AS SET FORTH
HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS CERTIFICATE AT
ANY TIME MAY BE LESS THAN THE INITIAL CERTIFICATE PRINCIPAL AMOUNT SET FORTH
BELOW.
THE RIGHTS OF HOLDERS OF THE CLASS G CERTIFICATES TO RECEIVE DISTRIBUTIONS OF
PRINCIPAL AND INTEREST IN RESPECT OF THE MORTGAGE LOANS WILL BE SUBORDINATED TO
THE RIGHTS OF HOLDERS OF THE CLASS A, CLASS B, CLASS C, CLASS D, CLASS E, CLASS
F, CLASS R AND CLASS LR CERTIFICATES TO RECEIVE DISTRIBUTIONS OF INTEREST AND
PRINCIPAL.
THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY
STATE OF THE UNITED STATES ("BLUE SKY LAWS"), AND SUCH CERTIFICATE MAY NOT BE
OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A) BY AN INITIAL
INVESTOR (1) TO A PERSON THAT THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A PROMULGATED UNDER THE
SECURITIES ACT IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A OR (2)
PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE
SECURITIES ACT (IF AVAILABLE) AND DELIVERY OF AN OPINION OF COUNSEL, IF REQUIRED
BY THE TRUSTEE OR THE CERTIFICATE REGISTRAR AND (B) BY SUBSEQUENT INVESTORS, AS
SET FORTH IN (A) ABOVE AND, IN ADDITION, TO INSTITUTIONAL ACCREDITED INVESTORS
AS DEFINED IN RULE 501(A)(1), (2), (3) OR (7) OF REGULATION D PROMULGATED UNDER
THE SECURITIES ACT IN A TRANSACTION EXEMPT FROM REGISTRATION REQUIREMENTS UNDER
THE SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES
LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER JURISDICTION.
NOTWITHSTANDING THE ABOVE, THIS CERTIFICATE MAY NOT BE PURCHASED BY OR PLEDGED,
SOLD OR OTHERWISE TRANSFERRED TO ANY PERSON WHICH IS AN EMPLOYEE BENEFIT PLAN
SUBJECT TO THE FIDUCIARY RESPONSIBILITY PROVISIONS OF THE EMPLOYEE RETIREMENT
INCOME SECURITY ACT OF 1974, AS AMENDED, OR SECTION 4975 OF THE INTERNAL
REVENUE CODE OF 1986, AS AMENDED, OR ANY PERSON ACTING ON BEHALF OF ANY SUCH
PLAN OR USING THE ASSETS OF SUCH PLAN TO ACQUIRE THIS CERTIFICATE UNLESS THE
DEPOSITOR, THE CERTIFICATE REGISTRAR AND THE TRUSTEE ARE PROVIDED WITH AN
OPINION OF COUNSEL WHICH ESTABLISHES TO THEIR SATISFACTION THAT THE ACQUISITION
AND SUBSEQUENT HOLDING OF SUCH OFFERED CERTIFICATES WOULD NOT CONSTITUTE A NON-
EXEMPT PROHIBITED TRANSACTION UNDER ERISA OR THE CODE.
THIS SECURITY WAS ISSUED ON MARCH 29, 1996 AT A PRICE EQUAL TO 48.244600% OF ITS
ORIGINAL PRINCIPAL AMOUNT. BASED ON THAT ISSUE PRICE, THIS SECURITY WAS ISSUED
WITH ORIGINAL ISSUE DISCOUNT ("OID") FOR FEDERAL INCOME TAX PURPOSES IN AN
AMOUNT EQUAL TO
A-7-2
<PAGE>
51.7554% OF ITS ORIGINAL PRINCIPAL AMOUNT. THE MONTHLY YIELD TO MATURITY OF THIS
SECURITY EXPRESSED ON AN ANNUAL BASIS IS APPROXIMATELY 11.29% AND THE AMOUNT OF
OID ALLOCABLE TO THE SHORT FIRST ACCRUAL PERIOD (MARCH 29, 1996 THROUGH APRIL
15, 1996) AS A PERCENTAGE OF THE ORIGINAL PRINCIPAL AMOUNT OF THE SECURITY IS
APPROXIMATELY 4.914763%. THE STATED INTEREST RATE ON THIS SECURITY IS 9.16% PER
ANNUM. IN COMPUTING THE MONTHLY YIELD TO MATURITY AND THE OID AMOUNTS SPECIFIED
ABOVE, THE FOLLOWING ASSUMPTIONS HAVE BEEN USED: A METHOD EMBODYING AN ECONOMIC
ACCRUAL OF INCOME, A CONSTANT ANNUAL PREPAYMENT RATE OF 3% ON THE MORTGAGE
COLLATERAL UNDERLYING THE CERTIFICATES, AND A 30 DAYS PER MONTH/360 DAYS PER
YEAR ACCOUNTING CONVENTION. THE ACTUAL YIELD TO MATURITY AND OID AMOUNTS MAY
DIFFER FROM THE PROJECTED AMOUNTS.
A-7-3
<PAGE>
LTC COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES,
SERIES 1996-1, CLASS G
evidencing a nonassessable, fully paid
percentage interest in a trust fund
which includes a pool of commercial mortgage loans
Pass-Through Rate: 9.16% No. G-1
Initial Certificate Principal
Amount: $5,624,255 First Distribution Date:
April 15, 1996
Original Class G Aggregate Final Scheduled
Certificate Principal Amount: Distribution Date:
$5,624,255 April 15, 2028
Cut-Off Date: March 1, 1996
A-7-4
<PAGE>
This certifies that LTC REMIC Corporation is the registered owner of
the Percentage Interest evidenced by this Certificate (obtained by dividing the
initial Certificate Principal Amount of this Certificate by the Aggregate
Certificate Principal Amount of all Certificates of such Class, each as noted
on the face hereof) in the Trust Fund, including the distributions to be made
with respect to the Class G Certificates. The Trust Fund, described more fully
below, consists primarily of Mortgage Loans held in trust by the Trustee and
serviced by the Master Servicer and the Special Servicer, as applicable. The
Trust Fund was created, and the Mortgage Loans are to be serviced, pursuant to
the Agreement (as defined below). The Holder of this Certificate, by virtue of
the acceptance hereof, assents to the terms, provisions and conditions of the
Agreement and is bound thereby. Also issued under the Agreement are the Class
A, Class B, Class C, Class D, Class E, Class F, Class X-1, Class X-2, Class R
and Class LR Certificates (together with the Class G Certificates, the
"Certificates") (the Holders of Certificates issued under the Agreement are
collectively referred to herein as "Certificateholders").
This Certificate is issued pursuant to, and in accordance with, the
terms of a Pooling and Servicing Agreement dated as of March 1, 1996 (the
"Agreement") among LTC REMIC Corporation, as Depositor, LaSalle National Bank,
as Trustee, ABN AMRO Bank, N.V., as Fiscal Agent, GMAC Commercial Mortgage
Corporation, as Master Servicer and LTC Properties, Inc., as Originator and
Special Servicer. In addition, LTC will be subservicer for the Mortgage Loans
pursuant to a subservicing agreement to be dated as of March 1, 1996 with GMAC
Commercial Mortgage Corporation (in such capacity the "Subservicer"). To the
extent not defined herein, capitalized terms used herein shall have the
meanings as signed thereto in the Agreement.
THIS CERTIFICATE DOES NOT REPRESENT AN INTEREST IN OR A DEPOSIT OR
OBLIGATION OF THE DEPOSITOR, THE ORIGINATOR, THE MASTER SERVICER, THE SPECIAL
SERVICER, THE SUBSERVICER, THE TRUSTEE OR THE FISCAL AGENT, OR ANY OF THEIR
AFFILIATES. THIS CERTIFICATE WILL NOT BE A SAVINGS ACCOUNT OR DEPOSIT AND IS
NOT INSURED OR GUARANTEED BY ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY OR BY
ANY PRIVATE ENTITY.
A-7-5
<PAGE>
This Certificate represents a "regular interest" in a "real estate
mortgage investment conduit," as those terms are defined, respectively, in
Sections 860G(a)(1) and 860D of the Internal Revenue Code of 1986, as amended
(the "Code"). Each Holder of this Certificate, by acceptance hereof, agrees to
treat, and to take no action inconsistent with the treatment of, this
Certificate in accordance with the preceding sentence for purposes of federal
income taxes, state and local income and franchise taxes and other taxes imposed
on or measured by income.
The Trustee makes no representation or warranty as to any of the
statements contained herein or the validity or sufficiency of the Certificates
or the Mortgage Loans and has caused to be executed and authenticated this
Certificate in its limited capacity as Trustee under the Agreement.
Pursuant to the terms of the Agreement, the Paying Agent will
distribute, on the fifteenth day of each month or if any such fifteenth day is
not a Business Day, on the next succeeding Business Day (each such date, a
"Distribution Date"), commencing in April 1996, to the Person in whose name this
Certificate is registered as of the related Record Date, an amount equal to such
Person's pro rata share (based on the Percentage Interest represented by this
Certificate) of that portion of the aggregate amount of principal and interest
then distributable, if any, allocable to the Class G Certificates for such
Distribution Date, all as more fully described in the Agreement. The amount of
interest which accrues on this Certificate during an Interest Accrual Period
will be subject to reduction with respect to any Net Prepayment Interest
Shortfall allocated to the Class G Certificates, as described in the Agreement.
Interest will accrue on the outstanding Certificate Principal Amount
of this Certificate at the Pass-Through Rate specified on the face of this
Certificate. Interest will be calculated on the basis of a 360-day year of
twelve 30-day months. Interest accrued on this Certificate during an Interest
Accrual Period, plus the Outstanding Class Interest Shortfall with respect to
this Certificate, if any, will be payable on the related
A-7-6
<PAGE>
Distribution Date to the extent provided in the Agreement. The "Interest Accrual
Period" relating to any Distribution Date is the one-month period from and
including the first day of the month preceding the month in which such
Distribution Date occurs to and including the last day of such month, commencing
in March 1996.
With the exception of the final distribution in respect of this
Certificate, distributions on this Certificate will be made by the Paying Agent
without the presentation or surrender of this Certificate or the making of any
notation hereon, by check mailed by first-class mail to the address of the
Holder set forth in the Certificate Register, or, provided the Holder holds
Certificates the aggregate initial Certificate Principal Amount of which exceeds
$5,000,000 and has provided the Paying Agent with wire instructions in writing
at least five Business Days before the related Record Date, by wire transfer of
immediately available funds to the account of such Holder at a bank or other
entity located in the United States and having appropriate facilities therefor.
The final distribution on this Certificate will be made in like manner after
notice by the Trustee of the pendency of such distribution and only upon
presentation and surrender of this Certificate at the Corporate Trust Office or
such other location specified in the notice to Holders of such final
distribution.
This Certificate is one of a duly authorized issue of Certificates
designated as LTC Commercial Mortgage Pass-Through Certificates, Series 1996-1
and represents a fractional undivided interest in a Trust Fund. As more fully
described in and subject to the limitations of the Agreement, the Trust Fund
will consist primarily of (i) such Mortgage Loans as from time to time are
subject to the Agreement, together with the Mortgage Files relating thereto;
(ii) all payments due on or collections in respect of the Mortgage Loans due
after the Cut-Off Date; (iii) any REO Property; (iv) all revenues received in
respect of any REO Property; (v) the rights of the Trustee, Master Servicer and
Special Servicer under the insurance policies with respect to the Mortgage Loans
required to be maintained pursuant to this Agreement and any proceeds thereof;
(vi) any Assignments of Leases, Rents and Profits; (vii) any guaranties given as
additional security for any Mortgage Loans; (viii) all
A-7-7
<PAGE>
assets deposited in the Collection Account, the Distribution Account, the Upper-
Tier Distribution Account and the REO Account including reinvestment income; and
(ix) the proceeds of any of the foregoing.
This Certificate is limited in right of payment to, among other
things, certain collections and recoveries in respect of the Mortgage Loans, as
more specifically set forth herein and in the Agreement.
As provided in the Agreement, withdrawals from the Collection Account
may be made by the Master Servicer from time to time for purposes other than
distributions to Certificateholders, such purposes including, among other
things, reimbursement or payment to the Master Servicer, the Special Servicer,
the Subservicer, the Trustee or the Fiscal Agent of certain expenses incurred or
certain fees earned by the Master Servicer, the Special Servicer or the
Trustee, including, without limitation, certain Nonrecoverable Advances.
This Certificate does not purport to summarize the Agreement, and
reference is made to the Agreement for the interests, rights, benefits,
obligations and duties evidenced hereby, and the limitations thereon, and the
rights, duties and immunities of the Trustee. This Certificate is issued under
and is subject to the terms, provisions and conditions of the Agreement, to
which Agreement, as amended from time to time, the holder of this Certificate by
virtue of the acceptance hereof assents and by which the holder of this
Certificate is bound.
As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Certificate Register only upon surrender of this Certificate for registration
of transfer at the office of the Certificate Registrar or at the office of its
agent in the City of New York. The Trustee or the Certificate Registrar may
require that this Certificate be duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Trustee and the Certificate
Registrar duly executed by, the Holder hereof or such Holder's attorney duly
authorized in writing. Thereupon, one or more new Certificates of a like
aggregate Percentage
A-7-8
<PAGE>
Interest in the same Class of authorized denominations will be executed and
authenticated by the Trustee and delivered by the Certificate Registrar to the
designated transferee or transferees.
Prior to due presentation of this Certificate for registration of
transfer, the Depositor, the Master Servicer, the Special Servicer, the
Subservicer, the Trustee, the Certificate Registrar and any agent of any of them
may treat the Person in whose name this Certificate is registered as the owner
hereof for all purposes, and none of the Depositor, Master Servicer, the Special
Servicer, the Subservicer, the Trustee, the Certificate Registrar or any agent
of any of them shall be affected by notice to the contrary.
