<PAGE>
- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20459
----------
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition period from ____ to ____
Commission file number 1-11314
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)
(805) 981-8655
(Registrant's telephone number, including area code)
Indicate by check mark whether Registrant (1) has filed all reports 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 Registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No __
Shares of Registrant's common stock, $.01 par value, outstanding at November 6,
1998 - 27,837,485
- --------------------------------------------------------------------------------
<PAGE>
LTC PROPERTIES, INC.
FORM 10-Q
SEPTEMBER 30, 1998
INDEX
PART I -- FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Condensed Consolidated Balance Sheets................................ 3
Condensed Consolidated Statements of Income ......................... 4
Condensed Consolidated Statements of Cash Flows ..................... 5
Notes to Condensed Consolidated Financial Statements ................ 6
Item 2. Management's Discussion and
Analysis of Financial Condition and Results of Operations .......... 11
PART II -- OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K ................................... 18
2
<PAGE>
LTC PROPERTIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
-------------------------------------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Real Estate Investments:
Buildings and improvements, net of accumulated depreciation and
amortization: 1998 - $23,941; 1997 - $20,042 $ 362,869 $ 282,582
Land 16,696 16,246
Mortgage loans receivable held for sale, net of allowance for doubtful
accounts: 1998 - $1,000; 1997 - $1,000 170,267 254,094
REMIC Certificates, at estimated fair value 101,194 87,811
-------------------------------------------
Real estate investments, net 651,026 640,733
Other Assets:
Cash and cash equivalents 25,435 4,974
Debt issue costs, net 2,635 3,733
Interest receivable 3,214 3,862
Note receivable from LTC Healthcare, Inc. 12,363 -
Prepaid expenses and other assets 4,133 3,362
-------------------------------------------
47,780 15,931
-------------------------------------------
Total assets $ 698,806 $ 656,664
-------------------------------------------
-------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Convertible subordinated debentures due 1999-2001 $ 59,429 $ 91,823
Bank borrowings 101,500 87,500
Mortgage loans 55,539 56,785
Bonds payable and capital lease obligations 17,656 13,616
Accrued interest 2,228 4,453
Accrued expenses and other liabilities 7,936 4,429
Distributions payable 985 772
-------------------------------------------
Total liabilities 245,273 259,378
Minority interest 10,243 11,159
Commitments
Stockholders' equity:
Preferred stock $0.01 par value: 10,000,000 shares authorized;
shares issued and outstanding: 1998-7,080,000, 1997-5,080,000 165,500 127,000
Common stock: $0.01 par value; 40,000,000 shares authorized;
shares issued and outstanding: 1998-27,678,905, 1997-25,025,003 277 250
Capital in excess of par value 310,550 277,732
Notes receivable from stockholders (11,128) (9,429)
Cumulative net income 146,014 107,677
Cumulative distributions (167,923) (117,103)
-------------------------------------------
Total stockholders' equity 443,290 386,127
-------------------------------------------
Total liabilities and stockholders' equity $ 698,806 $ 656,664
-------------------------------------------
-------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES
3
<PAGE>
LTC PROPERTIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------------------- --------------------------------
1998 1997 1998 1997
-------------------------------- --------------------------------
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 11,777 $ 8,211 $ 31,424 $ 22,086
Interest income from mortgage loans 4,747 6,682 17,886 19,170
Interest income from REMIC Certificates 4,614 3,355 12,357 10,802
Interest and other income 2,113 561 5,382 1,353
---------- ---------- ---------- ----------
Total revenues 23,251 18,809 67,049 53,411
---------- ---------- ---------- ----------
Expenses:
Interest expense 6,101 6,126 17,634 17,465
Depreciation and amortization 3,942 2,403 9,423 6,578
Minority interest 382 307 1,110 901
Operating and other expenses 1,329 856 3,893 2,801
---------- ---------- ---------- ----------
Total expenses 11,754 9,692 32,060 27,745
---------- ---------- ---------- ----------
Operating income 11,497 9,117 34,989 25,666
Other Income:
Unrealized gain (loss) on REMIC Certificates (6,481) 257 (6,578) 57
Gain on sale of real estate 1,738 - 9,926 -
Other income, net - - - 111
---------- ---------- ---------- ----------
Total other income (4,743) 257 3,348 168
---------- ---------- ---------- ----------
Net income 6,754 9,374 38,337 25,834
Preferred dividends (3,217) (1,829) (9,125) (4,084)
---------- ---------- ---------- ----------
Net income available to common stockholders $ 3,537 $ 7,545 $ 29,212 $ 21,750
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Net Income per Common Share:
Basic net income per common share $ 0.13 $ 0.32 $ 1.09 $ 0.95
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Diluted net income per common share $ 0.13 $ 0.31 $ 1.08 $ 0.93
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
SEE ACCOMPANYING NOTES
4
<PAGE>
LTC PROPERTIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------------------
1998 1997
--------------------- ---------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 38,337 $ 25,834
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 9,423 6,578
Gain on sale of real estate (9,926) -
Unrealized holding (gain) loss on estimated fair value of REMIC
Certificates 6,578 (57)
Gain on sale of REMIC Certificates - (1,231)
Vesting of restricted stock - 1,120
Other non-cash charges 1,723 1,578
Net change in other assets and liabilities (824) (1,679)
--------------------- ---------------------
Net cash provided by operating activities 45,311 32,143
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of preferred stock, net 37,605 73,800
Proceeds from issuance of common stock, net - 35,444
Borrowings under the lines of credit 217,000 246,532
Repayments of bank borrowings (203,000) (195,245)
Principal payments on mortgage loans payable and capital lease obligations (4,910) (2,558)
Distributions paid (39,883) (35,285)
Other (969) (649)
--------------------- ---------------------
Net cash provided by (used in) financing activities 5,843 122,039
CASH FLOWS USED IN INVESTING ACTIVITIES:
Investment in real estate mortgages (28,348) (74,832)
Acquisitions of real estate properties, net (135,419) (99,792)
Proceeds from the sale of REMIC Certificates, net 108,613 11,811
Sale of real estate properties 16,706 -
Principal payments on mortgage loans receivable 1,351 6,701
Investment in LTC Healthcare, Inc. (2,001) -
Advances under note receivable from LTC Healthcare, Inc., net (8,635)
Payments on note receivable from LTC Healthcare, Inc., net 17,668 -
Other (628) 180
--------------------- ---------------------
Net cash used in investing activities (30,693) (155,932)
--------------------- ---------------------
Increase (decrease) in cash and cash equivalents 20,461 (1,750)
Cash and cash equivalents, beginning of period 4,974 3,148
--------------------- ---------------------
Cash and cash equivalents, end of period $ 25,435 $ 1,398
--------------------- ---------------------
--------------------- ---------------------
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 19,106 $ 16,938
Non-cash investing and financing transactions:
Conversion of debentures into common stock $ 32,284 $ 43,555
Distribution of investment in LTC Healthcare, Inc. 10,724 -
Notes receivable relating to exercise of employee stock options 2,088 7,774
Assumption of mortgage loans payable for acquisitions of real estate
properties 11,224 -
Conversion of mortgage loans into owned properties 7,301 15,831
Minority interest related to acquisitions of real estate properties 3,432 -
</TABLE>
SEE ACCOMPANYING NOTES
5
<PAGE>
LTC PROPERTIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL
The condensed consolidated financial statements included herein have been
prepared by LTC Properties, Inc. (the "Company") without audit and in the
opinion of management, include all adjustments necessary for a fair
presentation of the results of operations for the three and nine months ended
September 30, 1998 and 1997 pursuant to the rules and regulations of the
Securities and Exchange Commission. The accompanying condensed consolidated
financial statements include the accounts of the Company, its wholly-owned
subsidiaries and controlled partnerships. All significant intercompany
accounts and transactions have been eliminated in consolidation. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations; however, the Company believes that the disclosures in the
accompanying financial statements are adequate to make the information
presented not misleading. The results of operations for the three and nine
months ended September 30, 1998 and 1997 are not necessarily indicative of
the results for a full year. Certain reclassifications have been made to the
prior year financial statements to conform to the current year presentation.
No provision has been made for federal income taxes. The Company qualifies as
a real estate investment trust ("REIT") under Sections 856 through 860 of the
Internal Revenue Code of 1986, as amended. As such, the Company is not taxed
on its income that is distributed to its stockholders.
2. REAL ESTATE INVESTMENTS
MORTGAGE LOANS. During the three months ended September 30, 1998, the Company
invested $3,571,000 in a mortgage loan secured by a skilled nursing facility
with 212 beds and $6,521,000 (net of construction funding) in mortgage loans
secured by four assisted living facilities ("ALFs") with 166 units.
OWNED PROPERTIES. During the three months ended September 30, 1998, the Company
acquired an ALF with 53 units for $3,710,000, a charter school for $5,333,000
and provided additional funding of $496,000 for properties that were previously
acquired.
In September 1998, the Company sold two skilled nursing facilities acquired in
1994 and located in California for gross proceeds of approximately $5,106,000.
The Company's initial and net investment in this facility was approximately
$3,823,000 and $3,332,000, respectively. Proceeds from the sale of these
properties were used to repay borrowings outstanding under the Company's line of
credit. The Company recognized a gain of approximately $1,738,000 on the sale of
these facilities.