As provided in the Agreement and subject to certain limitations herein
set forth, this Certificate is exchangeable for other Certificates of the same
Class of authorized denominations of like aggregate Percentage Interests, as
requested by the Holder surrendering the same.
No service charge will be made to a Certificateholder for any such
registration of transfer or exchange, but the Certificate Registrar may require
payment of a sum sufficient to cover any tax or other governmental charge
payable in connection therewith.
The Agreement permits, with certain exceptions therein provided, the
amendment of the Agreement and the modification of the rights of the
Certificateholders under the Agreement at any time by the Depositor, the Master
Servicer, the Special Servicer and the Trustee with the consent of the Holders
of Class A, Class B, Class C, Class D, Class E, Class F, Class G, Class R, Class
LR, Class X-1 and Class X-2 Certificates representing not less than 66-2/3% of
the Voting Rights allocated to each such Class of the Certificates affected by
the amendment. Any such consent by the Holder of this Certificate shall be
conclusive and binding on such Holder and upon all future Holders of this
Certificate and of any Certificates issued upon the transfer hereof or in
exchange herefor or in lieu hereof whether or not notation of such consent is
made upon this Certificate. The Agreement also permits the amendment thereof in
certain
A-7-9
<PAGE>
circumstances without the consent of the Holders of any of the Certificates,
provided that such amendment would not adversely affect in any material respect
the interests of any Certificateholder.
Each of the Master Servicer, any Holder of a Class LR Certificate and
the Special Servicer, may at its option, upon not less than 30 days' prior
notice, given to the Trustee any time on or after the Early Termination Date
specifying the Anticipated Termination Date, purchase on the Early Termination
Date all, but not less than all, of the Mortgage Loans then included in the
Trust Fund, all property acquired in respect of any Mortgage Loans and any
assets conveyed to the Trust Fund, at a purchase price, payable in cash, equal
to not less than the greater of:
(i) the sum of (without duplication of any amount in clauses (A)
through (E) below):
(A) 100% of the unpaid principal balance of each Mortgage Loan
included in the Trust Fund as of the Early Termination Determination
Date; and
(B) all unpaid interest accrued on such principal balance of
each such Mortgage Loan at the related Mortgage Interest Rate to such
Early Termination Determination Date; and
(C) the fair market value of all other property included in the
Trust Fund as of such Early Termination Determination Date; and
(D) all unreimbursed P&I Advances, unreimbursed Servicing
Advances and interest thereon at the Advance Rate; and
(E) all unreimbursed Servicing Fees, Special Servicing Fees and
Trustee Fees; and
(ii) the aggregate fair market value (determined in accordance with
Section 9.01(d)(ii)(B) of the Agreement) of the Mortgage Loans, and all
other property acquired in respect of any Mortgage Loan in the Trust Fund,
as of the date of purchase.
A-7-10
<PAGE>
The obligations created by the Agreement shall terminate upon the
earliest to occur of (i) the repurchase of all Mortgage Loans by the Master
Servicer, any Holder of a Class LR Certificate or the Special Servicer as
described above; (ii) the later of (a) the distribution to Certificateholders of
final payment with respect to the last outstanding Mortgage Loan or (b) the
disposition of all property acquired upon foreclosure or deed in lieu of
foreclosure with respect to the last outstanding Mortgage Loan and the
remittance to the Certificateholders of all funds due under the Agreement; or
(iii) the sale of assets of the Trust Fund after the Certificate Principal
Amounts of all the Certificates have been reduced to zero under circumstances
set forth in the Agreement. In no event, however, will the trust created by the
Agreement continue beyond the expiration of 21 years from the death of the last
surviving descendant of a certain individual named in the Agreement living on
the date thereof.
Unless the Certificate of Authentication on this Certificate has been
executed by or on behalf of the Trustee, by manual signature, this Certificate
shall not be entitled to any benefit under the Agreement or be valid for any
purpose.
A-7-11
<PAGE>
IN WITNESS WHEREOF, the Authenticating Agent has caused this
Certificate to be duly executed.
LASALLE NATIONAL BANK
as Authenticating Agent
By:________________________________
Authorized Signatory
Certificate of Authentication
This is one of the Class G Certificates referred to in the Agreement.
Dated: March 29, 1996
LASALLE NATIONAL BANK
as Authenticating Agent
By:________________________________
Authorized Officer
A-7-12
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned ("Assignor(s)") hereby sell(s),
assign(s) and transfer(s) unto _________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
_____________________ (please print or typewrite name(s) and address(es),
including postal zip code(s) of assignee(s)) ("Assignee(s)") the entire
Percentage Interest represented by the Class G Certificate and hereby authorize
(i) the registration of transfer of such interest to Assignee(s) on the
Certificate Register of the Trust Fund.
I (we) further direct the Certificate Registrar to issue a new Class G
Certificate of the entire Percentage Interest represented by the within Class G
Certificates to the above-named Assignee(s) and to deliver such Class G
Certificate to the following address:
________________________________________________________________________________
________________________________________________________________________________
Date:_________________ ____________________________
Signature by or on behalf
of Assignor(s)
____________________________
Taxpayer Identification Number
A-7-13
<PAGE>
DISTRIBUTION INSTRUCTIONS
The Assignee(s) should include the following for purposes of
distribution:
Address of the Assignee(s) for the purpose of receiving notices and
distributions:__________________________________________________________________
________________________________________________________________________________
Distributions, if be made by wire transfer in immediately available funds to
________________________________________________________________________________
for the account of _____________________________________________________________
account number _________________________________________________________________
This information is provided by ________________________________________________
the Assignee(s) named above, or ________________________________________________
as its (their) agent.
By________________________________________________
__________________________________________________
[Please print or type name(s))
__________________________________________________
Title
__________________________________________________
Taxpayer Identification Number
A-7-14
<PAGE>
EXHIBIT A-8
FORM OF CLASS X-1 CERTIFICATES
A-8-1
<PAGE>
THE RIGHTS OF HOLDERS OF THE CLASS X-1 CERTIFICATES TO RECEIVE DISTRIBUTIONS OF
INTEREST IN RESPECT OF THE MORTGAGE LOANS WILL BE SUBORDINATED TO THE RIGHTS OF
HOLDERS OF THE CLASS A, CLASS B, CLASS C, CLASS D, CLASS E, CLASS F, CLASS R AND
CLASS LR CERTIFICATES TO RECEIVE DISTRIBUTIONS OF INTEREST AND PRINCIPAL.
THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY
STATE OF THE UNITED STATES ("BLUE SKY LAWS"), AND SUCH CERTIFICATE MAY NOT BE
OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A) BY AN INITIAL
INVESTOR (1) TO A PERSON THAT THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A PROMULGATED UNDER THE
SECURITIES ACT IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A OR (2)
PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE
SECURITIES ACT (IF AVAILABLE) AND DELIVERY OF AN OPINION OF COUNSEL, IF REQUIRED
BY THE TRUSTEE OR THE CERTIFICATE REGISTRAR AND (B) BY SUBSEQUENT INVESTORS, AS
SET FORTH IN (A) ABOVE AND, IN ADDITION, TO INSTITUTIONAL ACCREDITED INVESTORS
AS DEFINED IN RULE 501(A)(1), (2), (3) OR (7) OF REGULATION D PROMULGATED UNDER
THE SECURITIES ACT IN A TRANSACTION EXEMPT FROM REGISTRATION REQUIREMENTS UNDER
THE SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES
LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER JURISDICTION.
NOTWITHSTANDING THE ABOVE, THIS CERTIFICATE MAY NOT BE PURCHASED BY OR PLEDGED,
SOLD OR OTHERWISE TRANSFERRED TO ANY PERSON WHICH IS AN EMPLOYEE BENEFIT PLAN
SUBJECT TO THE FIDUCIARY RESPONSIBILITY PROVISIONS OF THE EMPLOYEE RETIREMENT
INCOME SECURITY ACT OF 1974, AS AMENDED, OR SECTION 4975 OF THE INTERNAL REVENUE
CODE OF 1986, AS AMENDED, OR ANY PERSON ACTING ON BEHALF OF ANY SUCH PLAN OR
USING THE ASSETS OF SUCH PLAN TO ACQUIRE THIS CERTIFICATE UNLESS THE DEPOSITOR,
THE CERTIFICATE REGISTRAR AND THE TRUSTEE ARE PROVIDED WITH AN OPINION OF
COUNSEL WHICH ESTABLISHES TO THEIR SATISFACTION THAT THE ACQUISITION AND
SUBSEQUENT HOLDING OF SUCH OFFERED CERTIFICATES WOULD NOT CONSTITUTE A NON-
EXEMPT PROHIBITED TRANSACTION UNDER ERISA OR THE CODE.
THIS SECURITY WAS ISSUED ON MARCH 29, 1996 AT A PRICE EQUAL TO 4.6391% OF ITS
ORIGINAL NOTIONAL AMOUNT. BASED ON THAT ISSUE PRICE, THIS SECURITY WAS ISSUED
WITH ORIGINAL ISSUE DISCOUNT ("OID") FOR FEDERAL INCOME TAX PURPOSES IN AN
AMOUNT EQUAL TO 95.3609% OF ITS ORIGINAL NOTIONAL AMOUNT. THE MONTHLY YIELD TO
MATURITY OF THIS SECURITY EXPRESSED ON ANNUAL BASIS IS APPROXIMATELY 19.9637%.
IN COMPUTING THE MONTHLY YIELD TO MATURITY AND
A-8-2
<PAGE>
THE OID AMOUNTS SPECIFIED ABOVE, THE FOLLOWING ASSUMPTIONS HAVE BEEN USED:_) A
METHOD EMBODYING AN ECONOMIC ACCRUAL OF INCOME,_) A CONSTANT ANNUAL PREPAYMENT
RATE OF 3% ON THE MORTGAGE COLLATERAL UNDERLYING THE CERTIFICATES, AND A_) 30
DAYS PER MONTH/360 DAYS PER YEAR ACCOUNTING CONVENTION. THE ACTUAL YIELD TO
MATURITY AND OID AMOUNTS MAY DIFFER FROM THE PROJECTED AMOUNTS.
A-8-3
<PAGE>
LTC COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES,
SERIES 1996-1, CLASS X-1
evidencing a nonassessable, fully paid
percentage interest in a trust fund
which includes a pool of commercial mortgage loans
No. X-1
Percentage Interest evidenced First Distribution Date
by this Certificate: 100%
April 15, 1996
Final Scheduled
Distribution Date:
April 15, 2028
Cut-Off Date: March 1, 1996
A-8-4
<PAGE>
This certifies that LTC REMIC Corporation is the registered owner of
the Percentage Interest evidenced by this Certificate in monthly Distributions
to Holders of Class X-1 Certificates with respect to the Trust Fund. The Trust
Fund, described more fully below, consists primarily of Mortgage Loans held in
trust by the Trustee and serviced by the Master Servicer and the Special
Servicer, as applicable. The Trust Fund was created, and the Mortgage Loans are
to be serviced, pursuant to the Agreement (as defined below). The Holder of this
Certificate, by virtue of the acceptance hereof, assents to the terms,
provisions and conditions of the Agreement and is bound thereby. Also issued
under the Agreement are Class A, Class B, Class C, Class D, Class E, Class F,
Class G, Class X-2, Class R and Class LR Certificates (together with the Class
X-1 Certificates, the "Certificates") (the Holders of Certificates issued under
the Agreement are collectively referred to herein as "Certificateholders").
This Certificate is issued pursuant to, and in accordance with, the
terms of a Pooling and Servicing Agreement dated as of March 1, 1996 (the
"Agreement") among LTC REMIC Corporation, as Depositor, LaSalle National Bank,
as Trustee, ABN AMRO Bank N.V., as Fiscal Agent, GMAC Commercial Mortgage
Corporation, as Master Servicer and LTC Properties, Inc., as Originator and
Special Servicer. In addition, LTC will be subservicer for the Mortgage Loans
pursuant to a subservicing agreement to be dated as of March 1, 1996 with GMAC
Commercial Mortgage Corporation (in such capacity the "Subservicer"). To the
extent not defined herein, capitalized terms used herein shall have the meanings
assigned thereto in the Agreement.
THIS CERTIFICATE DOES NOT REPRESENT AN INTEREST IN OR A DEPOSIT OR
OBLIGATION OF THE DEPOSITOR, THE ORIGINATOR, THE MASTER SERVICER, THE SPECIAL
SERVICER, THE SUBSERVICER, THE TRUSTEE OR THE FISCAL AGENT, OR ANY OF THEIR
AFFILIATES. THIS CERTIFICATE WILL NOT BE A SAVINGS ACCOUNT OR DEPOSIT AND IS NOT
INSURED OR GUARANTEED BY ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY OR BY ANY
PRIVATE ENTITY.
This Certificate represents a "regular interest" in a "real estate
mortgage investment conduit," as those terms are defined, respectively, in
Sections 860G(a)(1) and 860D of the Internal Revenue Code of 1986, as amended
(the "Code"). Each Holder of this Certificate, by acceptance hereof, agrees to
treat, and to take no action inconsistent with the treatment of, this
Certificate in accordance with the preceding sentence for purposes of federal
income taxes, state and local income and
A-8-5
<PAGE>
franchise taxes and other taxes imposed on or measured by income.
The Trustee makes no representation or warranty as to any of the
statements contained herein or the validity or sufficiency of the Certificates
or the Mortgage Loans and has caused to be executed and authenticated this
Certificate in its limited capacity as Trustee under the Agreement.
Pursuant to the terms of the Agreement, the Paying Agent will
distribute, on the fifteenth day of each month or if any such fifteenth day is
not a Business Day, on the next succeeding Business Day (each such date, a
"Distribution Date"), commencing in April 1996, to the Person in whose name this
Certificate is registered as of the related Record Date, an amount equal to such
Person's pro rata share (based on the Percentage Interest represented by this
Certificate) of that portion of the aggregate amount of interest then
distributable, if any, allocable to the Class X-1 Certificates for such
Distribution Date, all as more fully described in the Agreement. The Class X-1
Certificates are not entitled to receive distributions of principal. Interest
will accrue on the Class X-1 Certificates during each Interest Accrual Period in
an amount equal to a portion of the interest accrued on each Mortgage Loan
during the related Mortgage Loan Due Period equal to interest accrued on such
Mortgage Loan during such period at a rate per annum equal to the excess of the
Net Mortgage Interest Rate of such Mortgage Loan over 9.16%, calculated on the
basis of the actual number of days for which interest accrues on such Mortgage
Loan during the related Mortgage Loan Due Period according to the terms of such
Mortgage Loan and a 360-day year. The amount of interest which accrues on this
Certificate during an Interest Accrual Period will be subject to reduction with
respect to any Net Prepayment Interest Shortfall allocated to the Class X-1
Certificates, as described in the Agreement.
Interest accrued on this Certificate during an Interest Accrual
Period, plus the Outstanding Class Interest Shortfall with respect to this
Certificate, if any, will be payable on the related Distribution Date to the
extent provided in the Agreement. The "Interest Accrual Period" relating to any
Distribution Date is the Mortgage Loan Due Period for each Mortgage Loan.
With the exception of the final distribution in respect of this
Certificate, distributions on this Certificate will be made by the Paying Agent
without the presentation or surrender of this Certificate or the making of any
notation hereon, by check
A-8-6
<PAGE>
mailed by first-class mail to the address of the Holder set forth in the
Certificate Register, or, provided the Holder holds Certificates the aggregate
initial Notional Amount of which exceeds $5,000,000 and has provided the Paying
Agent with wire instructions in writing at least five Business Days before the
related Record Date, by wire transfer of immediately available funds to the
account of such Holder at a bank or other entity located in the United States
and having appropriate facilities therefor. The final distribution on this
Certificate will be made in like manner after notice by the Trustee of the
pendency of such distribution and only upon presentation and surrender of this
Certificate at the Corporate Trust Office or such other location specified in
the notice to Holders of such final distribution.
This Certificate is one of a duly authorized issue of Certificates
designated as LTC Commercial Mortgage Pass-Through Certificates, Series 1996-1
and represents a fractional undivided interest in a Trust Fund. As more fully
described in and subject to the limitations of the Agreement, the Trust Fund
will consist primarily of (i) such Mortgage Loans as from time to time are
subject to the Agreement, together with the Mortgage Files relating thereto;
(ii) all payments due on or collections in respect of the Mortgage Loans due
after the Cut-Off Date; (iii) any REO Property; (iv) all revenues received in
respect of any REO Property; (v) the rights of the Trustee, Master Servicer and
Special Servicer under the insurance policies with respect to the Mortgage Loans
required to be maintained pursuant to this Agreement and any proceeds thereof;
(vi) any Assignments of Leases, Rents and Profits; (vii) any guaranties given as
additional security for any Mortgage Loans; (viii) all assets deposited in the
Collection Account, the Distribution Account, the Upper-Tier Distribution
Account and the REO Account including reinvestment income; and (ix) the proceeds
of any of the foregoing.
This Certificate is limited in right of payment to, among other
things, certain collections and recoveries in respect of the Mortgage Loans, as
more specifically set forth herein and in the Agreement.
As provided in the Agreement, withdrawals from the Collection Account
may be made by the Master Servicer from time to time for purposes other than
distributions to Certificateholders, such purposes including, among other
things, reimbursement or payment to the Master Servicer, the Special Servicer,
the Subservicer, the Trustee or the Fiscal Agent of certain expenses
A-8-7
<PAGE>
incurred or certain fees earned by the Master Servicer, the Special Servicer or
the Trustee, including, without limitation, certain Nonrecoverable Advances.
This Certificate does not purport to summarize the Agreement, and
reference is made to the Agreement for the interests, rights, benefits,
obligations and duties evidenced hereby, and the limitations thereon, and the
rights, duties and immunities of the Trustee. This Certificate is issued under
and is subject to the terms, provisions and conditions of the Agreement, to
which Agreement, as amended from time to time, the holder of this Certificate by
virtue of the acceptance hereof assents and by which the holder of this
Certificate is bound.
As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Certificate Register only upon surrender of this Certificate for registration of
transfer at the office of the Certificate Registrar or at the office of its
agent in the City of New York. The Trustee or the Certificate Registrar may
require that this Certificate be duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Trustee and the Certificate
Registrar duly executed by, the Holder hereof or such Holder's attorney duly
authorized in writing. Thereupon, one or more new Certificates of a like
aggregate Percentage Interest in the same Class of authorized denominations will
be executed and authenticated by the Trustee and delivered by the Certificate
Registrar to the designated transferee or transferees.
Prior to due presentation of this Certificate for registration of
transfer, the Depositor, the Master Servicer, the Special Servicer, the
Subservicer, the Trustee, the Certificate Registrar and any agent of any of them
may treat the Person in whose name this Certificate is registered as the owner
hereof for all purposes, and none of the Depositor, Master Servicer, the Special
Servicer, the Subservicer, the Trustee, the Certificate Registrar, any Paying
Agent or any agent of any of them shall be affected by notice to the contrary.
As provided in the Agreement and subject to certain limitations herein
set forth, this Certificate is exchangeable for other Certificates of the same
Class of authorized denominations of like aggregate Percentage Interests, as
requested by the Holder surrendering the same.
A-8-8
<PAGE>
No service charge will be made to a Certificateholder for any such
registration of transfer or exchange, but the Certificate Registrar may require
payment of a sum sufficient to cover any tax or other governmental charge
payable in connection therewith.
The Agreement permits, with certain exceptions therein provided, the
amendment of the Agreement and the modification of the rights of the
Certificateholders under the Agreement at any time by the Depositor, the Master
Servicer, the Special Servicer and the Trustee with the consent of the Holders
of Class A, Class B, Class C, Class D, Class E, Class F, Class G, Class R, Class
LR, Class X-1 and Class X-2 Certificates representing not less than 66-2/3% of
the Voting Rights allocated to each such Class of the Certificates affected by
the amendment. Any such consent by the Holder of this Certificate shall be
conclusive and binding on such Holder and upon all future Holders of this
Certificate and of any Certificates issued upon the transfer hereof or in
exchange herefor or in lieu hereof whether or not notation of such consent is
made upon this Certificate. The Agreement also permits the amendment thereof in
certain circumstances without the consent of the Holders of any of the
Certificates, provided that such amendment would not adversely affect in any
material respect the interests of any Certificateholder.
Each of the Master Servicer, any Holder of a Class LR Certificate and
the Special Servicer, may at its option, upon not less than 30 days' prior
notice, given to the Trustee any time on or after the Early Termination Date
specifying the Anticipated Termination Date, purchase on the Early Termination
Date all, but not less than all, of the Mortgage Loans then included in the
Trust Fund, all property acquired in respect of any Mortgage Loans and any
assets conveyed to the Trust Fund, at a purchase price, payable in cash, equal
to not less than the greater of:
(i) the sum of (without duplication of any amount in clauses (A)
through (E) below):
(A) 100% of the unpaid principal balance of each Mortgage
Loan included in the Trust Fund as of the Early Termination
Determination Date; and
(B) all unpaid interest accrued on such principal balance
of each such Mortgage Loan at the related Mortgage Interest Rate to
such Early Termination Determination Date; and
A-8-9
<PAGE>
(C) the fair market value of all other property included in
the Trust Fund as of such Early Termination Determination Date; and
(D) all unreimbursed P&I Advances, unreimbursed Servicing
Advances and interest thereon at the Advance Rate; and
(E) all unreimbursed Servicing Fees, Special Servicing Fees
and Trustee Fees; and
(ii) the aggregate fair market value (determined in accordance with
Section 9.01(d)(ii)(B) of the Agreement) of the Mortgage Loans, and all
other property acquired in respect of any Mortgage Loan or Underlying
Certificate in the Trust Fund, as of the date of purchase.
The obligations created by the Agreement shall terminate upon the
earliest to occur of (i) the repurchase of all Mortgage Loans by the Master
Servicer, any Holder of a Class LR Certificate or the Special Servicer as
described above; (ii) the later of (a) the distribution to Certificateholders of
final payment with respect to the last outstanding Mortgage Loan or (b) the
disposition of all property acquired upon foreclosure or deed in lieu of
foreclosure with respect to the last outstanding Mortgage Loan and the
remittance to the Certificateholders of all funds due under the Agreement; or
(iii) the sale of assets of the Trust Fund after the Certificate Principal
Amounts of all the Certificates have been reduced to zero under circumstances
set forth in the Agreement. In no event, however, will the trust created by the
Agreement continue beyond the expiration of 21 years from the death of the last
surviving descendant of a certain individual named in the Agreement living on
the date thereof.
Unless the Certificate of Authentication on this Certificate has been
executed by or on behalf of the Trustee, by manual signature, this Certificate
shall not be entitled to any benefit under the Agreement or be valid for any
purpose.
A-8-10
<PAGE>
IN WITNESS WHEREOF, the Authenticating Agent has caused this
Certificate to be duly executed.
LASALLE NATIONAL BANK,
as Authenticating Agent
By:________________________________
Authorized Signatory
Certificate of Authentication
This is one of the Class X-1 Certificates referred to in the
Agreement.
Dated: March 29, 1996
LASALLE NATIONAL BANK,
as Authenticating Agent
By:________________________________
Authorized Officer
A-8-11
<PAGE>
DISTRIBUTION INSTRUCTIONS
The Assignee(s) should include the following for purposes of
distribution:
Address of the Assignee(s) for the purpose of receiving notices and
distributions:
________________________________________________________________________________
________________________________________________________________________________
Distributions, if be made by wire transfer in immediately available funds to
________________________________________________________________________________
________________________________________________________________________________
or the account of ______________________________________________________________
account number _________________________________________________________________
This information is provided by ________________________ the Assignee(s) named
above, or _________________________ as its (their) agent.
By___________________________________________
_____________________________________________
[Please print or type name(s)]
_____________________________________________
Title
_____________________________________________
Taxpayer Identification Number
A-8-12
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned ("Assignor(s)" hereby sell(s),
assign(s) and transfer(s) unto _________________________________________________
________________________________________________________________________________
________________________________________________________________________________
______________ (please print or typewrite name(s) and address(es), including
postal zip code(s) of assignee(s)) ("Assignee(s)") the entire Percentage
Interest represented by the Class X-1 Certificate and hereby authorize(s) the
registration of transfer of such interest to Assignee(s) on the Certificate
Register of the Trust Fund.
I (we) further direct the Certificate Registrar to issue a new Class
X-1 Certificate of the entire Percentage Interest represented by the within
Class X-1 Certificates to the above-named Assignee(s) and to deliver such Class
X-1 Certificate to the following address:
________________________________________________________________________________
________________________________________________________________________________
Date:________________ ________________________________
Signature by or on behalf
of Assignor(s)
________________________________
Taxpayer Identification Number
A-8-13
<PAGE>
EXHIBIT A-9
FORM OF CLASS X-2 CERTIFICATE
A-9-1
<PAGE>
THE RIGHTS OF HOLDERS OF THE CLASS X-2 CERTIFICATES TO RECEIVE DISTRIBUTIONS OF
INTEREST IN RESPECT OF THE MORTGAGE LOANS WILL BE SUBORDINATED TO THE RIGHTS OF
HOLDERS OF THE CLASS A, CLASS B, CLASS C, CLASS D, CLASS E, CLASS F, CLASS R AND
CLASS LR CERTIFICATES TO RECEIVE DISTRIBUTIONS OF INTEREST AND PRINCIPAL.
THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY
STATE OF THE UNITED STATES ("BLUE SKY LAWS"), AND SUCH CERTIFICATE MAY NOT BE
OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A) BY AN INITIAL
INVESTOR (1) TO A PERSON THAT THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A PROMULGATED UNDER THE
SECURITIES ACT IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A OR (2)
PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE
SECURITIES ACT (IF AVAILABLE) AND DELIVERY OF AN OPINION OF COUNSEL, IF REQUIRED
BY THE TRUSTEE OR THE CERTIFICATE REGISTRAR AND (B) BY SUBSEQUENT INVESTORS, AS
SET FORTH IN (A) ABOVE AND, IN ADDITION, TO INSTITUTIONAL ACCREDITED INVESTORS
AS DEFINED IN RULE 501(A)(1), (2), (3) OR (7) OF REGULATION D PROMULGATED UNDER
THE SECURITIES ACT IN A TRANSACTION EXEMPT FROM REGISTRATION REQUIREMENTS UNDER
THE SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES
LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER JURISDICTION.
NOTWITHSTANDING THE ABOVE, THIS CERTIFICATE MAY NOT BE PURCHASED BY OR PLEDGED,
SOLD OR OTHERWISE TRANSFERRED TO ANY PERSON WHICH IS AN EMPLOYEE BENEFIT PLAN
SUBJECT TO THE FIDUCIARY RESPONSIBILITY PROVISIONS OF THE EMPLOYEE RETIREMENT
INCOME SECURITY ACT OF 1974, AS AMENDED, OR SECTION 4975 OF THE INTERNAL REVENUE
CODE OF 1986, AS AMENDED, OR ANY PERSON ACTING ON BEHALF OF ANY SUCH PLAN OR
USING THE ASSETS OF SUCH PLAN TO ACQUIRE THIS CERTIFICATE UNLESS THE DEPOSITOR,
THE CERTIFICATE REGISTRAR AND THE TRUSTEE ARE PROVIDED WITH AN OPINION OF
COUNSEL WHICH ESTABLISHES TO THEIR SATISFACTION THAT THE ACQUISITION AND
SUBSEQUENT HOLDING OF SUCH OFFERED CERTIFICATES WOULD NOT CONSTITUTE A NON-
EXEMPT PROHIBITED TRANSACTION UNDER ERISA OR THE CODE.