REMIC CERTIFICATES. As of September 30, 1998, the outstanding certificate
principal balance and the weighted average pass-through rate for the senior
REMIC Certificates (all held by outside third parties) was $302,304,000 and
7.29%. As of September 30, 1998, the face value and the estimated fair value of
the subordinated REMIC Certificates held by the Company was $82,662,000 and
$101,194,000, respectively. The effective yield on the subordinated REMIC
Certificates held by the Company, based on expected future cash flows discounted
to give effect to potential risks associated with prepayments and unanticipated
credit losses was 17.9% at September 30, 1998.
In October 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 134, "ACCOUNTING FOR
MORTGAGE-BACKED SECURITIES RETAINED AFTER THE SECURITIZATION OF MORTGAGE LOANS
HELD FOR SALE BY A MORTGAGE BANKING ENTERPRISE" ("SFAS 134") which amends SFAS
No. 115, "ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT AND EQUITY SECURITIES"
6
<PAGE>
LTC PROPERTIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
("SFAS 115"). Currently, under the provisions of SFAS 115, the Company is
required to classify its investment in REMIC Certificates as trading
securities, without regard to investment intent or the ability to hold such
securities, which are accounted for at fair value with unrealized holding
gains and losses recorded in earnings. SFAS 134 permits the transfer of
mortgage-backed securities from the trading category to the
available-for-sale or held-to-maturity categories based on the Company's
ability and intent, as of the date of adoption of SFAS 134, to hold such
investments. Under the provisions of SFAS 134, the Company will classify its
investment in REMIC Certificates as available-for-sale securities or
held-to-maturity securities which will result in unrealized holding gains and
losses no longer being recorded in earnings. Available-for-sale REMIC
Certificates will continue to be accounted for at fair value with unrealized
holding gains and losses recorded as a separate component of stockholders'
equity and held-to-maturity REMIC Certificates will be accounted for at
amortized cost. For the three and nine months ended September 30, 1998, the
Company recorded unrealized holding losses in earnings of $6,481,000 and
$6,578,000, respectively, on its REMIC Certificates. SFAS 134 is effective
for the first fiscal quarter beginning after December 15, 1998.
COMMITMENTS. As of November 6, 1998, the Company had outstanding commitments
aggregating approximately $124,700,000 of which $47,200,000 and $50,000,000
are due to expire in 1999 and 2000, respectively.
INVESTMENTS COMPLETED SUBSEQUENT TO SEPTEMBER 30, 1998. Subsequent to
September 30, 1998, the Company funded two mortgage loans for approximately
$5,589,000.
3. LTC HEALTHCARE, INC.
During 1998, the Company acquired 4,002 shares of LTC Healthcare, Inc.
("Healthcare") non-voting common stock for $2,001,000 and contributed equity
investments with a book value of $788,000, 13 real estate properties with a
net book value of $61,462,000 that were encumbered by mortgage debt on seven
of the properties of $29,263,000 and a minority interest liability of
$3,461,000, and other related assets and liabilities with a book value of
$93,000 to Healthcare in exchange for an additional 36,000 shares of
Healthcare non-voting common stock and borrowings by Healthcare under the
unsecured line of credit provided by the Company of $21,396,000. During 1998,
the Company provided additional funding of $8,635,000 under the unsecured
line of credit. Subsequent to the contribution of the above assets and
liabilities by the Company to Healthcare, Healthcare obtained mortgage
financing of $17,400,000 from a third-party lender on four of the
unencumbered properties. Healthcare utilized proceeds from the mortgage debt
and cash on hand to repay borrowings of $17,668,000 under the unsecured line
of credit provided by the Company.
On September 30, 1998, the 40,002 shares of Healthcare non-voting common
stock held by the Company were converted into 3,335,882 shares of Healthcare
voting common stock. Concurrently, the Company completed the spin-off of all
Healthcare voting common stock through a taxable dividend distribution to the
holders of Company common stock, Cumulative Convertible Series C Preferred
Stock ("Series C Preferred Stock") and Convertible Subordinated Debentures
(the "Debentures"). One share of Healthcare common stock was distributed to
each holder of Company common stock, Series C Preferred Stock and Debentures
for each ten shares of Company common stock owned and for each ten shares of
Company common stock that would have been issued upon conversion of the
Debentures and Series C Preferred Stock. The Company incurred costs of
approximately $500,000 in connection with the
7
<PAGE>
LTC PROPERTIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
distribution. Upon completion of the distribution, Healthcare began operating
as a separate public company.
For book purposes, no gain was recognized on the distribution of Healthcare
common stock which had a net book value of approximately $10,724,000. The
distribution was a taxable dividend distribution and accordingly, for tax
purposes, the net assets were transferred at their net fair market value of
approximately $15,650,000 ($4.69 per share of Healthcare common stock) which
resulted in a taxable gain of approximately $4,900,000.
The Company and Healthcare have entered into various agreements which, among
other things, provide for a sharing of corporate overhead under an
administrative services agreement. During the three months ended September
30, 1998, the Company charged Healthcare an administrative services fee of
approximately $175,000. In addition, the Company provided Healthcare with a
$20.0 million unsecured line of credit that bears interest at 10% and matures
in March 2008. As of September 30, 1998 approximately $12,363,000 was
outstanding under the line of credit. The Company recorded interest income
related to the unsecured line of credit of $222,200 and $320,700 for the three
and nine months ended September 30, 1998, respectively.
Subsequent to September 30, 1998, the Company acquired 299,900 shares of
Healthcare common stock, representing approximately 9.0% of Healthcare's
outstanding common stock, for an aggregate purchase price of $644,000
(excluding brokerage commissions).
4. DEBT OBLIGATIONS
BANK BORROWINGS. As of September 30, 1998, $101,500,000 was outstanding under
the Company's $170,000,000 Senior Unsecured Revolving Line of Credit (the
"Revolving Credit Facility") which expires on October 3, 2000. On October 2,
1998, the Company repaid borrowings of $23,000,000 under the Revolving Credit
Facility. The Revolving Credit Facility pricing varies between LIBOR plus
1.25% and LIBOR plus 1.5% depending on the Company's leverage ratio.
Currently the pricing is LIBOR plus 1.25%.
During the third quarter of 1998, the Revolving Credit Facility was amended
to permit the Company to invest up to $75 million in the child-care and
education industry. The Revolving Credit Facility contains financial
covenants including, but not limited to, maximum leverage ratios, minimum
debt-service coverage ratios, cash flow coverage ratios and minimum
consolidated tangible net worth.
On November 2, 1998, the Company entered into an interest rate swap agreement
whereby the Company effectively fixed the interest rate on LIBOR based
variable rate debt. Under this agreement, which expires in November 2000, the
Company will be credited interest at three month LIBOR and will incur
interest at a fixed rate of 4.74% on a notional amount of $50,000,000. The
notional amount of the interest rate swap is used to measure interest to be
paid or received and does not represent the amount of exposure to credit
loss. The differential paid or received on the interest rate swap will be
recognized as an adjustment to interest expense.
In June 1998, the FASB issued SFAS No. 133, "ACCOUNTING FOR DERIVATIVE
INSTRUMENTS AND HEDGING ACTIVITIES" ("SFAS 133") which is effective for
fiscal years beginning after June 1999. SFAS 133 requires all derivatives to
be recorded at fair value and establishes unique accounting for fair value
hedges, cash flow hedges and foreign currency net investment hedges. Under
SFAS 133, the Company's
8
<PAGE>
LTC PROPERTIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
interest rate swap would be designated as a cash flow hedge of $50,000,000
outstanding principal balance under the Revolving Credit Facility and would
be recorded at fair value with changes in fair value recognized as a
component of comprehensive income. Because of the Company's limited use of
derivatives, management does not anticipate that the adoption of SFAS 133
will have a significant effect on the Company's financial position or results
of operations.
CONVERTIBLE SUBORDINATED DEBENTURES. On July 1, 1998, the Company redeemed
the outstanding $90,000 principal amount of its 8.5% Convertible Subordinated
Debentures due 2000 and $20,000 principal amount of its 9.75% Convertible
Subordinated Debentures due 2004. During the three months ended September 30,
1998, holders of $697,000 principal amount of convertible subordinated
debentures converted such debentures into 42,119 shares of common stock at
prices ranging from $15.50 to $17.25 per share. As of September 30, 1998, the
Company had $59,429,000 principal amount of convertible subordinated
debentures outstanding which were convertible into 3,679,904 shares of common
stock.
Subsequent to September 30, 1998, an additional $2,617,000 in principal
amount of convertible subordinated debentures converted into 158,580 shares
of the Company's common stock at prices ranging from $16.50 to $17.25 per
share.
5. STOCKHOLDERS EQUITY
On September 2, 1998, the Company issued 2,000,000 shares of 8.5% Series C
Convertible Preferred Stock (the "Series C Preferred Stock") at $19.25 per
share for net proceeds of $37,605,000. The Series C Preferred Stock is
convertible into 2,000,000 shares of the Company's common stock, has a
liquidation value of $19.25 per share and has an annual coupon of 8.5%,
payable quarterly.
At September 30, 1998, loans of $11,128,000 were outstanding to management
and directors bearing interest at rates ranging from 5.77% to 6.63% per
annum. These loans are secured by a pledge of the shares of common stock
acquired through the exercise of options and are full recourse to the
borrower. The market value of the common stock securing these loans was
approximately $14,525,000 at September 30, 1998.
Subsequent to September 30, 1998, the Company repurchased and retired 200,000
shares of common stock for an aggregate purchase price of approximately
$3,295,000.