THIS SECURITY WAS ISSUED ON MARCH 29, 1996 AT A PRICE EQUAL TO 5.7693% OF ITS
ORIGINAL NOTIONAL AMOUNT. BASED ON THAT ISSUE PRICE, THIS SECURITY WAS ISSUED
WITH ORIGINAL ISSUE DISCOUNT ("OID") FOR FEDERAL INCOME TAX PURPOSES IN AN
AMOUNT EQUAL TO 94.2307% OF ITS ORIGINAL NOTIONAL AMOUNT. THE MONTHLY YIELD TO
MATURITY OF THIS SECURITY EXPRESSED ON ANNUAL BASIS IS APPROXIMATELY 25.3304%.
IN COMPUTING THE MONTHLY YIELD TO MATURITY AND
A-9-2
<PAGE>
THE OID AMOUNTS SPECIFIED ABOVE, THE FOLLOWING ASSUMPTIONS HAVE BEEN USED:_) A
METHOD EMBODYING AN ECONOMIC ACCRUAL OF INCOME, _) A CONSTANT ANNUAL PREPAYMENT
RATE OF 3% ON THE MORTGAGE COLLATERAL UNDERLYING THE CERTIFICATES, AND _) A 30
DAYS PER MONTH/360 DAYS PER YEAR ACCOUNTING CONVENTION. THE ACTUAL YIELD TO
MATURITY AND OID AMOUNTS MAY DIFFER FROM THE PROJECTED AMOUNTS.
A-9-3
<PAGE>
LTC COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES,
SERIES 1996-1, CLASS X-2
evidencing a nonassessable, fully paid
percentage interest in a trust fund
which includes a pool of commercial mortgage loans
No. X-2
Percentage Interest evidenced First Distribution Date:
by this Certificate: 100% April 15, 1996
Final Scheduled
Distribution Date:
April 15, 2028
Cut-Off Date: March 1, 1996
A-9-4
<PAGE>
This certifies that LTC REMIC Corporation is the registered owner of
the Percentage Interest evidenced by this Certificate in monthly Distributions
to Holders of Class X-2 Certificates with respect to the Trust Fund. The Trust
Fund, described more fully below, consists primarily of Mortgage Loans held in
trust by the Trustee and serviced by the Master Servicer and the Special
Servicer, as applicable. The Trust Fund was created, and the Mortgage Loans are
to be serviced, pursuant to the Agreement (as defined below). The Holder of this
Certificate, by virtue of the acceptance hereof, assents to the terms,
provisions and conditions of the Agreement and is bound thereby. Also issued
under the Agreement are Class A, Class B, Class C, Class D, Class E, Class F,
Class G, Class X-1, Class R and Class LR Certificates (together with the Class
X-2 Certificates, the "Certificates") (the Holders of Certificates issued under
the Agreement are collectively referred to herein as "Certificateholders").
This Certificate is issued pursuant to, and in accordance with, the
terms of a Pooling and Servicing Agreement dated as of March 1, 1996 (the
"Agreement") among LTC REMIC Corporation, as Depositor, LaSalle National Bank,
as Trustee, ABN AMRO Bank N.V., as Fiscal Agent, GMAC Commercial Mortgage
Corporation, as Master Servicer and LTC Properties, Inc., as Originator and
Special Servicer. In addition, LTC will be subservicer for the Mortgage Loans
pursuant to a subservicing agreement to be dated as of March 1, 1996 with GMAC
Commercial Mortgage Corporation (in such capacity the "Subservicer"). To the
extent not defined herein, capitalized terms used herein shall have the
meanings assigned thereto in the Agreement.
THIS CERTIFICATE DOES NOT REPRESENT AN INTEREST IN OR A DEPOSIT OR
OBLIGATION OF THE DEPOSITOR, THE ORIGINATOR, THE MASTER SERVICER, THE SPECIAL
SERVICER, THE SUBSERVICER, THE TRUSTEE OR THE FISCAL AGENT, OR ANY OF THEIR
AFFILIATES. THIS CERTIFICATE WILL NOT BE A SAVINGS ACCOUNT OR DEPOSIT AND IS NOT
INSURED OR GUARANTEED BY ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY OR BY ANY
PRIVATE ENTITY.
This Certificate represents a "regular interest" in a "real estate
mortgage investment conduit," as those terms are defined, respectively, in
Sections 860G(a)(1)
A-9-5
<PAGE>
and 860D of the Internal Revenue Code of 1986, as amended (the "Code"). Each
Holder of this Certificate, by acceptance hereof, agrees to treat, and to take
no action inconsistent with the treatment of, this Certificate in accordance
with the preceding sentence for purposes of federal income taxes, state and
local income and franchise taxes and other taxes imposed on or mea sured by
income.
The Trustee makes no representation or warranty as to any of the
statements contained herein or the validity or sufficiency of the Certificates,
the Mortgage Loans and has caused to be executed and authenticated this
Certificate in its limited capacity as Trustee under the Agreement.
Pursuant to the terms of the Agreement, the Paying Agent will
distribute, on the fifteenth day of each month or if any such fifteenth day is
not a Business Day, on the next succeeding Business Day (each such date, a
"Distribution Date"), commencing in April 1996, to the Person in whose name this
Certificate is registered as of the related Record Date, an amount equal to such
Person's pro rata share (based on the Percentage Interest represented by this
Certificate) of that portion of the aggregate amount of interest then
distributable, if any, allocable to the Class X-2 Certificates for such
Distribution Date, all as more fully described in the Agreement. The Class X-2
Certificates are not entitled to receive distributions of principal. Interest
will accrue on the Class X-2 Certificates during each Interest Accrual Period in
an amount equal to the aggregate of the interest accrued (on the basis of a 360-
day year consisting of twelve 30-day months) on the Certificate Principal Amount
of the Class AL Interest at the Class A Spread Rate, on the Certificate
Principal Amount of the Class AR-L Interest at the Class R Spread Rate, on the
Certificates Principal Amount of the Class BL Interest at the Class B Spread
Rate, on the Certificate Principal Amount of the Class CL Interest at the Class
C Spread Rate and on the Certificate Principal Amount of the Class DL Interest
at the Class D Spread Rate. The amount of interest which accrues on this
Certificate during an Interest Accrual Period will be subject to reduction with
respect to any Net Prepayment Interest Shortfall allocated to the Class X-2
Certificates, as described in the Agreement.
A-9-6
<PAGE>
Interest will be calculated on the basis of a 360-day year of twelve
30-day months. Interest accrued on this Certificate during an Interest Accrual
Period, plus the Outstanding Class Interest Shortfall with respect to this
Certificate, if any, will be payable on the related Distribution Date to the
extent provided in the Agreement. The "Interest Accrual Period" relating to any
Distribution Date is the Mortgage Loan Due Period for each Mortgage Loan.
With the exception of the final distribution in respect of this
Certificate, distributions on this Certificate will be made by the Paying Agent
without the presentation or surrender of this Certificate or the making of any
notation hereon, by check mailed by first-class mail to the address of the
Holder set forth in the Certificate Register, or, provided the Holder holds
Certificates the aggregate initial Notional Amount of which exceeds $5,000,000
and has provided the Paying Agent with wire instructions in writing at least
five Business Days before the related Record Date, by wire transfer of
immediately available funds to the account of such Holder at a bank or other
entity located in the United States and having appropriate facilities therefor.
The final distribution on this Certificate will be made in like manner after
notice by the Trustee of the pendency of such distribution and only upon
presentation and surrender of this Certificate at the Corporate Trust Office or
such other location specified in the notice to Holders of such final
distribution.
This Certificate is one of a duly authorized issue of Certificates
designated as LTC Commercial Mortgage Pass-Through Certificates, Series 1996-1
and represents a fractional undivided interest in a Trust Fund. As more fully
described in and subject to the limitations of the Agreement, the Trust Fund
will consist primarily of (i) such Mortgage Loans as from time to time are
subject to the Agreement, together with the Mortgage Files relating thereto;
(ii) all payments due on or collections in respect of the Mortgage Loans due
after the Cut-Off Date; (iii) any REO Property; (iv) all revenues received in
respect of any REO Property; (v) the rights of the Trustee, Master Servicer and
Special Servicer under the insurance policies with respect to the
A-9-7
<PAGE>
Mortgage Loans required to be maintained pursuant to this Agreement and any
proceeds thereof; (vi) any Assignments of Leases, Rents and Profits; (vii) any
guaranties given as additional security for any Mortgage Loans; (viii) all
assets deposited in the Collection Account, the Distribution Account, the Upper-
Tier Distribution Account and the REO Account including reinvestment income; and
(ix) the proceeds of any of the foregoing.
This Certificate is limited in right of payment to, among other
things, certain collections and recoveries in respect of the Mortgage Loans, as
more specifically set forth herein and in the Agreement.
As provided in the Agreement, withdrawals from the Collection Account
may be made by the Master Servicer from time to time for purposes other than
distributions to Certificateholders, such purposes including, among other
things, reimbursement or payment to the Master Servicer, the Special Servicer,
the Subservicer, the Trustee or the Fiscal Agent of certain expenses incurred or
certain fees earned by the Master Servicer, the Special Servicer or the
Trustee, including, without limitation, certain Nonrecoverable Advances.
This Certificate does not purport to summarize the Agreement, and
reference is made to the Agreement for the interests, rights, benefits,
obligations and duties evidenced hereby, and the limitations thereon, and the
rights, duties and immunities of the Trustee. This Certificate is issued under
and is subject to the terms, provisions and conditions of the Agreement, to
which Agreement, as amended from time to time, the holder of this Certificate by
virtue of the acceptance hereof assents and by which the holder of this
Certificate is bound.
As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Certificate Register only upon surrender of this Certificate for registration of
transfer at the office of the Certificate Registrar or at the office of its
agent in the City of New York. The Trustee or the Certificate Registrar may
require that this Certificate be duly endorsed by, or accompanied by a written
instrument of transfer in form
A-9-8
<PAGE>
satisfactory to the Trustee and the Certificate Registrar duly executed by, the
Holder hereof or such Holder's attorney duly authorized in writing. Thereupon,
one or more new Certificates of a like aggregate Percentage Interest in the same
Class of authorized denominations will be executed and authenticated by the
Trustee and delivered by the Certificate Registrar to the designated transferee
or transferees.
Prior to due presentation of this Certificate for registration of
transfer, the Depositor, the Master Servicer, the Special Servicer, the
Subservicer, the Trustee, the Certificate Registrar and any agent of any of them
may treat the Person in whose name this Certificate is registered as the owner
hereof for all purposes, and none of the Depositor, Master Servicer, the Special
Servicer, the Subservicer, the Trustee, the Certificate Registrar, any Paying
Agent or any agent of any of them shall be affected by notice to the contrary.
As provided in the Agreement and subject to certain limitations herein
set forth, this Certificate is exchangeable for other Certificates of the same
Class of authorized denominations of like aggregate Percentage Interests, as
requested by the Holder surrendering the same.
No service charge will be made to a Certificateholder for any such
registration of transfer or exchange, but the Certificate Registrar may require
payment of a sum sufficient to cover any tax or other governmental charge
payable in connection therewith.
The Agreement permits, with certain exceptions therein provided, the
amendment of the Agreement and the modification of the rights of the
Certificateholders under the Agreement at any time by the Depositor, the Master
Servicer, the Special Servicer and the Trustee with the consent of the Holders
of Class A, Class B, Class C, Class D, Class E, Class F, Class G, Class R, Class
LR, Class X-1 and Class X-2 Certificates representing not less than 66-2/3% of
the Voting Rights allocated to each such Class of the Certificates affected by
the amendment. Any such consent by the Holder of this Certificate shall be
conclusive and binding on such Holder and upon all future Holders of this
Certificate
A-9-9
<PAGE>
and of any Certificates issued upon the transfer hereof or in exchange herefor
or in lieu hereof whether or not notation of such consent is made upon this
Certificate. The Agreement also permits the amendment thereof in certain
circumstances without the consent of the Holders of any of the Certificates,
provided that such amendment would not adversely affect in any material respect
the interests of any Certificateholder.
Each of the Master Servicer, any Holder of a Class LR Certificate and
the Special Servicer, may at its option, upon not less than 30 days' prior
notice, given to the Trustee any time on or after the Early Termination Date
specifying the Anticipated Termination Date, purchase on the Early Termination
Date all, but not less than all, of the Mortgage Loans then included in the
Trust Fund, all property acquired in respect of any Mortgage Loans and any
assets conveyed to the Trust Fund, at a purchase price, payable in cash, equal
to not less than the greater of:
(i) the sum of (without duplication of any amount in clauses (A)
through (E) below):
(A) 100% of the unpaid principal balance of each Mortgage
Loan included in the Trust Fund as of the Early Termination
Determination Date; and
(B) all unpaid interest accrued on such principal balance
of each such Mortgage Loan at the related Mortgage Interest Rate to
such Early Termination Determination Date; and
(C) the fair market value of all other property included in
the Trust Fund as of such Early Termination Determination Date; and
(D) all unreimbursed P&I Advances, unreimbursed Servicing
Advances and interest thereon at the Advance Rate; and
(E) all unreimbursed Servicing Fees, Special Servicing Fees
and Trustee Fees; and
(ii) the aggregate fair market value (determined
A-9-10
<PAGE>
in accordance with Section 9.01(d)(ii)(B) of the Agreement) of the Mortgage
Loans, and all other property acquired in respect of any Mortgage Loan in
the Trust Fund, as of the date of purchase.
The obligations created by the Agreement shall terminate upon the
earliest to occur of (i) the repurchase of all Mortgage Loans by the Master
Servicer, any Holder of a Class LR Certificate or the Special Servicer as
described above; (ii) the later of (a) the distribution to Certificateholders of
final payment with respect to the last outstanding Mortgage Loan or (b) the
disposition of all property acquired upon foreclosure or deed in lieu of
foreclosure with respect to the last outstanding Mortgage Loan and the
remittance to the Certificateholders of all funds due under the Agreement; or
(iii) the sale of assets of the Trust Fund after the Certificate Principal
Amounts of all the Certificates have been reduced to zero under circumstances
set forth in the Agreement. In no event, however, will the trust created by the
Agreement continue beyond the expiration of 21 years from the death of the last
surviving descendant of a certain individual named in the Agreement living on
the date thereof.