6. DISTRIBUTIONS
During the three months ended September 30, 1998, the Company declared and
paid cash dividends on its Series A Preferred Stock, Series B Preferred Stock
and Series C Preferred Stock totaling $1,829,000, $1,125,000, $263,000,
respectively. The dividend declared and paid on the Series C Preferred Stock
represents a partial quarterly dividend for the period September 2, 1998
through September 30, 1998. During the three months ended September 30, 1998,
the Company declared and paid cash dividends on its common stock totaling
$10,794,000. Dividends declared and paid on the Company's common stock
represent the regular quarterly dividend of $.39 per share.
On September 30, 1998, the Company distributed its investment in Healthcare
common stock by means of a taxable dividend to the holders of its common
stock, convertible subordinated debentures and Series C Preferred Stock. The
book value and fair value of the distribution was approximately $10,724,000
and $15,650,000 million, respectively. See Note 3. -LTC Healthcare, Inc.
9
<PAGE>
LTC PROPERTIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
6. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted net income
per share (in thousands, except per share amounts):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income $ 6,754 $ 9,374 $38,337 $25,834
Preferred dividends (3,217) (1,829) (9,125) (4,084)
------- ------- ------- -------
Net income for basic net income per share 3,537 7,545 29,212 21,750
Effect of dilutive securities:
7.75% convertible debentures due 2002 - - 473 -
8.50% convertible debentures due 2001 - - 1,671 -
8.50% convertible debentures due 2000 - - 684 -
9.75% convertible debentures due 2004 - 9 28 30
8.25% convertible debentures due 1999 - - 645 -
Convertible partnership units - - 164 -
------- ------- ------- -------
Net income for diluted net income per share $ 3,537 $7,554 $32,877 $21,780
------- ------- ------- -------
------- ------- ------- -------
Shares for basic net income per share 27,668 23,776 26,824 22,936
Effect of dilutive securitites:
Stock options 3 193 15 291
7.75% convertible debentures due 2002 - - 465 -
8.50% convertible debentures due 2001 - - 1,553 -
8.50% convertible debentures due 2000 - - 665 -
9.75% convertible debentures due 2004 - 72 33 79
8.25% convertible debentures due 1999 - - 645 -
Convertible partnership units - - 241 -
------- ------- ------- -------
Shares for diluted net income per share 27,671 24,041 30,441 23,306
------- ------- ------- -------
------- ------- ------- -------
Basic net income per share $0.13 $0.32 $1.09 $0.95
------- ------- ------- -------
------- ------- ------- -------
Diluted net income per share $0.13 $0.31 $1.08 $0.93
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
10
<PAGE>
LTC PROPERTIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OPERATING RESULTS
THREE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 1997
Revenues for the three months ended September 30, 1998 increased
approximately 24% to $23,251,000 from $18,809,000 for the same period in
1997. The increase in revenues resulted from increased rental income of
$3,566,000, increased interest income from REMIC certificates of $1,259,000
and an increase in interest and other income of $1,552,000. Partially
offsetting the above increases was a decrease of approximately $1,935,000 in
interest income on mortgage loans.
Rental income increased $4,388,000 as a result of property acquisitions.
"Same-store" rents increased $157,000 due to the receipt of contingent rents
and rental increases as provided for in the lease agreements. Partially
offsetting the above increases in rental income was a decrease of $979,000
resulting from the sale of properties. During May 1998, the Company completed
its fourth securitization transaction resulting in an increase in interest
income from REMIC certificates and a decrease in interest income on mortgage
loans. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -Liquidity and Capital Resources." Increased interest
and other income for 1998 resulted primarily from interest income on notes
receivable from stockholders and increased commitment fees.
Total expenses for the three months ended September 30, 1998 increased
$2,062,000 however, as a percentage of revenues, total expenses decreased
slightly to 51% in 1998 from 52% in 1997. The decrease as a percentage of
revenues is primarily due to a reduction in interest expense resulting from
the conversion of subordinated debentures. Depreciation and amortization
increased as a result of a larger investment base in owned properties in 1998
as compared to 1997. The increase in operating and other expenses is
primarily due to increased salaries and benefits attributable to an increase
in full time employees.
Other income for the three months ended September 30, 1998 includes a gain of
approximately $1,738,000 on the sale of two skilled nursing facilities.
Offsetting the increase in other income attributable to the gain on the sale
of real estate was a decrease in the estimated fair value of REMIC
certificates that resulted in an unrealized loss of $6,481,000 during the
current period as compared to the prior period's unrealized gain of $257,000.
During the three months ended September 30, 1998, the Company declared
dividends of $3,217,000 representing a full quarter of dividends on its
Series A Cumulative Preferred Stock (issued in March 1997) and its Series B
Cumulative Preferred Stock (issued in December 1997) and a partial quarter of
dividends on its Series C Convertible Preferred Stock (issued in September
1998). Dividends of $1,829,000 declared during the three months ended
September 30, 1997 represent a full quarter of dividends on the Series A
Cumulative Preferred Stock.
As a result of the changes in revenues and expenses discussed above, net
income available to common shareholders decreased $4,008,000 to $3,537,000
for the three months ended September 30, 1998 from $7,545,000 for the same
period in 1997. Excluding the unrealized holding gains and losses on REMIC
certificates, net income available to common shareholders increased
$2,730,000 to $10,018,000 in 1998 from $7,288,000 in 1997.
11
<PAGE>
LTC PROPERTIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 1997
Revenues for the nine months ended September 30, 1998 increased approximately
26% to $67,049,000 from $53,411,000 for the same period in 1997. The increase
in revenues resulted from increased rental income of $9,338,000, increased
interest income from REMIC certificates of $1,555,000 and an increase in
interest and other income of $4,029,000. Partially offsetting the above
increases was a decrease of approximately $1,284,000 in interest income on
mortgage loans.
Rental income increased $5,566,000 as a result of property acquisitions
completed during the later part of 1997 and $5,362,000 due to the property
acquisitions completed during 1998. "Same-store" rents increased $368,000 due
to the receipt of contingent rents and rental increases as provided for in
the lease agreements. Partially offsetting the above increases in rental
income was a decrease of $1,958,000 resulting from the sale of properties.
During May 1998, the Company completed its fourth securitization transaction
resulting in an increase in interest income from REMIC certificates and a
decrease in interest income on mortgage loans. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations -Liquidity and
Capital Resources." Increased interest and other income for 1998 resulted
primarily from interest income on notes receivable from stockholders and
increased commitment fees.
Total expenses for the nine months ended September 30, 1998 were 48% of net
revenues compared to 52% for the same period in 1997. The decrease is
primarily due to a reduction in interest expense resulting from the
conversion of subordinated debentures. Depreciation and amortization
increased as a result of a larger investment base in owned properties in 1998
as compared to 1997. The increase in operating and other expenses is due to
increased salaries and benefits attributable to an increase in full time
employees.
Other income for the nine months ended September 30, 1998 includes a gain of
approximately $9,926,000 on the sale of three skilled nursing facilities.
Offsetting the increase in other income attributable to the gain on the sale
of real estate was a decrease in the estimated fair value of REMIC
certificates that resulted in an unrealized loss of $6,578,000 during the
current period as compared to the prior period's unrealized gain of $57,000.
During the nine months ended September 30, 1998, the Company declared
dividends of $9,125,000 representing the regular monthly dividend on its
Series A Cumulative Preferred Stock (issued in March 1997) and its Series B
Cumulative Preferred Stock (issued in December 1997) and a partial dividend
on its Series C Convertible Preferred Stock (issued in September 1998).
Dividends declared during the nine months ended September 30, 1997 represent
a partial dividend for the month of March 1997 and the regular monthly
dividend for April 1997 through September 1997 on the Series A Cumulative
Preferred Stock issued in March 1997.
As a result of the changes in revenues and expenses discussed above, net
income available to common shareholders increased $7,462,000 to $29,212,000
for the nine months ended September 30, 1998 from $21,750,000 for the same
period in 1997. Excluding the unrealized holding gains and losses on REMIC
certificates, net income available to common shareholders increased
$14,097,000 to $35,790,000 in 1998 from $21,693,000 in 1997.
12
<PAGE>
LTC PROPERTIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1998, the Company's real estate investment portfolio
consisted of approximately $403,506,000 invested primarily in owned skilled
nursing and assisted living facilities (before accumulated depreciation of
$23,941,000), approximately $171,267,000 invested in mortgage loans (before
allowance for doubtful accounts of $1,000,000) and approximately $101,194,000
invested in REMIC Certificates. As of September 30, 1998, the outstanding
certificate principal balance and the weighted average pass-through rate for the
senior REMIC Certificates (all held by outside third parties) was $302,304,000
and 7.29%. As of September 30, 1998, the face value and the estimated fair value
of the subordinated REMIC Certificates held by the Company was $82,662,000 and
$101,194,000, respectively. The effective yield on the subordinated REMIC
Certificates held by the Company, based on expected future cash flows discounted
to give effect to potential risks associated with prepayments and unanticipated
credit losses was 17.9% at September 30, 1998. The Company's portfolio consists
of 277 skilled nursing facilities, 87 assisted living facilities and four
schools in 36 states.
As of September 30, 1998, $101,500,000 was outstanding under the Company's
$170,000,000 Senior Unsecured Revolving Line of Credit (the "Revolving Credit
Facility") which expires on October 3, 2000. On October 2, 1998, the Company
repaid borrowings of $23,000,000 under the Revolving Credit Facility. The
Revolving Credit Facility pricing varies between LIBOR plus 1.25% and LIBOR plus
1.5% depending on the Company's leverage ratio. Currently the pricing is LIBOR
plus 1.25%.