Unless the Certificate of Authentication on this Certificate has been
executed by or on behalf of the Trustee, by manual signature, this Certificate
shall not be entitled to any benefit under the Agreement or be valid for any
purpose.
A-9-11
<PAGE>
IN WITNESS WHEREOF, the Authenticating Agent has caused this
Certificate to be duly executed.
LASALLE NATIONAL BANK
as Authenticating Agent
By ________________________________
Authorized Signatory
Certificate of Authentication
This is one of the Class X-2 Certificates referred to in the
Agreement.
Dated: March 29, 1996
LASALLE NATIONAL BANK
as Authenticating Agent
By:________________________________
Authorized Officer
A-9-12
<PAGE>
DISTRIBUTION INSTRUCTIONS
The Assignee(s) should include the following for purposes of
distribution:
Address of the Assignee(s) for the purpose of receiving notices and
distributions:
________________________________________________________________________________
________________________________________________________________________________
Distributions, if be made by wire transfer in immediately available funds to
________________________________________________________________________________
________________________________________________________________________________
for the account of _____________________________________________________________
account number _________________________________________________________________
This information is provided by ________________________________________________
the Assignee(s) named above, or ________________________________________________
as its (their) agent.
By __________________________________
_____________________________________
[Please print or type name(s)]
_____________________________________
Title
_____________________________________
Taxpayer Identification Number
A-9-13
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned ("Assignor(s)" hereby sell(s),
assign(s) and transfer(s) unto _________________________________________________
________________________________________________________________________________
________________________________________________________________________________
_______ (please print or typewrite name(s) and address(es), including postal zip
code(s) of assignee(s)) ("Assignee(s)") the entire Percentage Interest
represented by the Class X-2 Certificate and hereby authorize(s) the
registration of transfer of such interest to Assignee(s) on the Certificate
Register of the Trust Fund.
I (we) further direct the Certificate Registrar to issue a new Class
X-2 Certificate of the entire Percentage Interest represented by the within
Class X-2 Certificates to the above-named Assignee(s) and to deliver such Class
X-2 Certificate to the following address:
________________________________________________________________________________
________________________________________________________________________________
Date:________________ ________________________________
Signature by or on behalf of
Assignor(s)
________________________________
Taxpayer Identification Number
A-9-14
<PAGE>
EXHIBIT D
FORM OF CUSTODIAL AGREEMENT
THIS CUSTODIAL AGREEMENT, dated as of [ ] by and among [NAME OF
CUSTODIAN], as Custodian (the "Custodian"), GMAC Commercial Mortgage
Corporation, as Master Servicer (the "Master Servicer "), and LaSalle National
Bank, as Trustee (the "Trustee").
W I T N E S S E T H :
WHEREAS, the Master Servicer and the Trustee are parties to a Pooling
and Servicing Agreement (the "Pooling and Servicing Agreement"), dated as of
March 1, 1996, among LTC REMIC Corporation, as Depositor, the Master Servicer,
LTC Properties Inc., as Special Servicer and Originator, the Trustee, and ABN
AMRO Bank N.V. as Fiscal Agent, relating to Commercial Mortgage Pass-Through
Certificates, Series 1996-1 (capitalized terms used but not defined herein
having the meaning assigned thereto in the Pooling and Servicing Agreement);
WHEREAS, the parties hereto desire the Custodian to take possession of
the documents specified in Section 2.1 of the Pooling and Servicing Agreement,
as custodian for the Trustee, in accordance with the terms hereof;
NOW, THEREFORE, in consideration of the mutual undertakings herein
expressed, the parties hereto hereby agree as follows:
1. The Trustee hereby certifies that it has caused to be delivered
and released to the Custodian and the Custodian hereby acknowledges receipt of
the documents specified in Section 2.1 of the Pooling and Servicing Agreement
pertaining to each of the Mortgage Loans identified in the Mortgage Loan
Schedule attached to the Pooling and Servicing Agreement as Exhibit B. From time
to time, the Master Servicer or the Special Servicer, as applicable, shall
forward to the Custodian additional original documents evidencing an assumption
or modification of a Mortgage Loan approved by the Master Servicer. All Mortgage
Loan documents held by the Custodian as to each Mortgage Loan are referred to
herein as the "Custodian's Mortgage File." The Custodian hereby agrees to review
each of the Custodian's Mortgage Files and perform such other obligations of the
Custodian as such
<PAGE>
obligations are set forth in the Pooling and Servicing Agreement (including
Sections 2.1 and 2.2 thereof).
2. With respect to each Note, each Mortgage, each Assignment of
Mortgage and each other document constituting each Custodian's Mortgage File
which is delivered to the Custodian or which at any time comes into the
possession of the Custodian, the Custodian is exclusively the custodian for and
the bailee of the Trustee or the Master Servicer. The Custodian shall hold all
documents constituting each Custodian's Mortgage File received by it for the
exclusive use and benefit of the Trustee, and shall make disposition thereof
only in accordance with the instructions furnished by the Master Servicer. The
Custodian shall segregate and maintain continuous custody of all documents
constituting the Custodian's Mortgage File received in secure and fire resistant
facilities located in the State of Illinois in accordance with customary
standards for such custody. In the event the Custodian discovers any defect with
respect to any Custodian's Mortgage File, the Custodian shall give written
specification of such defect to the Master Servicer and the Trustee.
3. From time to time and as appropriate for the foreclosure or
servicing of any of the Mortgage Loans, the Custodian is hereby directed, upon
written request and receipt from the Master Servicer (a copy of which shall be
forwarded to the Trustee), to release to the Master Servicer the related
Custodian's Mortgage File or the documents set forth in such receipt to the
Master Servicer. All documents so released to the Master Servicer shall be held
by it in trust for the benefit of the Trustee. The Master Servicer shall return
to the Custodian the Custodian's Mortgage File or such documents when the Master
Servicer's need therefor in connection with such foreclosure or servicing no
longer exists, unless the Mortgage Loan shall be liquidated, in which case, upon
receipt of a certification to this effect from the Master Servicer to the
Custodian, the Master Servicer's receipt shall be released by the Custodian to
the Master Servicer.
4. Upon the re-purchase of any Mortgage Loan pursuant to the terms
of the Pooling and Servicing Agreement or the payment in full of any Mortgage
Loan, and upon receipt by the Custodian of the Master Servicer's request for
release, receipt and certification (which certification shall include a
statement to the effect that all amounts received in connection with such
payment or repurchase have been credited to the Collection Account or
Distribution Account as provided in the Pooling and
D-2
<PAGE>
Servicing Agreement), the Custodian shall promptly release the related
Custodian's Mortgage File to the Master Servicer.
5. It is understood that the Custodian will charge such fees for its
services under this Agreement as set forth in a separate agreement between the
Custodian and the Trustee , the payment of which, together with the Custodian's
expenses in connection therewith, shall be solely the obligation of the Trustee.
6. The Trustee may upon 30 days written notice (with a copy to the
Master Servicer ) remove and discharge the Custodian or any successor Custodian
thereafter appointed from the performance of its duties under this Custodial
Agreement. Simultaneously, the Trustee shall appoint a successor Custodian to
act on its behalf by written instrument, one original counterpart of which
instrument shall be delivered to each Rating Agency, one copy to the Master
Servicer and one copy to the successor Custodian. In the event of any such
removal, the Custodian shall promptly transfer to the successor Custodian, as
directed, all Custodian's Mortgage Files being administered under this Custodial
Agreement. Notwithstanding the foregoing, so long as LaSalle National Bank is
Trustee, the Master Servicer shall not have a right to remove the Custodian.
7. Upon reasonable prior written notice to the Custodian, the
Trustee and its agents, accountants, attorneys and auditors will be permitted
during normal business hours to examine the Custodian's Mortgage Files,
documents, records and other papers in the possession of or under the control of
the Custodian relating to any or all of the Mortgage Loans.
8. If the Custodian is furnished with written notice from the
Trustee or the Master Servicer that the Pooling and Servicing Agreement has been
terminated as to any or all of the Mortgage Loans, it shall upon written request
of the Trustee or the Master Servicer release to such persons as the Trustee or
the Master Servicer shall designate the Custodian's Mortgage Files relating to
such Mortgage Loans as the Trustee or the Master Servicer shall request and
shall complete the Assignments of Mortgage and endorse the Notes only as, and
if, the Trustee or the Master Servicer shall request. The person making such
written request shall send notice of such request to all other parties to the
Pooling and Servicing Agreement.
9. The Custodian shall, at its own expense, maintain
D-3
<PAGE>
at all times during the existence of this Custodial Agreement and keep in full
force and effect (a) fidelity insurance, (b) theft of documents insurance, (c)
forgery insurance and (d) errors and omissions insurance. All such insurance
shall be in amounts, with standard coverage and subject to deductibles, as are
customary for insurance typically maintained by banks which act as custodian in
similar transactions provided, however, that so long as the Custodian is rated
at least "A" no such insurance shall be required.
10. This Custodial Agreement may be executed simultaneously in any
number of counterparts, each of which counteparts shall be deemed to be an
original, and such counterparts shall constitute and be one and the same
instrument.
11. Within 10 days of each anniversary of the date of this Custodial
Agreement, or upon the request of the Trustee or the Master Servicer at any
other time, the Custodian shall provide to the Trustee and the Master Servicer a
list of all the Mortgage Loans for which the Custodian holds a Custodian's
Mortgage File pursuant to this Custodial Agreement. Such list may be in the form
of a copy of the Mortgage Loan Schedule with manual deletions to specifically
denote any Mortgage Loans paid off, liquidated or repurchased since the date of
this Custodial Agreement.
12. THIS CUSTODIAL AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF
THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
13. By execution of this Custodial Agreement, the Custodian warrants
that it currently does not hold and during the existence of this Custodial
Agreement shall not hold any adverse interest, by way of security or otherwise,
in any Mortgage Loan, and hereby waives and releases any such interest which it
may have in any Mortgage Loan as of the date hereof.
14. The Custodian may terminate its obligations under this Custodial
Agreement upon at least 60 days notice to the Trustee and the Master Servicer,
provided that so long as LaSalle National Bank is the Trustee, LaSalle National
Bank will not resign from its duties hereunder. In the event of such
termination, the Trustee shall appoint a successor Custodian. Upon such
appointment, the Custodian shall promptly transfer to the successor Custodian,
as directed, all Custodian's Mortgage Files
D-4
<PAGE>
being administered under this Custodial Agreement.
15. This Custodial Agreement shall terminate upon the final payment
or other liquidation (or advance with respect thereto) of the last Mortgage Loan
or the disposition of all property acquired upon foreclosure or deed in lieu of
foreclosure of any Mortgage Loan, and the final remittance of all funds due the
Certificateholders under the Pooling and Servicing Agreement. In such event, all
documents remaining the Custodian's Mortgage Files shall be forwarded to the
Trustee.
16. All demands, notices and communications hereunder shall be in
writing and shall be deemed to have been duly given when received by the
addressee. Any such demand, notice or communication hereunder shall be deemed to
have been received on the date delivered to or received at the premises of the
addressee (as evidenced, in the case of registered or certified mail, by the
date noted on the return receipt).
D-5
<PAGE>
IN WITNESS WHEREOF, the Custodian, the Master Servicer and the Trustee
have caused their names to be signed hereto by their respective officers
thereunto duly authorized, all as of the date first written above.
[LaSalle National Bank]
as Custodian
By:____________________________
Name:
Title:
GMAC COMMERCIAL MORTGAGE CORPORATION,
as Master Servicer
By:____________________________
Name:
Title:
LASALLE NATIONAL BANK,
as Trustee
By:____________________________
Name:
Title:
D-6
<PAGE>
EXHIBIT E
FORM OF SUBSERVICING AGREEMENT
E-1
<PAGE>
SUBSERVICING AGREEMENT
----------------------
THIS SUBSERVICING AGREEMENT (the "Agreement") is made as of this 1st day of
March, 1996 by and between GMAC Commercial Mortgage Corporation and LTC
Properties, Inc., as subservicer in such capacity (the "Subservicer").
RECITALS
--------
A. Pursuant to that certain Pooling and Servicing Agreement dated as
of March 1, 1996 (the "Pooling and Servicing Agreement") among LTC REMIC
Corporation, as Depositor (the "Depositor"), LaSalle National Bank, as Trustee
(the "Trustee"), ABN AMRO Bank N.V., as Fiscal Agent (the "Fiscal Agent"), GMAC
Commercial Mortgage Corporation, as Master Servicer (the "Master Servicer") and
LTC Properties, Inc., as Special Servicer and Originator ("LTC"), the Depositor
transferred the entire beneficial ownership in certain mortgage loans (the
"Mortgage Loans") to the extent described in the Pooling and Servicing Agreement
in exchange for certain pass-through certificates issued in multiple classes.
Capitalized terms used herein and not otherwise defined shall have the
respective meanings set forth in the Pooling and Servicing Agreement.
B. Pursuant to the Pooling and Servicing Agreement, the Master
Servicer has agreed to service the Mortgage Loans and to perform certain other
duties as more fully described in the Pooling and Servicing Agreement.
C. The Master Servicer and the Subservicer desire to enter into this
Agreement for the purpose of transferring from the Master Servicer to the
Subservicer certain of the Master Servicer's rights and obligations under the
Pooling and Servicing Agreement, as more fully set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants, agreements,
representations and warranties set forth herein, the parties hereto do hereby
agree as follows:
1. Representations, Warranties and Covenants of Subservicer. The
--------------------------------------------------------
Subservicer hereby represents and warrants to and covenants with the Master
Servicer that as of the date hereof and at all times during the term hereof:
1.1 Organization. The Subservicer is a corporation
------------
E-2
<PAGE>
duly organized, validly existing and in good standing under the laws of the
State of Maryland and is or will be in compliance with the laws of each state in
which any Mortgaged Property is located to the extent necessary to perform its
obligations under this Agreement and ensure the enforceability of each Mortgage
Loan by the Subservicer in accordance with the terms of this Agreement.