As of September 30, 1998 the Company had $565,647,000 of unencumbered real
estate investments consisting of $293,186,000 owned properties (before
accumulated depreciation), $171,267,000 in mortgage loans (before allowance for
doubtful accounts) and $101,194,000 in REMIC Certificates. The Company believes
that its current cash from operations available for distribution or
reinvestment, its borrowing capacity (including borrowings against unencumbered
real estate investments), and the Company's ability to access the capital
markets are sufficient to provide for payment of its operating costs, provide
funds for distribution to its stockholders and to fund additional investments.
During the nine months ended September 30, 1998, the Company completed
approximately $178,423,000 in new investments consisting of approximately
$28,348,000 in mortgage loans and approximately $150,075,000 in owned
properties. The Company financed its investments through the assumption of
mortgage loans and bonds of $11,224,000 bearing interest at a weighted average
rate of 11.6%, issuance of $3,432,000 in minority interests, proceeds from the
sale of real estate properties and its recently completed securitization
transaction as discussed below, short-term borrowings and cash on hand.
During June 1998, the Company sold a skilled nursing facility that was acquired
in 1992 for gross proceeds of approximately $11,600,000 and in September 1998
sold two skilled nursing facilities that were acquired in 1994 for gross
proceeds of approximately $5,106,000. The Company's initial and net investment
in these facilities was approximately $7,654,000 and $6,332,000, respectively.
In connection with the sale, proceeds of approximately $4,271,000 were used to
repay an outstanding mortgage loan secured by one of the facilities. The
mortgage loan was payable to the pool of mortgage loans securing the Company's
investment in REMIC Certificates. The remaining proceeds were used to repay
borrowings outstanding under the Company's line of credit. The Company
recognized a gain of approximately $9,926,000 on the sale of these facilities.
13
<PAGE>
LTC PROPERTIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
During May 1998, the Company completed the securitization of approximately
$129,300,000 of mortgage loans with a weighted average interest rate of 10.2%
and $26,400,000 face amount ($20,700,000 carrying value) of subordinated
certificates, retained from a securitization completed in 1993, with an
interest rate of 9.78% on the face value (15.16% on the amortized cost) (the
"1998-1 Pool"). As part of the securitization, the Company sold approximately
$121,400,000 face amount of senior certificates at a weighted average
pass-through rate of 6.3% and retained $34,300,000 face amount of
subordinated certificates along with the interest only certificates. The
subordinated and interest only certificates retained by the Company had an
aggregate fair value of approximately $41,400,000 at the time of the
securitization and a weighted average effective yield of 19.7%. Included in
the 1998-1 Pool were 40 mortgage loans, including mortgage loans of
approximately $25,741,000 with a weighted average interest rate of
approximately 8.7% provided to wholly owned subsidiaries and limited
partnerships of the Company. Net proceeds of approximately $108,613,000 from
the above securitization were used to repay borrowings outstanding under the
Company's line of credit.
On September 2, 1998, the Company issued 2,000,000 shares of 8.5% Series C
Convertible Preferred Stock at $19.25 per share for net proceeds of
$37,605,000. The Series C Preferred Stock is convertible into 2,000,000
shares of the Company's common stock, has a liquidation value of $19.25 per
share and has an annual coupon of 8.5%, payable quarterly.
Subsequent to September 30, 1998, the Company repurchased and retired 200,000
shares of common stock for an aggregate purchase price of approximately
$3,295,000.
On May 20, 1998, the Company announced that on July 1, 1998 it was redeeming
all of its outstanding 8.5% Convertible Subordinated due 2000 (the "8.5%
Debentures") and all of its outstanding 9.75% Convertible Subordinated
Debentures due 2004 (the "9.75% Debentures"). Including conversions made in
connection with the redemption of the 8.5% Debentures and the 9.75%
Debentures, during the nine months ended September 30, 1998, holders of
approximately $32,284,000 in principal amount of convertible subordinated
debentures elected to convert the debentures into 2,115,402 shares of common
stock at prices ranging from $15.00 to $17.25 per share. On July 1, 1998, the
Company redeemed the outstanding $90,000 principal amount of 8.5% Debentures
and $20,000 principal amount of 9.75% Debentures. On September 30, 1998, the
Company had $59,429,000 principal amount of convertible subordinated
debentures outstanding which were convertible into 3,679,904 shares of common
stock.
During 1998, the Company acquired 4,002 shares of LTC Healthcare, Inc.
("Healthcare") non-voting common stock for $2,001,000 and contributed equity
investments with a book value of $788,000, 13 real estate properties with a
net book value of $61,462,000 that were encumbered by mortgage debt on seven
of the properties of $29,263,000 and a minority interest liability of
$3,461,000, and other related assets and liabilities with a book value of
$93,000 to Healthcare in exchange for an additional 36,000 shares of
Healthcare non-voting common stock and borrowings by Healthcare under the
unsecured line of credit provided by the Company of $21,396,000. During 1998,
the Company provided additional funding of $8,635,000 under the unsecured
line of credit. Subsequent to the contribution of the above assets and
liabilities by the Company to Healthcare, Healthcare obtained mortgage
financing of $17,400,000 from a third-party lender on four of the
unencumbered properties. Healthcare utilized proceeds from the mortgage debt
and cash on hand to repay borrowings of $17,668,000 under the unsecured line
of credit provided by the Company.
14
<PAGE>
LTC PROPERTIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
On September 30, 1998, the 40,002 shares of Healthcare non-voting common stock
held by the Company were converted into 3,335,882 shares of Healthcare voting
common stock. Concurrently, the Company completed the spin-off of all Healthcare
voting common stock through a taxable dividend distribution to the holders of
Company common stock, Cumulative Convertible Series C Preferred Stock ("Series C
Preferred Stock") and Convertible Subordinated Debentures (the "Debentures").
One share of Healthcare common stock was distributed to each holder of Company
common stock, Series C Preferred Stock and Debentures for each ten shares of
Company common stock owned and for each ten shares of Company common stock that
would have been issued upon conversion of the Debentures and Series C Preferred
Stock. The Company incurred costs of approximately $500,000 in connection with
the distribution. Upon completion of the distribution, Healthcare began
operating as a separate public company.
For book purposes, no gain was recognized on the distribution of Healthcare
common stock which had a net book value of approximately $10,724,000. The
distribution was a taxable dividend distribution and accordingly, for tax
purposes, the net assets were transferred at their net fair market value of
approximately $15,650,000 ($4.69 per share of Healthcare common stock) which
resulted in a taxable gain of approximately $4,900,000.
The Company and Healthcare have entered into various agreements which, among
other things, provide for a sharing of corporate overhead under an
administrative services agreement. During the three months ended September 30,
1998, the Company charged Healthcare an administrative services fee of
approximately $175,000. In addition, the Company provided Healthcare with a
$20.0 million unsecured line of credit that bears interest at 10% and matures in
March 2008. As of September 30, 1998 approximately $12,363,000 was outstanding
under the line of credit. The Company recorded interest income related to the
unsecured line of credit of $222,200 and $320,700 for the three and nine months
ended September 30, 1998, respectively.
Subsequent to September 30, 1998, the Company acquired 299,900 shares of
Healthcare common stock, representing approximately 9.0% of Healthcare's
outstanding common stock, for an aggregate purchase price of approximately
$644,000 (excluding brokerage commissions).
On November 2, 1998, the Company entered into an interest rate swap agreement
whereby the Company effectively fixed the interest rate on LIBOR based variable
rate debt. Under this agreement, which expires in November 2000, the Company
will be credited interest at three month LIBOR and will incur interest at a
fixed rate of 4.74% on a notional amount of $50,000,000. The notional amounts of
interest rate agreements are used to measure interest to be paid or received and
do not represent the amount of exposure to credit loss.
As of November 6, 1998, the Company had outstanding commitments aggregating
approximately $126,700,000 of which $47,200,000 and $50,000,000 are due to
expire in 1999 and 2000, respectively.
FUNDS FROM OPERATIONS
The Company has adopted the definition of Funds From Operations ("FFO")
prescribed by the National Association of Real Estate Investment Trusts
("NAREIT"). FFO is defined as net income applicable to common stockholders
(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
15
<PAGE>
LTC PROPERTIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
unconsolidated entities in which a REIT holds an interest. In addition, the
Company excludes any unrealized gains or losses resulting from temporary
changes in the estimated fair value of its REMIC Certificates from the
computation of FFO.
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 indicator of operating performance or
as an alternative to cash flows from operations, investing or 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. 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,
as 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.
The following table reconciles net income available to common stockholders to
FFO available to common stockholders (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ -----------------
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Net income available to common stockholders $ 3,537 $7,545 $29,212 $21,750
Real estate depreciation 3,942 2,396 9,423 6,519
Real estate depreciation included in equity
earnings 90 - 90 -
Gain on sale of real estate (1,738) - (9,926) -
Unrealized (gain) loss on REMIC Certificates 6,481 (257) 6,578 (57)
------- ------ ------- -------
FFO available to common stockholders $12,312 $9,684 $35,377 $28,212
------- ------ ------- -------
------- ------ ------- -------
Basic FFO per share $ 0.44 $ 0.41 $ 1.32 $ 1.23
------- ------ ------- -------
------- ------ ------- -------
Diluted FFO per share $ 0.43 $ 0.39 $ 1.28 $ 1.17
------- ------ ------- -------
------- ------ ------- -------
</TABLE>
YEAR 2000
The Company has evaluated its internal accounting and information systems
(collectively the "Systems") to assess whether it will function properly with
respect to dates in the year 2000 and beyond. Systems that are determined to
be non-compliant with the year 2000 and beyond will be upgraded or replaced.