1.2 No Breach. The execution and delivery of this Agreement by the
---------
Subservicer and its performance of and compliance with the terms of this
Agreement will not violate the Subservicer's articles of incorporation or by-
laws or constitute a default (or an event which, with notice or the lapse of
time or both, would constitute a default) under, or result in the breach of, any
material contract, agreement or other instrument to which the Subservicer is a
party or which may be applicable to the Subservicer or any of its assets.
1.3 Authority. This Agreement, assuming due authorization, execution
--------
and delivery by the Master Servicer, constitutes a valid, legal and binding
obligation of the Subservicer, enforceable against it in accordance with the
terms hereof, except as such enforcement may be limited by applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, receiver ship,
moratorium and similar laws affecting the rights and remedies of creditors
generally and by general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing (regardless of whether
such enforcement is sought in a proceeding in equity or at law).
1.4 No Violation. The Subservicer is not in violation of, and the
------------
execution and delivery of this Agreement by the Subservicer and its performance
and compliance with the terms of this Agreement will not constitute a violation
with respect to, any law or regulation applicable to the Subservicer, any order
or decree of any court or of any federal, state, municipal or governmental
agency having jurisdiction, which violation could reasonably be expected to
materially affect the performance of its duties hereunder.
1.5 No Litigation. No litigation is pending or, to the best knowledge
-------------
of the Subservicer, threatened, against the Subservicer which would prohibit its
entering into or performing its obligations under this Agreement.
2. Subservicing of Mortgage Loans.
------------------------------
E-3
<PAGE>
2.1 General Duties. The Subservicer shall perform for the Master
--------------
Servicer all services and duties described herein and in the Schedule of Duties
to be performed by the Subservicer attached to this Agreement as Exhibit A, in
each case in accordance with the terms of the Pooling and Servicing Agreement
and of applicable law. In performing its duties hereunder, the Subservicer shall
have the status of and shall act as an independent contractor. Nothing herein
shall be construed to create a partnership or joint venture between the Master
Servicer and the Subservicer. Nothing contained in this Agreement shall prohibit
the Master Servicer from taking any action, including the payment of advances or
other amounts, which it deems necessary to assure the fulfillment of any of its
duties under the Pooling and Servicing Agreement or any related document,
agreement or instrument, whether or not the Subservicer is also required to
fulfill such duty pursuant to this Agreement.
2.2 Remittance Reports and Accounting. In addition to the other
---------------------------------
reports and information that the Subservicer is required to provide to the
Master Servicer pursuant to this Agreement, the Subservicer shall provide to
the Master Servicer in each month during the term hereof, no later than the day
following the Determination Date, (i) the information described in Exhibit B
attached hereto and (ii) with respect to any Subservicing Account meeting the
requirements of Section 3.5 of the Pooling and Servicing Agreement or other fund
or account maintained by the Subservicer hereunder, a statement prepared by the
Subservicer setting forth the status of the applicable fund or account as of the
close of business on such Determination Date and detailing, for the period
covered by such statement, each category of deposit into and withdrawal from and
earnings on such fund or account (clauses (i) and (ii) together, "Servicing
Information").
In addition, on or before April 30 of each year, beginning with April
30, 1997, the Subservicer at its expense shall cause to be prepared and
delivered to the Master Servicer, a statement in the form, and prepared by a
firm of Independent public accountants satisfying the criteria described in
Section 3.15 of the Pooling and Servicing Agreement, except that such statement
shall relate to the Subservicer's subservicing activities hereunder.
Notwithstanding any other provision contained herein, any required statements,
certifications, elections, notices,
E-4
<PAGE>
reports, plans or responses to direction from any Person which are required by
the Pooling and Servicing Agreement to be in the name of or to be otherwise
provided by the Master Servicer and which are delegated to the Subservicer
hereunder shall be prepared by the Subservicer at its expense in the form
required by the Pooling and Servicing Agreement and shall be delivered, no later
than the second Business Day prior to the day such item is required from the
Master Servicer under the Pooling and Servicing Agreement, to the Master
Servicer for its execution as Master Servicer and its distribution in accordance
with the Pooling and Servicing Agreement.
2.3 Fidelity Bond and Insurance. The Subservicer, at no expense to
---------------------------
the Master Servicer, shall keep in force during the term of this Agreement, for
the benefit of the Trustee and the Master Servicer, a policy or policies of
insurance covering errors and omissions for failure in the performance of the
Subservicer's obligations under this Agreement, which policy or policies shall
be in such form and amount that would meet the servicing requirements of prudent
institutional commercial mortgage lenders and loan servicers. The Subservicer
shall also maintain a fidelity bond in the form and amount that would meet the
servicing requirements of prudent institutional commercial mortgage lenders and
loan servicers. The Subservicer shall be deemed to have complied with this
provision if an affiliate of the Subservicer has such errors and omissions and
fidelity bond coverage and, by the terms of such insurance policy or fidelity
bond, the coverage afforded thereunder extends to the Subservicer. Each such
fidelity bond and errors and omissions policy shall be issued by an insurer
having a claims-paying ability of at least "A" by S&P and "A" by Fitch or
otherwise acceptable to the Rating Agencies; provided, however, that so long as
the long term debt or deposit obligations of the Subservicer are rated at least
"A" by S&P and Fitch, the Subservicer shall be allowed to provide self-insurance
with respect to an errors and omissions insurance policy; provided further that
if such long term debt or deposit obligation is at the time of such investment
not rated by Fitch, such long term debt or deposit need only be rated by S&P.
Any such errors and omissions policy and fidelity bond shall not be canceled
without 10 days' prior written notice to the Trustee and the Master Servicer.
2.4 Documents Received After Termination. The Subservicer shall
------------------------------------
promptly deliver and remit to the Master Servicer any Mortgage Files and any and
all bills, invoices,
E-5
<PAGE>
insurance policies, letters, documents and all other correspondence or
communications relating to the Mortgage Loans (collectively, "Loan Documents")
that are received by the Subservicer after termination of this Agreement. The
Subservicer's obligations under this Section 2.4 with respect to such
documents, correspondence and communications shall be those of a trustee or
other fiduciary.
2.5 Remittances into the Collection Account. The Subservicer shall
---------------------------------------
deposit into the Collection Account not later than three Business Days after
receipt thereof or the day preceding each Master Servicer Remittance Date, all
proceeds of Mortgage Loans received by the Subservicer in accordance with
Section 3.1(b)(2) of the Pooling and Servicing Agreement, without any deduction
for the Subservicer's servicing compensation; provided, however, that Mortgage
-------- -------
Loan proceeds received by the Subservicer on or within two Business Days prior
to the Determination Date shall be deposited into the Collection Account no
later than the date after the Determination Date. If the Subservicer fails to
remit to the Master Servicer any amounts required to be remitted pursuant to
this section, the Subservicer shall pay interest at the Advance Rate on amounts
not remitted.
2.6 Statements as to Compliance. On or before April 30 of each year,
---------------------------
beginning April 30, 1997, the Subservicer will deliver to the Master Servicer,
the Trustee and the Depositor an Officers' Certificate stating, as to the
signatory thereof, that (i) a review of the activities of the Subservicer during
the preceding calendar year (or such longer period from the Closing Date to the
end of the related calendar year) and of its performance under this Agreement
has been made under such officer's supervision, (ii) to the best of such
officer's knowledge, based on such review, the Subservicer has fulfilled all of
its obligations under this Agreement in all material respects throughout such
year (or such longer period), or, if there has been a default in the fulfillment
of any such obligation in any material respect, specifying each such default
known to such officer, the nature and status thereof and what action the
Subservicer proposes to take with respect thereto and (iii) whether it has
received any notice regarding qualification, or challenging the status, of
either of the Upper-Tier REMIC or the Lower-Tier REMIC as a REMIC from the
Internal Revenue Service or any other governmental agency or body.
2.7 Purchase of All Outstanding Mortgage Loans. The Subservicer shall
------------------------------------------
be assigned, the right of the Master Servicer
E-7
<PAGE>
during the term of this Agreement to exercise the option contained in Section
9.1(c) of the Pooling and Servicing Agreement to purchase all of the Mortgage
Loans then included in the Trust Fund, all property acquired in respect of any
Mortgage Loan and any assets conveyed to the Trust Fund.
If the Subservicer elects to exercise such option, it shall notify the
Master Servicer and the Trustee of such election no later than 30 days prior to
the Early Termination Determination Date, as provided in Section 9.1 of the
Pooling and Servicing Agreement. Upon payment by the Subservicer to the Master
Servicer for deposit into the Collection Account in accordance with the Pooling
and Servicing Agreement of the amount required by Section 9.1 thereof in
connection with the exercise of such option, the Master Servicer shall release
or cause to be released to the Subservicer, promptly upon its receipt thereof,
the Mortgage Files for the remaining Mortgage Loans and REO Properties, and
shall execute and deliver or cause to be executed and delivered such instruments
of transfer or assignment, in each case without recourse, as shall be necessary
to vest in the Subservicer title to such Mortgage Loans and REO Properties.
2.8 Modifications, Waivers, Amendments and Consents.
-----------------------------------------------
(a) So long as the Subservicer and Special Servicer is LTC, the
Subservicer may, and is hereby expressly permitted to, consent to any
modification, waiver or amendment of any term of any Mortgage Loan serviced by
the Subservicer, or to any substitution of collateral, requested by the related
Borrower without the prior consent of the Master Servicer, except as prohibited
by this Section 2.8. The Subservicer is expressly authorized to execute and
deliver all agreements, letters, certificates and other written instruments
necessary to effect any such modification, waiver or amendment. All
modifications, waivers or amendments of any such Mortgage Loan shall be in
writing and shall be consistent with the servicing standard set forth in Section
3.1 of the Pooling and Servicing Agreement.
(b) The Subservicer may not agree to a modification, waiver or
amendment of any term of any Mortgage Loan if such modification, waiver or
amendment would:
(i) cause (A) a loss of REMIC status with respect to either
the Upper-Tier REMIC or Lower-Tier REMIC,
E-7
<PAGE>
or (B) a gain on the disposition of a Qualified Mortgage which would be
subject to the 100% tax on prohibited transactions imposed by Section
860F(a) of the Code, or (C) the Upper-Tier REMIC or Lower-Tier REMIC to be
subject to any tax under the REMIC Provisions, which shall be required to
be evidenced by an Opinion of Counsel to be obtained at the expense of the
Borrower requesting such modification, waiver or amendment;
(ii) reduce in any manner the amount of, or delay or alter
the timing of, payments to be received on such Mortgage Loan which are
required to be distributed on any Certificate, unless a default in respect
of payment on such Mortgage Loan has occurred, or, in the Subservicer's
reasonable judgment, as evidenced by an Officer's Certificate, is
imminent; or
(iii) result in a release of the lien of the Mortgage on any
material portion of the related Mortgaged Property without a corresponding
principal prepayment in an amount not less than the fair market value (as
determined by an appraisal delivered to the Subservicer) of the property to
be released, or would in the Subservicer's judgment, otherwise materially
impair the security for such Mortgage Loan or reduce the likelihood of
timely payment of amounts due thereon, unless a default in respect of
payment on such Mortgage Loan has occurred, or, in the Subservicer's reason
able judgment, as evidenced by an Officer's Certificate, is imminent.
(c) The Subservicer may (i) extend the date on which any Balloon
Payment is scheduled to be due, and (ii) defer a portion of the scheduled
monthly payments of principal and interest on any Mortgage Loan, provided, that
--------
the Subservicer has determined that the conditions set forth in Sections 3.20(c)
and (d) of the Pooling and Servicing Agreement, respectively, are satisfied.
(d) The Subservicer may from time to time permit a Borrower to
substitute collateral for all or a portion of the related Mortgaged Property or
pledge additional collateral for the related Mortgage Loan, or may release part
of the related Mortgaged Property from the lien of the related Mortgage,
provided, that the Subservicer has determined that the conditions set forth in
Section 3.20(h) of the Pooling and Servicing Agreement
E-8
<PAGE>
are satisfied.
(e) Notwithstanding anything to the contrary contained in this
Agreement, the Subservicer shall not agree to any modification, waiver,
amendment or consent pursuant to subsections (b), (c) or (d) above unless each
Rating Agency shall have confirmed in writing that such modification, waiver,
amendment or consent will not result in the downgrading or withdrawal of the
then current rating of the Certificates by such Rating Agency, or
Certificateholders representing 100% of the Voting Rights shall have consented
thereto.
(f) The Subservicer may, as a condition to granting any request
by a Borrower for consent, modification, waiver or indulgence or any other
matter or thing, the granting of which is not prohibited by the terms of this
Agreement, require that such Borrower pay to the Subservicer, as additional
servicing compensation, a reasonable or customary fee for the additional
services performed in connection with such request, together with any related
costs and expenses incurred by the Subservicer.
(g) The Subservicer is expressly permitted to exercise all of
the rights granted under this Section 2.8 without the prior consent of the
Special Servicer, and upon exercise of such rights, shall not be required to
convey to the Special Servicer any of the Mortgage Loans serviced by the
Subservicer, including any modified or amended Mortgage Loan. The Subservicer is
expressly permitted to, and shall, service and administer the Mortgage Loans it
is obligated to service pursuant to this Agreement.
(h) The Subservicer shall notify the Trustee and the Master
Servicer of any modification, waiver or amendment of any term of any Mortgage
Loan and the date thereof, and shall deliver to the Custodian for deposit in the
related Mortgage File, an original counterpart of the agreement relating to such
modification, waiver or amendment, promptly following the execution thereof.