Implementation of year 2000 compliant Systems and upgrades to existing
Systems are expected to be completed by mid-1999. The total cost associated
with modifications required to become year 2000 compliant will not be
material to the Company's financial position, results of operations or
liquidity. Due to the Company's limited reliance on complex Systems, the
Company believes the year 2000 issue, as it relates to its internal Systems,
will not have a material adverse effect upon the Company's financial
position, results of operations or liquidity and as such has not developed a
contingency plan.
The Company is currently assessing the extent to which its operations are
vulnerable should its tenants or other parties with which the Company
conducts business fail to ensure their computer systems are year 2000
compliant. Neither we nor our lessees can be assured that the federal and
state governments, upon which our lessees rely for Medicare and Medicaid
revenue, will be in compliance in a timely manner.
16
<PAGE>
LTC PROPERTIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
The General Accounting Office has reported that the Health Care Financing
Administration which runs Medicare, is behind schedule in taking steps to
deal with the year 2000 issue and that it is highly unlikely that all of the
Medicare systems will be compliant in time to ensure the delivery of
uninterrupted benefits and services into the year 2000. Due to the general
uncertainty surrounding the readiness of third-party tenants and other
third-parties, including the federal and state governments, with which the
Company and its lessees does business, the Company is unable at this time to
determine whether non-compliance with the year 2000 issue by third-parties
will have a material impact on the Company's financial position, results of
operations or liquidity.
The Company will also have year 2000 exposure in non-information technology
areas as it relates to owned properties. There is a risk that embedded chips
in elevators, security systems, electrical systems and similar
technology-driven devices may stop functioning on January 1, 2000. All of the
Company's owned properties are leased under triple-net leases and as such,
the cost to repair any of these items will be paid by the lessee.
Readers are cautioned that forward-looking statements contained in the above
discussion regarding year 2000 compliance should be read in conjunction with
the disclosure under the heading -Statement Regarding Forward Looking
Disclosure.
STATEMENT REGARDING FORWARD LOOKING DISCLOSURE
Certain information contained in this report includes forward looking
statements, which can be identified by the use of forward looking terminology
such as "may", "will", "expect", "should" or comparable terms or negatives
thereof. These statements involve risks and uncertainties that could cause
actual results to differ materially from those described in the statements.
These risks and uncertainties include (without limitation) the following: the
effect of economic and market conditions and changes in interest rates,
government policy relating to the health care industry including changes in
reimbursement levels under the Medicare and Medicaid programs, changes in
reimbursement by other third party payors, the financial strength of the
operators of the Company's facilities as it affects the continuing ability of
such operators to meet their obligations to the Company under the terms of
the Company's agreements with its borrowers and operators, the amount and the
timing of additional investments, access to capital markets and changes in
tax laws and regulations affecting real estate investment trusts.
17
<PAGE>
PART II
LTC PROPERTIES, INC.
OTHER INFORMATION
SEPTEMBER 30, 1998
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
3.1 Certificate of Amendment to Amended and Restated Bylaws of
LTC Properties, Inc.
3.2 Articles Supplementary Classifying 2,000,000 Shares of 8.5%
Series C Cumulative Convertible Preferred Stock of LTC
Properties, Inc.
10.1 Transfer and Repurchase Agreement dated as of April 20, 1998,
by and between LTC REMIC IV Corporation and LTC Properties,
Inc.
10.2 Purchase Agreement dated as of May 11, 1998, by and
between LTC REMIC IV Corporation, LTC Properties, Inc.
and Goldman Sachs & Co.
10.3 Subservicing Agreement dated as of May 14, 1998, by and
between GMAC Commercial Mortgage Corporation, as Master
Servicer, LTC Properties, Inc. as Subservicer
10.4 Pooling and Servicing Agreement dated as of April 20, 1998
among LTC REMIC IV Corporation, LaSalle National Bank and
LTC Properties, Inc.
10.5 Distribution Agreement, dated as of September 30, 1998, by
and between LTC Properties, Inc. and LTC Healthcare, Inc.
10.6 Administrative Services Agreement, dated as of September 30,
1998, by and between LTC Properties, Inc. and LTC Healthcare,
Inc.
10.7 Intercompany Agreement, dated as of September 30, 1998, by
and between LTC Properties, Inc. and LTC Healthcare, Inc.
10.8 Tax Sharing Agreement, dated as of September 30, 1998, by
and between LTC Properties, Inc. and LTC Healthcare, Inc.
10.9 Amended and Restated Promissory Note, dated as of May 19,
1998, between LTC Properties, Inc. and LTC Healthcare, Inc.
27 Financial Data Schedule
In accordance with Item 601(b)(4)(iii) of Regulation S-K,
certain instruments pertaining to Registrant's long-term debt
have not been filed; copies thereof will be furnished to the
Securities and Exchange Commission upon request.
(b) REPORTS ON FORM 8-K
No reports on Form 8-K were filed by the Company during the
three months ended September 30, 1998.
18
<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: November 12, 1998 By: /s/ JAMES J. PIECZYNSKI
-------------------------------------
James J. Pieczynski
President and Chief Financial Officer
19
<PAGE>
CERTIFICATE OF AMENDMENT
TO
AMENDED AND RESTATED BYLAWS
OF
LTC PROPERTIES, INC.
The undersigned Secretary of LTC Properties, Inc., a Maryland
corporation (the "Corporation"), does hereby certify as follows:
1. The Board of Directors of the Corporation duly adopted the
following resolution amending the Amended and Restated Bylaws (the "Bylaws") of
the Corporation at a meeting of the Board of Directors, duly called and held on
September 1, 1998 at which a quorum of directors was present and acting
throughout. Such resolution has not been revoked, rescinded or modified.
RESOLVED, that, without limiting the generality hereof or the Prior
Preambles and Resolutions, Section 2.04.1 of Article II of the Bylaws of the
Corporation is hereby amended to add the following sentence:
"Notwithstanding the foregoing, upon the occurrence of a default in
the payment of dividends on any class or series of preferred stock, or
any other event, which will entitle the holders of any class or series
of preferred stock to elect additional directors of the Corporation,
the number of directors of the Corporation will thereupon be increased
by the number of additional directors to be elected by the holders of
such class or series of preferred stock (even if the resulting number
of directors is more than 9), and such increase in the number of
directors shall remain in effect for so long as the holders of such
class or series of preferred stock are entitled to elect such
additional directors."
IN WITNESS WHEREOF, the undersigned Secretary of the Corporation has
executed this Certificate as of this 10th day of November, 1998.
/s/ Pamela J. Privett
----------------------------------------
Pamela J. Privett, Secretary
<PAGE>
EXHIBIT 3.2
LTC PROPERTIES, INC.
ARTICLES SUPPLEMENTARY CLASSIFYING
2,000,000 SHARES OF
8.5% SERIES C CUMULATIVE CONVERTIBLE PREFERRED STOCK
(THE "ARTICLES SUPPLEMENTARY")
LTC Properties, Inc., a Maryland corporation (the "Company"),
certifies to the Maryland State Department of Assessments and Taxation (the
"Department") that:
FIRST: Pursuant to the authority expressly vested in the Board of
Directors of the Company by Article SEVENTH of the Company's Articles of
Amendment and Restatement filed with the Department on August 3, 1992 (the
"Charter") and Section 2-105 of the Maryland General Corporation Law
("MGCL"), the Board of Directors has, at a meeting duly called and noticed at
which a quorum of directors was present and acting throughout, adopted
resolutions classifying and designating a separate series of authorized but
unissued Preferred Stock of the Company, par value $.01 per share (the
"Preferred Stock"), to consist of not more than 2,000,000 shares of Preferred
Stock, setting certain of the preferences, conversion and other rights,
voting powers, restrictions, qualifications and terms and conditions of
redemption of such separate series of Preferred Stock, providing for the
issuance of a maximum of 2,000,000 shares of such series of Preferred Stock
and, pursuant to the powers contained in the Bylaws of the Company and the
MGCL, delegating to a Committee (the "Committee") of the Board of Directors
comprised of Andre C. Dimitriadis and James J. Pieczynski, to the fullest
extent permitted by Maryland law and the Charter and Bylaws of the Company,
all powers of the Board of Directors with respect to designating and setting
of the preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends and other distributions, qualifications and terms
and conditions of redemption of such series of Preferred Stock and
determining the number or shares of such series of Preferred Stock (not in
excess of the aforesaid maximum number) to be issued and the price and other
terms and conditions upon which shares of such series of Preferred Stock are
to be offered, sold and issued.
SECOND: Pursuant to the authority conferred upon the Committee as
aforesaid, the Committee has, by unanimous written consent, duly adopted
resolutions designating the aforesaid series of Preferred Stock as "8.5%
Series C Cumulative Convertible Preferred Stock," establishing the number of
shares of the aforesaid series as 2,000,000, setting the preferences,
conversion and other rights, voting powers, restrictions and limitations as
to dividends, qualifications and terms and conditions of redemption of such
8.5% Series C Cumulative Convertible Preferred Stock (to the extent not set
by the Board of Directors in the resolutions referred to in Article FIRST of
these Articles Supplementary) and authorizing the issuance of 2,000,000
shares of 8.5% Series C Cumulative Convertible Preferred Stock.