2.9 Filing and Recording Fees. All costs and fees incurred in
-------------------------
connection with the filing of any UCC-2 or UCC-3 filings or the recording of any
assignments or reassignments of leases, rents and profits pursuant to Section
2.01 of the Pooling and Servicing Agreement shall be borne by the Subservicer.
E-9
<PAGE>
2.10 Advances. All advances required hereunder pursuant to Section
-------
3.22 of the Pooling and Servicing Agreement shall be made no later than 2 days
after the related Determination Date.
3. Compensation to the Subservicer.
-------------------------------
3.1 Subservicing Fee. As compensation for the activities of the
----------------
Subservicer hereunder, the Master Servicer shall, no later than the first
Business Day following each Distribution Date, remit to the Subservicer the
Subservicing Fee, as described below, with respect to each Mortgage Loan,
payable from amounts in the Collection Account paid to the Master Servicer. The
Subservicing Fee, with respect to each Mortgage Loan and for each Due Period,
shall be an amount equal to the product of one-twelfth of the Subservicing Fee
Rate and the Scheduled Principal Balance of each Mortgage Loan outstanding
immediately prior to the application of the Monthly Payment due on the Due Date
in such Due Period; provided however, that the Subservicer's right to receive
-------- -------
the Subservicing Fee shall be subject to the requirement that the Subservicing
Fee be applied to cover any excess of Prepayment Interest Shortfalls over
Prepayment Interest Excess for such Due Period. The Subservicing Fee Rate is
equal to .02% (two basis points) per annum. The right to receive the
Subservicing Fee may not be transferred in whole or in part except in connection
with the transfer of all of the Subservicer's responsibilities and obligations
under this Agreement.
3.2 Reimbursements. The Master Servicer shall remit to the
Subservicer, solely from funds available to Master Servicer pursuant to the
Pooling and Servicing Agreement, the following amounts: (i) amounts sufficient
to reimburse LTC for all Servicing Advances and P&I Advances pursuant to the
Pooling and Servicing Agreement made by LTC plus any applicable interest on any
such advances pursuant to the Pooling and Servicing Agreement, if and when funds
are available for withdrawal in respect thereof by the Master Servicer pursuant
to Section 3.6(ii) of the Pooling and Servicing Agreement; and (ii) amounts
sufficient to indemnify LTC for any loss, liability or expense incurred by LTC
for which indemnity from the Trust Fund is received by the Master Servicer
pursuant to Section 6.3 of the Pooling and Servicing Agreement if and when funds
are available for withdrawal in respect thereof by the Master Servicer pursuant
to the Pooling and Servicing Agreement subject to the Master Servicer's recovery
of its loss, liability or expenses from such
E-10
<PAGE>
monies.
3.3 Other Expenses. The Subservicer shall be required to pay all
--------------
expenses incurred by it in connection with its subservicing activities
hereunder, including payment of premiums for the fidelity bond and insurance
required by Section 2.3 hereof. Except as otherwise provided herein, the Master
Servicer shall not be responsible to reimburse the Subservicer for any expenses
incurred by the Subservicer or any disbursements or advances required to be made
by the Subservicer in the performance of the Subservicer's duties hereunder and
under the Pooling and Servicing Agreement. It is hereby understood that the
Subservicing Fee and the reimbursement payments payable under Section 3.2 hereof
represent the sole compensation payable by the Master Servicer to the
Subservicer hereunder.
3.4 Master Servicer Obligations. The Master Servicer agrees to
---------------------------
request payment and/or reimbursement as contemplated by Sections 3.1 and 3.2
hereof when and as permitted by, and in accordance with, the Pooling and
Servicing Agreement. In addition, the Master Servicer shall furnish the
Subservicer with copies of all notices received by the Master Servicer under the
Pooling and Servicing Agreement (other than such notices furnished by the
Subservicer) as soon as is practicable following the Master Servicer's receipt
of the same.
3.5 Certain Trust Fund Expenses. As long as the Subservicer is LTC
---------------------------
all expenses of the Trust Fund in connection with ongoing fees of the Rating
Agencies shall be borne by the Subservicer at its sole expense.
4. Term. Except in the event that this Agreement is terminated pursuant
----
to Section 5.1, 5.2 or 5.3 hereof, this Agreement shall continue in effect until
the termination of the obligations and responsibilities of the parties to the
Pooling and Servicing Agreement under the Pooling and Servicing Agreement
pursuant to Article IX thereof.
5. Termination.
-----------
5.1 Termination for Cause. The occurrence of any of the following
---------------------
events shall constitute a "Subservicer Default:"
(a) If the Subservicer shall fail to pay to the Master Servicer
any amount due to the Master Servicer pursuant to Section 7.1 hereunder
and such failure shall continue
E-11
<PAGE>
for a period of 30 days after written notice thereof has been delivered to
the Subservicer by the Master Servicer;
(b) If the Subservicer shall fail to make any payment, other
than as described in (a) above, when due hereunder;
(c) If the Subservicer shall materially breach any other term of
this Agreement or any term of the Pooling and Servicing Agreement specified
in Exhibit A hereto and such breach shall not be cured within 50 days after
written notice thereof has been delivered to the Subservicer by the Master
Servicer;
(d) If a decree or order for relief of a court or agency or
supervisory authority having jurisdiction in the premises in an involuntary
case under any present or future federal or state bankruptcy, insolvency or
similar law or the appointment of a conservator or receiver or liquidator
in any insolvency, readjustment of debt, marshalling of assets and
liabilities or similar proceeding, or for the winding-up or liquidation of
its affairs, shall have been entered against the Subservicer and such
decree or order shall have remained in force undischarged or unstayed for a
period of 60 days; or the Subservicer shall consent to the appointment of a
conservator or receiver or liquidator in any insolvency, readjustment of
debt, marshalling of assets and liabilities or similar proceedings of or
relating to the Subservicer or of or relating to all or substantially all
of its property; or the Subservicer shall admit in writing its inability to
pay its debts generally as they become due, file a petition to take
advantage of any applicable bankruptcy, insolvency or reorganization
statute, make an assignment for the benefit of its creditors, voluntarily
suspend payment of its obligations; or
(e) If the Subservicer shall assign or attempt to assign its
interest under this Agreement or delegate or at tempt to delegate any
portion of its rights, duties or obligations hereunder without the written
consent of the Master Servicer; provided, however, that delegation of the
Subservicer's duties and obligations shall not constitute a default
hereunder so long as the Subservicer remains pri marily liable to the
Master Servicer for the duties or obligations so delegated.
E-12
<PAGE>
In each and every case, so long as a Subservicer Default shall not
have been remedied, the Master Servicer may, by notice in writing to the
Subservicer, terminate all of the rights and obligations of the Subservicer as
subservicer under this Agreement. On or after the receipt by the Subservicer of
such written notice, all of its authority and power under this Agreement shall
pass to and be vested in the Master Servicer pursuant to and under this Section.
5.2 Termination by Trustee or Other Successor Master Servicer.
---------------------------------------------------------
Notwithstanding anything to the contrary contained herein, in the event that the
Master Servicer shall, for any reason (including, without limitation,
termination of the Master Servicer pursuant to Article VII of the Pooling and
Servicing Agreement) no longer be the Master Servicer under the Pooling and
Servicing Agreement, the Trustee or any successor Master Servicer under the
Pooling and Servicing Agreement shall, pursuant to Section 9 hereof, assume the
rights and obligations of the Master Servicer under this Agreement. The Trustee
or such successor Master Servicer shall only be entitled to terminate this
Agreement upon the occurrence of the events described in Section 5.1 hereof.
5.3 Rights Upon Termination. Upon termination of this Agreement
-----------------------
pursuant to Section 5.1 hereof, the Subservicer shall deliver to the Master
Servicer all documents relating to the Mortgage Loans in its possession not
previously delivered to the Master Servicer, together with all funds held with
respect to the Mortgage Loans. In addition, the Subservicer shall cooperate with
the Master Servicer and use its reasonable best efforts to assist the Master
Servicer in the transfer of the servicing rights to the Master Servicer or the
Master Servicer's nominee. Upon termination of this Agreement pursuant to
Section 5.2 hereof, the Subservicer shall deliver to the Trustee, as successor
to the rights and obligations of the Master Servicer hereunder, all documents
relating to the Mortgage Loans in its possession not previously delivered to
the Master Servicer, together with all funds held with respect to the Mortgage
Loans, and shall cooperate with and assist the Trustee to the same extent as it
would the Master Servicer pursuant to the preceding sentence. The Master
Servicer and the Subservicer each covenants and agrees to comply with all laws,
rules and regulations of any federal, state or local government authority
applicable to the termination of this Agreement and the transfer of the
servicing rights to the Master Servicer or the Trustee, as applicable.
E-13
<PAGE>
5.4 Limitation on Resignation of the Subservicer. The Subservicer
--------------------------------------------
shall not resign from the obligations and duties hereby imposed on it except (a)
by mutual consent of the Master Servicer and the Subservicer, or (b) upon
determination that its duties hereunder are no longer permissible under
applicable law. Any such determination pursuant to the foregoing clauses shall
be evidenced by an Opinion of Counsel to such effect delivered to the Master
Servicer.
6. Additional Rights of the Master Servicer.
----------------------------------------
6.1 Ownership of Documentation. Subject to the rights of the Trustee
--------------------------
and the Certificateholders under the Pooling and Servicing Agreement, all
Mortgage Files held or received by the Subservicer in connection with the
subservicing of the Mortgage Loans, whether or not prepared, developed or
originated by the Subservicer, shall be and remain at all times the property of
the Master Servicer, it being expressly understood that any Mortgage Files in
the possession of the Subservicer are retained in a custodial capacity only in
order, and during only such time as is necessary, to permit the performance of
the Subservicer's obligations hereunder. Subject to the last sentence of this
Section 6.1, the Subservicer shall not acquire any vested rights with respect to
the Mortgage Files and shall not have the right to possession of them except as
may be necessary to permit the Subservicer to fulfill its obligations hereunder.
Subsequent to the termination of this Agreement, the Subservicer shall promptly
deliver all such Mortgage Files to the Master Servicer or the Trustee, as
applicable. Such delivery shall be accompanied by a list identifying the
Mortgage File for each Mortgage Loan, the Master Servicer's loan number
(provided that the Master Servicer previously has furnished its loan numbers to
the Subservicer) and such other information as is reasonably requested by the
Master Servicer or the Trustee to identify the Mortgage Loans so delivered.
Notwithstanding anything contained in this Section 6.1 to the contrary, copies
of Mortgage Files maintained by the Subservicer shall remain the property of the
Subservicer and may be retained by the Subservicer after the termination of this
Agreement.
6.2 Inspection of Mortgage Records. The Master Servicer and its
------------------------------
representatives, agents, consultants, examiners and other Persons authorized by
the Master Servicer shall have the right to inspect the documents and records
maintained by the Subservicer with respect to the Mortgage Loans during the
Subservicer's regular business hours upon reasonable notice, and
E-14
<PAGE>
the Subservicer shall make such documents and records available to the Master
Servicer for inspection. The Subservicer shall afford the Depositor and the
Trustee access to records in accordance with Sections 3.23, 6.5 and 6.8 of the
Pooling and Servicing Agreement.
7. Indemnification.
---------------
7.1 General. The Subservicer agrees to pay, and shall indemnify,
-------
defend and hold harmless, the Master Servicer and the Master Servicer's
directors, officers, employees and agents (collectively, "Indemnitee"), from
and against any loss, liability, penalty, fine or expense incurred in connection
with any action or claim (including the reasonable compensation and the expenses
and disbursements of its counsel) incurred in defending any claim or action or
enforcing this indemnity that may result from, relate to or arise out of the
Subservicer's acting as subservicer under, breach of or failure to act under,
this Agreement or any payment contemplated under, or transaction contemplated
by, this Agreement; provided, however, that the indemnity obligation of the
-------- -------
Subservicer shall not apply to any loss, liability or expense arising or
resulting from (a) the negligence, intentional misconduct or bad faith of such
Indemnitee, (b) the failure of the Master Servicer to perform its obligations
hereunder, (c) the breach of the Master Servicer's representations and
warranties in Section 2.5 of the Pooling and Servicing Agreement or (d) actions
taken, or omitted to be taken, by the Subservicer specifically in accordance
with instructions furnished by the Master Servicer pursuant to or in connection
with this Agreement; and provided, further, that upon full payment of the
-------- -------
indemnity provided herein, the Subservicer shall be subrogated to all rights and
remedies of the Indemnitee so indemnified, in respect of the matter against
which indemnity has been paid.
7.2 Survival. All indemnities, obligations, adjusments and payments
--------
provided for in this Section 7 shall survive, and remain in full force and
effect, notwithstanding the expiration or other termination of this Agreement
or of the Pooling and Servicing Agreement. The obligations of the Subservicer in
respect of all such indemnities, obligations, adjustments and payments are
expressly made for the benefit of, and shall be enforceable by, the Indemnitee
entitled thereto, without declaring any breach of or default under the Pooling
and Servicing Agreement or taking any other action thereunder, and
notwithstanding any provision of the Pooling and Servicing Agreement.
E-16
<PAGE>
8. Notices. Any notices and communications hereunder shall be given and
-------
deemed given as provided for in Section 10.4 of the Pooling and Servicing
Agreement.
9. Right of Assumption by Trustee. In the event that the Master Servicer
------------------------------
shall, for any reason, no longer be the Master Servicer under the Pooling and
Servicing Agreement, including without limitation termination of the Master
Servicer in accordance with Article VII thereof, the Trustee, as successor to
the Master Servicer in its capacity as the Master Servicer under the Pooling and
Servicing Agreement or any successor Master Servicer, shall succeed to all of
the rights, title and interest of the Master Servicer and assume all of the
obligations, duties and liabilities of the Master Servicer under this Agreement
without any further act. In such event, the Trustee or the successor Master
Servicer appointed pursuant to the Pooling and Servicing Agreement shall be
deemed to have replaced the Master Servicer as a party to this Agreement to the
same extent as if this Agreement had been assigned to the assuming party.
Notwithstanding the foregoing, the Master Servicer shall not thereby be relieved
of any obligations, duties or liabilities under this Agreement with regard to
events occurring prior to the date the Master Servicer ceased to be the Master
Servicer under the Pooling and Servicing Agreement. Following the assumption of
the rights and obligations of the Master Servicer pursuant to this Section, the
Subservicer at the expense of the Master Servicer shall, upon the request of the
Trustee or such successor Master Servicer, deliver to the assuming party all
documents and records relating to this Agreement and the Mortgage Loans then
being serviced and an accounting of amounts collected and held by it and
otherwise use its reasonable best efforts to effect the orderly and efficient
transfer of this Agreement to the assuming party.
10. Miscellaneous.
-------------
10.1 Entire Agreement; Amendments. This Agreement together with the
----------------------------
other written agreements referred to herein is intended by the parties to be the
final expression of their agreement with respect to the subject matter hereof,
and is intended as the complete and exclusive statement of the terms of the
agreement between the parties. As such, this Agreement supersedes any prior
understanding between the parties, whether oral or written. Notwithstanding the
foregoing, in the event that the provisions of this Agreement are inconsistent
with the provisions of the Pooling and Servicing Agreement, the provisions of
the Pooling and Servicing Agreement shall prevail. Any
E-16
<PAGE>
amendments to this Agreement shall be in writing and shall be signed by all
parties hereto.
10.2 Invalidity. To the extent permitted by law, the invalidity of
----------
any portion of this Agreement shall in no way affect the remaining portions
hereof.
10.3 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
-------------
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
10.4 Agreement Binding. This Agreement shall be binding upon and
-----------------
inure to the benefit of the parties hereto and their respective successors and
permitted assigns.
10.5 Counterparts. This Agreement may be executed in any number of
------------
counterparts. Each counterpart so executed shall be deemed an original, but all
such counterparts shall together constitute one and the same instrument.
10.6 Assignment. Neither party shall assign this Agreement or any
----------
rights hereunder (including but not limited to the right to receive compensation
or money due hereunder) without the prior written consent of the other party
hereto; provided, however, that any assumption of the Master Servicer's rights
-------- -------
pursuant to Section 9 hereof and Sections 6.2 and 6.4 of the Pooling and
Servicing Agreement shall not require the consent of either party hereto.
10.7 Disputes. In the event of any dispute between the parties to
--------
this Agreement, the prevailing party shall be entitled to immediate payment of
all costs incurred by such party in such dispute, including but not limited to
court costs and reasonable attorneys's fees.
10.8 Section Headings. Section headings of this Agreement are
----------------
inserted for convenience only and do not in any manner limit or expand this
Agreement and do not constitute a part of this Agreement.
10.9 Further Assurances. To the extent permitted by law, each of the
------------------
Master Servicer and the Subservicer agrees that it will, from time to time,
execute, acknowledge and deliver, or cause to be executed, acknowledged and
delivered, such further instruments as either party hereto or the Trustee may
reasonably request to effectuate the intention of or facilitate the perfor-
E-17
<PAGE>
mance of this Agreement or the Pooling and Servicing Agreement.
10.10 Exercise of Rights. No failure or delay on the part of either
------------------
party to exercise any right, power or privilege under this Agreement and no
course of dealing between the Master Servicer and the Subservicer shall operate
as a waiver thereof, nor shall any single or partial exercise of any right,
power or privilege under this Agreement preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein expressly provided are cumulative and not exclusive of any
rights or remedies which a party would otherwise have pursuant to law or equity.
No notice to or demand on any party in any case shall entitle such party to any
other or further notice or demand in similar or other circumstances, or
constitute a waiver of the right of the other party to any other or further
action in any circumstances without notice or demand.
E-18
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first set forth above.
GMAC COMMERCIAL MORTGAGE
CORPORATION
By:
Name:
Title:
LTC PROPERTIES, INC.
By:________________________________
Name:
Title:
E-19
<PAGE>
EXHIBIT A
Schedule of Duties
to be Performed by the Subservicer
In addition to the duties otherwise contained in the Subservicing
Agreement, the Subservicer shall be obligated to perform the following, in each
case at the time and in the manner required under the terms of the Pooling and
Servicing Agreement (capitalized terms used in this Exhibit A have the meanings
assigned thereto in the Subservicing Agreement or the Pooling and Servicing
Agreement, as the case may be):
1. To provide the Trustee and the Master Servicer with the list of
servicing officers of the Subservicer as defined in the definition of "Servicing
Officer" in Article I of the Pooling and Servicing Agreement.
2. Upon discovery by the Subservicer of the existence in any material
respect of a repurchase or substitution event as set forth in Section 3.2 of the
Transfer and Repurchase Agreement in respect of any Mortgage Loan, to give
prompt notice to the Trustee, the Master Servicer and the Special Master
Servicer as required of the Master Servicer in Section 2.3 of the Pooling and
Servicing Agreement.
3. To give the notices required of the Master Servicer by Section 2.3(c)
of the Pooling and Servicing Agreement.
4. To give the notices required of the Master Servicer by Section 2.5(b)
of the Pooling and Servicing Agreement.
5. To give the notices required of the Master Servicer by Section 2.6(b)
of the Pooling and Servicing Agreement.
6. To (a) perform the duties of the Master Servicer set forth in
Subsection 3.1(a) of the Pooling and Servicing Agreement, (b) indemnify the
Master Servicer, the Trustee and the Depositor, as specified in the Pooling and
Servicing Agreement, to the extent the Subservicer breaches its obligations in
the Subservicing Agreement, (c) comply with all statutory or regulatory
requirements with regard to the manner in which it conducts its activities
pursuant to this item and the Subservicing Agreement, and (d) cooperate with
the Master Servicer in its performance of the Master Servicer's duties in
Section 3.1(a) of the
E-20
<PAGE>
Pooling and Servicing Agreement. The indemnities of the Subservicer pursuant to
this item shall survive the termination or discharge of the Subservicing
Agreement or the Pooling and Servicing Agreement. Notwithstanding anything
contained herein to the contrary, the Subservicer shall not be permitted to
terminate the Special Servicer without the prior written consent of the Master
Servicer.
7. To perform the duties of the Master Servicer set forth in Sections
3.1(d) (subject to the Master Servicer's determination regarding
recoverability), 3.3, 3.4 (subject to the Master Servicer's determination
regarding recoverability), 3.8, 3.9, 3.10, 3.16, 3.22, 4.8 and 6.8 of the
Pooling and Servicing Agreement.
8. To provide the information needed by the Master Servicer for the
Master Servicer to provide the reports required in Section 4.3 of Pooling and
Servicing Agreement.
9. To provide information reasonably requested by the Master Servicer to
enable the Master Servicer to deliver the statements required by Section 3.13 of
the Pooling and Servicing Agreement.
10. At the Master Servicer's request to perform the duties set forth in
Sections 3.21(a) and 3.21(d) of the Pooling and Servicing Agreement.
11. To deliver to the Master Servicer (i) an Officer's Certificate of the
Subservicer, containing substantially the information required pursuant to
Section 3.14 of the Pooling and Servicing Agreement on or before April 15 of
each year, beginning April 30, 1997, but referring to the Subservicer's
obligations under the Subservicing Agreement, (ii) an annual independent public
accountants' servicing report, containing substantially the information required
pursuant to Section 3.15 of the Pooling and Servicing Agreement on or before
April 30 of each year, beginning April 15, 1997, but referring to the
Subservicer's obligations under the Subservicing Agreement, and (iii) such other
information, certified by a responsible officer of the Subservicer, regarding
the Subservicer's organization, activities and personnel as the Master Servicer
or the Trustee may reason ably request from time to time.
12. To perform the inspections required of the Master Servicer in Section
3.19 of the Pooling and Servicing Agreement.
E-21
<PAGE>
13. To perform the duties of the Master Servicer set forth in Section 6.5
of the Pooling and Servicing Agreement.
E-22
<PAGE>
Exhibit B
- ---------
Remittance to GMAC Trust for period ending
<TABLE>
<CAPTION>
Facility # Beginning Principal Monthly Principal Interest Scheduled Mortgage Servicing Net
Balance Prepymts Payment Ending Interest Fees Mortgage
Balance Rate Interest
Rate
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PC 001
PC 002
PC 002
<CAPTION>
Paid Liquidation Liquidation Loan Payment
Through Date Amount Status Retension
Date Account
Indicate
- -------------------------------------------------------------------
<S> <C> <C> <C> <C>
</TABLE>
E-23
<PAGE>
<TABLE>
<CAPTION>
Facility # Beginning Principal Monthly Principal Interest Scheduled Mortgage Servicing Net
Balance Prepymts Payment Ending Interest Fees Mortgage
Balance Rate Interest
Rate
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PC 003
PC 004
PC 005
PC 006
PC 007
PC 008
0.00 0.00 0.00 0.00 0.00
---- ---- ---- ---- ----
<CAPTION>
Paid Liquidation Liquidation Loan Payment
Through Date Amount Status Retension
Date Account
Indicate
- -----------------------------------------------------------------
<S> <C> <C> <C> <C>
</TABLE>
E-24
<PAGE>
LTC PROPERTIES, INC.
EXHIBIT 11.1
COMPUTATION OF NET INCOME PER SHARE
<TABLE>
<CAPTION>
(Unaudited)
(In thousands, except per share amounts)
<S> <C> <C> <C> <C>
Twelve months ended December 31,
1996 1995 1994
---- ---- ----
(Restated)
-------------------------------------------------------
Primary:
Net income applicable to common shares $28,710 $18,384 $17,210
=======================================================
Applicable common shares:
Weighted average outstanding shares during the period 18,823 18,030 15,241
Weighted average shares issuable upon exercise of common stock
equivalents outstanding (principally stock options using the
treasury
stock method) 434 227 202
Less contingent shares - - -
-------------------------------------------------------
Total 19,257 18,257 15,443
=======================================================
Net income per share of common stock $1.49 $1.01 $ 1.11
=======================================================
Fully diluted:
Net income $ 28,710 $18,384 $17,210
Add back minority interest -(a) 57 n/a
Reduction of interest and amortization expenses resulting from
assumed conversion of 9.75% convertible subordinated debentures 145 1,239 -(a)
Reduction of interest and amortization expenses resulting from
assumed conversion of 8.5% convertible subordinated debentures -(a) -(a) -
Reduction of interest and amortization expenses resulting from
assumed conversion of 8.25% convertible subordinated debentures -(a) -(a) n/a
Reduction of interest and amortization expense resulting from
assumed conversion of 7.75% convertible subordinated debentures -(a) n/a n/a
Less applicable income taxes - -
-------------------------------------------------------
Adjusted net income applicable to common shares $28,855 $19,680 $17,210
=======================================================
Applicable common shares:
Weighted average outstanding shares during the period 18,823 18,030 15,241
Weighted average shares sizable upon exercise of common stock
equivalents outstanding (principally stock options using the
treasury
stock method) 499 250 216
Assumed conversion of 9.75% convertible subordinated debentures 145 1,225 -(a)
Assumed conversion of 8.5% convertible subordinated debentures -(a) -(a) -(a)
Assumed conversion of 8.25% convertible subordinated debentures -(a) -(a) n/a
Assumed conversion of 7.75% convertible subordinated debentures -(a) n/a n/a
Less contingent shares - - -
-------------------------------------------------------
Total 19,467 19,505 15,457
=======================================================
Net income per share of common stock $1.48 $1.01 $ 1.11
=======================================================
(a) Conversion would be anti-dilutive and is therefore not assumed
in the computation of fully diluted net income per share of common
stock.
</TABLE>
<PAGE>
LTC PROPERTIES, INC.
EXHIBIT 21.1
LIST OF SUBSIDIARIES
COMPANY STATE OF INCORPORATION
- ------- ----------------------
LTC REMIC Corporation Delaware
LTC GP I, Inc. Delaware
LTC GP II, Inc. Delaware
LTC GP III, Inc. Delaware
LTC GP IV, Inc. Delaware
Coronado Corporation Delaware
LTC Partners I, L.P. Delaware
LTC Partners II, L.P. Delaware
LTC Partners III, L.P. Delaware
LTC Partners IV, L.P. Delaware
LTC Partners V, L.P. Delaware
LTC Partners VI, L.P. Delaware
LTC Partners VII, L.P. Delaware
L-Tex GP, Inc. Delaware
L-Tex LP Corporation Delaware
Texas-LTC Limited Partnership Texas
Missouri River Corporation Delaware
Park Villa Corporation Delaware
Kansas-LTC Corporation Delaware
<PAGE>
LTC PROPERTIES, INC.
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement (Form
S-3 No. 333-2444) and in the Registration Statement (Form S-8 No. 33-85252) of
LTC Properties, Inc. of our report dated January 13, 1997, except Note 10, as to
which the date is February 1, 1997, with respect to the consolidated financial
statements and schedules of LTC Properties, Inc., as amended, included in its
Annual Report (Form 10-K/A) for the year ended December 31, 1996.
/s/ ERNST & YOUNG LLP
Los Angeles, California
February 11, 1997
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<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 3,148
<SECURITIES> 98,934
<RECEIVABLES> 178,262
<ALLOWANCES> 1,000
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 223,578
<DEPRECIATION> 11,640
<TOTAL-ASSETS> 500,538
<CURRENT-LIABILITIES> 0
<BONDS> 8,300
0
0
<COMMON> 195
<OTHER-SE> 190,608
<TOTAL-LIABILITY-AND-EQUITY> 500,538
<SALES> 0
<TOTAL-REVENUES> 54,930
<CGS> 0
<TOTAL-COSTS> 32,393
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 20,604
<INCOME-PRETAX> 28,710
<INCOME-TAX> 0
<INCOME-CONTINUING> 28,710
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 28,710
<EPS-PRIMARY> 1.49
<EPS-DILUTED> 1.48
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