THIRD: The series of Preferred Stock of the Company created by the
resolutions duly adopted by the Board of Directors of the Company and by the
Committee and referred to in
<PAGE>
Articles FIRST and SECOND of these Articles Supplementary shall have the
following designation, number of shares, preferences, conversion and other
rights, voting powers, restrictions and limitations as to dividends,
qualifications, terms and conditions of redemption and other terms and
conditions.
1. DESIGNATION AND NUMBER. A series of Preferred Stock, designated
the "8.5% Series C Cumulative Convertible Preferred Stock" (the "Series C
Preferred Stock"), is hereby established. The number of shares of the Series
C Preferred Stock shall be 2,000,000.
2. MATURITY. The Series C Preferred Stock has no stated maturity and
will not be subject to any sinking fund or mandatory redemption.
3. RANK. The Series C Preferred Stock will, with respect to dividend
rights and rights upon liquidation, dissolution or winding up of the Company,
rank (i) senior to all classes or series of Common Stock of the Company, and
to all equity securities ranking junior to the Series C Preferred Stock with
respect to dividend rights or rights upon liquidation, dissolution or winding
up of the Company; (ii) on a parity with the 9.5% Series A Cumulative
Preferred Stock, the 9% Series B Cumulative Preferred Stock and with all
equity securities issued by the Company the terms of which specifically
provide that such equity securities rank on a parity with the Series C
Preferred Stock with respect to dividend rights or rights upon liquidation,
dissolution or winding up of the Company; and (iii) junior to all existing
and future indebtedness of the Company. The term "equity securities" does not
include convertible debt securities, which will rank senior to the Series C
Preferred Stock prior to conversion.
4. DIVIDENDS
(a) Holders of shares of the Series C Preferred Stock are
entitled to receive, when and as declared by the Board of Directors (or a
duly authorized committee thereof), out of funds legally available for the
payment of dividends, preferential cumulative cash dividends at the rate of
8.5% per annum of the Liquidation Preference (as defined below) per share
(equivalent to a fixed annual amount of $1.63625 per share). Dividends on the
Series C Preferred Stock shall be cumulative from the date of original issue
and shall be payable quarterly in arrears on each of March 31, June 30,
September 30 and December 31 or, if not a business day, the immediately
preceding business day (each, a "Dividend Payment Date"). The first dividend,
which will be paid on September 30, 1998, will be for less than a full
quarter. Such dividend and any dividend payable on the Series C Preferred
Stock for any partial dividend period will be computed on the basis of a
360-day year consisting of twelve 30-day months. Dividends will be payable to
holders of record as they appear in the stock records of the Company at the
close of business on the applicable record date, which shall be the fifteenth
day of the calendar month in which the applicable Dividend Payment Date falls
or on such other date designated by the Board of Directors of the Company for
the payment of dividends
2
<PAGE>
that is not more than 30 nor less than 10 days prior to such Dividend Payment
Date (each, a "Dividend Record Date").
(b) No dividends on shares of Series C Preferred Stock shall be
declared by the Board of Directors or paid or set apart for payment by the
Company at such time as the terms and provisions of any agreement of the
Company, including any agreement relating to its indebtedness, prohibits such
declaration, payment or setting apart for payment or provides that such
declaration, payment or setting apart for payment would constitute a breach
thereof or a default thereunder, or if such declaration or payment shall be
restricted or prohibited by law.
(c) Notwithstanding the foregoing, dividends on the Series C
Preferred Stock will accrue whether or not the Company has earnings, whether
or not there are funds legally available for the payment of such dividends
and whether or not such dividends are declared. Accrued but unpaid dividends
on the Series C Preferred Stock will bear interest from the applicable
Dividend Payment Date at the prime rate of interest established from time to
time in the Wall Street Journal. Except as set forth in the next sentence, no
dividends will be declared or paid or set apart for payment on any capital
stock of the Company or any other series of Preferred Stock ranking, as to
dividends, on a parity with or junior to the Series C Preferred Stock (other
than a dividend in shares of the Company's Common Stock or in shares of any
other class of stock ranking junior to the Series C Preferred Stock as to
dividends and upon liquidation) for any period unless full cumulative
dividends have been or contemporaneously are declared and paid or declared
and a sum sufficient for the payment thereof is set apart for such payment on
the Series C Preferred Stock for all dividend periods ending prior to or on
the most recent past Dividend Payment Date. When dividends are not paid in
full for all such dividend periods (or a sum sufficient for such full payment
is not so set apart) upon the Series C Preferred Stock and the shares of any
other series of Preferred Stock ranking on a parity as to dividends with the
Series C Preferred Stock, all dividends declared upon the Series C Preferred
Stock and any other series of Preferred Stock ranking on a parity as to
dividends with the Series C Preferred Stock shall be declared pro rata so
that the amount of dividends declared per share of Series C Preferred Stock
and such other series of Preferred Stock shall in all cases bear to each
other the same ratio that accrued dividends per share (plus interest if any
thereon) on the Series C Preferred Stock and such other series of Preferred
Stock (which shall not include any accrual in respect of unpaid dividends for
prior dividend periods if such Preferred Stock does not have a cumulative
dividend) bear to each other.
(d) Except as provided in the immediately preceding paragraph,
unless full cumulative dividends on the Series C Preferred Stock have been or
contemporaneously are declared and paid or declared and a sum sufficient for
the payment thereof is set apart for payment for all dividend periods ending
prior to or on the most recent past Dividend Payment Date, no dividends
(other than in shares of Common Stock or other shares of capital stock
ranking junior to the Series C Preferred Stock as to dividends and upon
liquidation) shall be declared or paid or set aside for payment nor shall any
other distribution be declared or made upon the Common Stock, or any other
capital stock of the Company ranking junior to or on a parity with the Series
C Preferred Stock as to dividends or upon liquidation, nor shall any shares
of Common Stock, or any other shares of capital stock of the Company ranking
junior to or on a
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parity with the Series C Preferred Stock as to dividends or upon liquidation
be redeemed, purchased or otherwise acquired for any consideration (or any
moneys be paid to or made available for a sinking fund for the redemption of
any such shares) by the Company (except by conversion into or exchange for
other capital stock of the Company ranking junior to the Series C Preferred
Stock as to dividends and upon liquidation or redemptions for the purpose of
preserving the Company's qualification as a REIT). Holders of shares of the
Series C Preferred Stock shall not be entitled to any dividend, whether
payable in cash, property or stock, in excess of full cumulative dividends on
the Series C Preferred Stock as provided above. Any dividend payment made on
shares of the Series C Preferred Stock shall first be credited against the
earliest accrued but unpaid dividend due with respect to such shares which
remains payable.
5. LIQUIDATION PREFERENCE. Upon any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Company, the
holders of shares of Series C Preferred Stock are entitled to be paid out of
the assets of the Company legally available for distribution to its
stockholders a liquidation preference of $19.25 per share (the "Liquidation
Preference"), plus an amount equal to any accrued and unpaid dividends to the
date of payment, with interest, before any distribution of assets is made to
holders of Common Stock or any other class or series of capital stock of the
Company that ranks junior to the Series C Preferred Stock as to liquidation
rights. The Company will promptly provide to the holders of Series C
Preferred Stock written notice of any event triggering the right to receive
such Liquidation Preference. After payment of the full amount of the
Liquidation Preference, plus any accrued and unpaid dividends and the
interest thereon to which they are entitled, the holders of Series C
Preferred Stock will have no right or claim to any of the remaining assets of
the Company. The consolidation or merger of the Company with or into any
other corporation, trust or entity or of any other corporation with or into
the Company, or the sale, lease or conveyance of all or substantially all of
the property or business of the Company, shall not be deemed to constitute a
liquidation, dissolution or winding up of the Company.
In determining whether a distribution (other than upon
voluntary or involuntary liquidation) by dividend, redemption or other
acquisition of shares of stock of the Company or otherwise is permitted under
the MGCL, no effect shall be given to amounts that would be needed if the
Company would be dissolved at the time of the distribution, to satisfy the
preferential rights upon distribution of holders of shares of stock of the
Corporation whose preferential rights upon distribution are superior to those
receiving the distribution.
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6. REDEMPTION.
Except as provided in Section 9 hereof or Article NINTH of the Company's
Charter, the Series C Preferred Stock will not be redeemable.
7. VOTING RIGHTS.
(a) Holders of the Series C Preferred Stock will not have any
voting rights, except as set forth below. Without limiting the generality of the
foregoing sentence, holders of Series C Preferred Stock will have no voting
rights with respect to any additional directors which the holders of any other
class or series of Preferred Stock may have the right to elect upon any defaults
in the payment of dividends on such class or series of Preferred Stock
notwithstanding that such class or series of Preferred Stock may rank on a
parity with the Series C Preferred Stock as to dividends or upon liquidation.
(b) Whenever any dividend payment on any shares of Series C
Preferred Stock shall be in arrears for more than 10 business days after its
applicable Dividend Payment Date (a "Preferred Dividend Default"), the number of
directors then constituting the Board of Directors shall be increased by two.
Such increase shall be separate and apart and in addition to any increase in the
number of directors which may be occasioned by defaults in the payments of
dividends on any other class or series of Preferred Stock. The holders of such
shares of Series C Preferred Stock will be entitled to vote separately as a
class, in order to fill the vacancies thereby created, for the election of a
total of two additional directors of the Company (the "Series C Preferred Stock
Directors") at a special meeting called by the holders of record of at least 20%
of the Series C Preferred Stock (unless such request is received less than 90
days before the date fixed for the next annual or special meeting of the
stockholders) or at the next annual meeting of stockholders, and at each
subsequent annual meeting until all dividends accumulated on such shares of
Series C Preferred Stock for the past dividend periods and the dividend for the
then current dividend period shall have been fully paid or declared and a sum
sufficient for the payment thereof set aside for payment. In the event the
directors of the Company are divided into classes, each such vacancy shall be
apportioned among the classes of directors to prevent stacking in any one class
and to ensure that the number of directors in each of the classes of directors
are as equal as possible. Each Series C Preferred Stock Director, as a
qualification for election as such (and regardless of how elected), shall submit
to the Board of Directors of the Company a duly executed, valid, binding and
enforceable letter of resignation from the Board of Directors, to be effective
upon the date upon which all dividends accumulated on such shares of Series C
Preferred Stock for the past dividend periods and the dividend for the then
current dividend period shall have been fully paid or declared and a sum
sufficient for the payment thereof set aside for payment, whereupon the terms of
office of all persons elected as Series C Preferred Stock Directors by the
holders of the Series C Preferred Stock shall, upon the effectiveness of their
respective letters of resignation, forthwith terminate, and the number of
directors then constituting the Board of Directors shall be reduced accordingly.
A quorum for any such meeting to elect the Series C Preferred Stock
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Directors shall exist if at least a majority of the outstanding shares of
Series C Preferred Stock are represented in person or by proxy at such
meeting. Such Series C Preferred Stock Directors shall be elected upon the
affirmative vote of a plurality of the shares of Series C Preferred Stock
present and voting in person or by proxy at a duly called and held meeting at
which a quorum is present. If and when all accumulated dividends and the
dividend for the then current dividend period on the Series C Preferred Stock
shall have been paid in full or declared and set aside for payment in full,
the holders thereof shall be divested of the foregoing voting rights (subject
to revesting in the event of each and every Preferred Dividend Default) and
the term of office of each Series C Preferred Stock Director so elected shall
terminate. Any Series C Preferred Stock Director may be removed at any time
with or without cause by, and shall not be removed otherwise than by the vote
of, the holders of record of a majority of the outstanding shares of the
Series C Preferred Stock when they have the voting rights described above
(voting separately as a class). So long as a Preferred Dividend Default shall
continue, any vacancy in the office of a Series C Preferred Stock Director
may be filled by written consent of the Series C Preferred Stock Director
remaining in office, or if none remains in office, by a vote of the holders
of record of a majority of the outstanding shares of Series C Preferred Stock
when they have the voting rights described above (voting separately as a
class). The Series C Preferred Stock Directors shall each be entitled to one
vote per director on any matter.
(c) In addition to the rights granted in Section 7(b), in the
case of a Preferred Dividend Default, the holders of Series C Preferred Stock
shall be granted voting rights equivalent to those rights of holders of the
Common Stock; except that the holders of Series C Preferred Stock will not have
the right to vote generally in the election of directors but with respect to the
election of directors will only have the voting rights set forth in Section 7(b)
to elect Series C Preferred Stock Directors. In such case, the voting rights of
the holders of the Series C Preferred Stock would be determined on an as
converted basis, determined pursuant to the conversion provisions contained in
Section 8 hereof. The rights granted by this Section 7(c) shall continue only
during a Preferred Dividend Default, and all such rights shall immediately
terminate at such time as a Preferred Dividend Default ceases to exist.
(d) So long as any shares of Series C Preferred Stock remain
outstanding, the Company will not, without the affirmative vote or consent of
the holders of at least two-thirds of the shares of the Series C Preferred Stock
outstanding at the time (voting separately as a class), given in person or by
proxy, either in writing or at a meeting, amend, alter or repeal the provisions
of the Charter or the Articles Supplementary, whether by merger, consolidation
or otherwise (an "Event"), so as to materially and adversely affect any right,
preference, privilege or voting power of the Series C Preferred Stock or the
holders thereof; provided, however, that with respect to the occurrence of any
Event set forth above, so long as the Series C Preferred Stock (or any
equivalent class or series of stock issued by the surviving corporation in any
merger or consolidation to which the Company became a party) remains outstanding
with the terms thereof materially unchanged, the occurrence of any such Event
shall not be deemed to materially and adversely affect such rights, preferences,
privileges or
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voting power of holders of the Series C Preferred Stock and provided, further
that (i) any increase in the amount of the authorized Preferred Stock (other
than the Series C Preferred Stock) or the creation or issuance of any other
series of Preferred Stock, or (ii) any increase in the amount of authorized
shares of such series, in each case ranking on a parity with or junior to the
Series C Preferred Stock with respect to payment of dividends or the
distribution of assets upon liquidation, dissolution or winding up, shall not
be deemed to materially and adversely affect such rights, preferences,
privileges or voting powers.
(e) Except as expressly stated in these Articles
Supplementary, the Series C Preferred Stock shall not have any relative,
participating, optional or other special voting rights and powers and the
consent of the holders thereof shall not be required for the taking of any
corporate action, including but not limited to, any merger or consolidation
involving the Corporation or a sale of all or substantially all of the assets of
the Corporation, irrespective of the effect that such merger, consolidation or
sale may have upon the rights, preferences or voting power of the holders of the
Series C Preferred Stock.
8. CONVERSION. The holders of Series C Preferred Stock shall have
optional conversion rights as follows:
(a) Subject to and upon compliance with the provisions of this
Section 8, the holder of any shares of Series C Preferred Stock shall have the
right, at the holder's option, at any time, to convert the shares into a number
of fully paid and nonasessable shares of Common Stock (calculated as to each
conversion to the nearest 1/100th of a share) equal to the aggregate Liquidation
Preference (as defined in Section 5 above) of all of the shares surrendered for
conversion divided by the Conversion Price (as defined in Section 8(d) below) by
surrendering the shares to be converted, in the manner provided in Section 8(b)
below.
(b) (i) In order to exercise the conversion privilege, the
holder of each share of Series C Preferred Stock to be converted shall surrender
the certificate representing such share to the conversion agent for the Series C
Preferred Stock appointed for such purpose by the Company, with a written notice
of conversion duly executed, at the principal office of the conversion agent.
Unless the shares issuable on conversion are to be issued in the same name as
the name in which the share of Series C Preferred Stock is registered, each
share surrendered for conversion shall be accompanied by instruments of
transfer, in form satisfactory to the Company, duly executed by the holder of
his duly authorized attorney and by funds in an amount sufficient to pay any
transfer or similar tax.
(ii) The holders of shares of Series C Preferred Stock
who convert and whose conversion is deemed effective before the close of
business on a Dividend Record Date shall not be entitled to receive any
portion of the dividend payable on those shares of Series C Preferred Stock
on the corresponding Dividend Payment Date notwithstanding the conversion of
the shares on the Dividend Record Date and prior to such Dividend Payment
Date but will, however, be entitled to receive the entire corresponding
dividend payable, if
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any, on the shares of Common Stock issuable upon conversion provided that any
conversion of Series C Preferred Stock becomes effective prior to the close
of business on the record date for such dividend payable on such shares of
Common Stock. The holders of shares of Series C Preferred Stock on a Dividend
Record Date who (or whose transferees) convert any of those shares after the
Dividend Record Date will receive the dividend payable by the Company on
those shares of Series C Preferred Stock on the Dividend Payment Date. Except
as provided above, the Company shall make no payment or adjustment for
accrued and unpaid dividends on shares of Series C Preferred Stock, whether
or not in arrears on conversion of those shares or for dividends on the
shares of Common Stock issued upon the conversion.
(iii) As promptly as practicable after the
surrender by a holder of the certificates for shares of Series C Preferred
Stock in accordance with this Section 8(b), the Company shall issue and shall
deliver at the office of the conversion agent to the holder, or on his
written order, a certificate or certificates for the number of full shares of
Common Stock issuable upon the conversion of those shares in accordance with
the provisions of this Section 8, and any fractional interest in respect of a
share of Common Stock arising upon the conversion shall be settled as
provided in Section 8(c) below.
(iv) Each conversion shall be deemed to have been
effected immediately prior to the close of business on the date on which all
of the conditions specified in Section 8(b) (i) above shall have been
satisfied, and, the person or persons in whose name or names any certificate
or certificates for shares of Common Stock shall be issuable upon such
conversion shall be deemed to have become the holder or holders of record of
the shares of Common Stock represented by those certificates at such time on
such date and such conversion shall be at the Conversion Price (as defined in
Section 8(d) below) in effect at such time on such date, unless the stock
transfer books of the Company shall be closed on the date, in which event
such person or persons shall be deemed to have become such holder or holders
of record at the close of business on the next succeeding day on which such
stock transfer books are open, but such conversion shall be at the Conversion
Price in effect on the date upon which all of the conditions specified in
Section 8(b)(i) above shall have been satisfied. All shares of Common Stock
delivered upon conversion of the Series C Preferred Stock will upon delivery
be duly and validly issued and fully paid and non-assessable, free of all
liens and charges created by or through the Company or any of its
subsidiaries and not subject to any preemptive rights. Upon the surrender of
certificates representing shares of Series C Preferred Stock to be converted,
the shares shall no longer be deemed to be outstanding and all rights of a
holder with respect to the shares surrendered for conversion shall
immediately terminate except the right to receive the Common Stock or other
securities, cash or other assets as herein provided.
(c) No fractional shares or securities representing fractional
shares of Common Stock shall be issued upon conversion of Series C Preferred
Stock. Any fractional interest in a share of Common Stock resulting from
conversion of a share of Series C Preferred Stock shall be paid in cash
(computed to the nearest cent) based on the Current Market Price (as defined in
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Section 8(d)(iv) below) of the Common Stock on the Trading Day (as defined in
Section 8(d)(iv) below) next preceding the day of conversion. If more than one
share shall be surrendered for conversion at one time by the same holder, the
number of full shares of Common Stock issuable upon the conversion shall be
computed on the basis of the aggregate Liquidation Preference of the shares of
Series C Preferred Stock so surrendered.
(d) The "Conversion Price" per share of Common Stock shall be
$19.25, subject to adjustment from time to time as follows:
(i) In case the Company shall (A) pay a
dividend or make a distribution on its Common Stock in shares of its
Common Stock, (B) subdivide its outstanding Common Stock into a greater
number of shares, or (C) combine its outstanding Common Stock into a smaller
number of shares, the Conversion Price in effect immediately prior to such
event shall be adjusted so that the holder of any share of Series C Preferred
Stock thereafter surrendered for conversion shall be entitled to receive the
number of shares of Common Stock of the Company which he would have owned or
have been entitled to receive after the happening of such event had the share
been converted immediately prior to the happening of such event. An
adjustment made pursuant to this Section 8(d)(i) shall become effective
immediately after the record date in the case of a dividend or distribution
except as provided in Section 8(d)(viii) below, and shall become effective
immediately after the effective date in the case of subdivision or
combination. If any dividend or distribution is not paid or made, the
Conversion Price then in effect shall be appropriately readjusted.
(ii) In case the Company shall issue rights or
warrants to all or substantially all holders of its Common Stock entitling
them (for a period expiring within 45 days after the record date mentioned
below) to subscribe for or purchase Common Stock at a price per share less
than the Current Market Price (as defined in Section 8(d)(iv) below) of the
Common Stock at the record date for the determination of stockholders
entitled to receive the rights or warrants, the Conversion Price in effect
immediately prior to the issuance of such rights or warrants shall be
adjusted so that it shall equal the price determined by multiplying the
Conversion Price in effect immediately prior to the date of issuance of the
rights or warrants by a fraction of which the numerator shall be the number
of shares of Common Stock outstanding on the date of issuance of the rights
or warrants plus the number of shares of Common Stock which the aggregate
offering price of the total number of shares of Common Stock so offered for
subscription or purchase would purchase at the Current Market Price at that
record date, and of which the denominator shall be the number of shares of
Common Stock outstanding on the date of issuance of the rights or warrants
plus the number of additional shares of Common Stock offered for subscription
or purchase. The adjustment provided for in this Section 8(d)(ii) shall be
made successively whenever any such rights or warrants are issued, and shall
become effective immediately, except as provided in Section 8(d)(vii) below
after such record date. In determining whether any rights or warrants entitle
the holders of the Common Stock to subscribe for or purchase shares of Common
Stock at less than the Current Market Price, and in determining the aggregate
offering price of the shares of Common Stock so offered, there shall be taken
into account any consideration received by the
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Company for such rights or warrants, the value of such consideration, if
other than cash, to be determined by the Board of Directors (whose
determination, if made in good faith, shall be conclusive). If any or all of
such rights or warrants are not so issued or expired or terminate without
having been exercised, the Conversion Price then effect shall be
appropriately readjusted.
(iii) In case the Company shall distribute to all
or substantially all holders of its Common Stock, cash, any shares of capital
stock of the Company (other than Common Stock) or evidences of indebtedness
or assets (including securities, but excluding those dividends, rights,
warrants and distributions covered by Sections 8(d)(i) and (ii) above and
excluding Permitted Common Stock Cash Distributions (as defined below)) or
rights or warrants to subscribe for or purchase any of its securities
(excluding those referred to in Section 8(d)(ii) above) then, in each such
case, the Conversion Price shall be adjusted so that it shall equal the price
determined by multiplying the Conversion Price in effect immediately prior to
the date of the distribution by a fraction of which the numerator shall be
the Current Market Price of the Common Stock on the record date mentioned
below less the then fair market value (as determined by the Board of
Directors, whose determination, if made in good faith, shall be conclusive)
of the proportion of the capital stock or assets or evidences of indebtedness
so distributed, or of the rights or warrants so distributed, with respect to
one share of Common Stock, and of which the denominator shall be the Current
Market Price of the Common Stock on the record date; PROVIDED, HOWEVER, that
in connection with the Company's spin-off of LTC Healthcare, Inc., each
holder of Series C Preferred Stock on the record date of the spin-off of LTC
Healthcare, Inc. shall receive as a special dividend 1/10 of a share of
common stock, par value $.01 per share, of LTC Healthcare, Inc. for each
share of the Company's Common Stock into which such holder's Series C
Preferred Stock may be converted in lieu of adjustment of the Conversion
Price for such distribution. Notwithstanding the foregoing, in the event that
said spin-off does not involve the issuance of 1/10 of a share of common
stock of LTC Healthcare, Inc. for each share of the Company's Common Stock,
then the number of shares of common stock of LTC Healthcare, Inc. issued to
the holders of the Series C Preferred Stock shall be adjusted accordingly
such that each holder of one share of Series C Preferred Stock is treated
equivalently to the holder of a share of the Company's Common Stock. Such
adjustment shall become effective immediately, except as provided in Section
8(d)(vii) below, after the record date or the determination of stockholders
entitled to receive such distribution. If any such distribution is not made
or if any or all of such rights or warrants expire or terminate without
having been exercised, the Conversion Price then in effect shall be
appropriately readjusted. "Permitted Common Stock Cash Distributions" means
cash dividends and distributions paid with respect to the Common Stock in the
ordinary course of the Company's business as determined by the Board of
Directors in good faith and not in excess of the stockholders' equity of the
Company.
(iv) For the purpose of any computation
under Sections 8(d)(ii) and 8(d)(iii) above, the "Current Market Price"
of the Common Stock at any date shall be the average of the last reported
sale prices per share for the ten consecutive Trading Days (as
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defined below) preceding the date of such computation. The last reported sale
price for each day shall be (A) if the Common Stock is listed or admitted for
trading on any national securities exchange, the last sale price, or the
closing bid price if no sale occurred that day, of the Common Stock on the
principal securities exchange on which the Common Stock is listed, or (B) the
last reported sale price of the Common Stock on the Nasdaq Stock Market's
National Market (the "Nasdaq National Market"), or any similar system of
automated dissemination of quotations of securities prices then in common
use, if so quoted, or (C) if not listed or quoted as described in clauses (A)
or (B), the mean between the high bid and low asked quotations for the Common
Stock as reported by the National Quotation Bureau Incorporated if at least
two securities dealers have inserted both bid and asked quotations for the
Common Stock on at least five of the ten preceding days. If the Common Stock
is quoted on a national securities or central market system, in lieu of a
market or quotation system described above, the last reported sale price
shall be determined in the manner set forth in clause (C) of the preceding
sentences if bid and asked quotations are reported but actual transactions
are not, and in the manner set forth in clause (A) of the preceding sentence
if actual transactions are reported. If none of the conditions set forth
above is met, the last reported sale price of the Common Stock on any day or
the average of such last reported sale prices for any period shall be the
fair market value of such class of stock as determined by a member firm of
the New York Stock Exchange, Inc. selected by the Company. As used herein the
term "Trading Days" means (x) if the Common Stock is listed or admitted for
trading on any national securities exchange, days on which such national
securities exchange is open for business, (y) if the Common Stock is quoted
on the Nasdaq National Market or any similar system of automated
dissemination of quotations of securities prices, days on which trades may be
made on such system, or (z) if not quoted as described in clauses (x) or (y),
days on which quotations are reported by the National Quotation Bureau
Incorporated.
(v) No adjustment in the Conversion Price shall be
required unless such adjustment would require a change of at least 1% in the
Conversion Price; PROVIDED, HOWEVER, that any adjustments which by reason of
this Section 8(d)(v) are not required to be made shall be carried forward and
take into account in any subsequent adjustment; and PROVIDED, FURTHER, that
adjustment shall be required and made in accordance with the provisions of
this Section 8 (other than this Section 8(d)(v)) not later than such time as
may be required in order to preserve the tax free nature of a distribution to
the holders of shares of Common Stock which would otherwise require an
adjustment to be made pursuant this Section 8(d). All calculations under this
Section 8 shall be made to the nearest cent or to the nearest one hundredth
of a share, as the case may be. Anything in this Section 8(d) to the contrary
notwithstanding, the Company shall be entitled to (but under no obligation
to) make such reductions in the Conversion Price, in addition to those
required by this Section 8(d), as it in its discretion shall determine to be
advisable in order that any stock dividend, subdivision or combination of
shares, distribution of capital stock or rights or warrants to purchase stock
or securities, or distributions of evidences of indebtedness or assets (other
than cash dividends or
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distributions paid from retained earnings) hereinafter made by the Company to
its stockholders shall be a tax free distribution for federal income tax
purposes.
(vi) Whenever the Conversion Price is
adjusted, as herein provided, the Company shall promptly file with the
conversion agent an officers' certificate setting forth the Conversion Price
after the adjustment and setting forth a brief statement of the facts
requiring the adjustment, which certificate shall be conclusive evidence of
the correctness of the adjustment. Promptly after delivery of the
certificate, the Company shall prepare a notice of the adjustment of the
Conversion Price setting forth the adjusted Conversion Price and the date on
which the adjustment becomes effective and shall mail the notice of such
adjustment of the Conversion Price to the holder of each share of Series C
Preferred Stock at his last address as shown on the stock books of the
Company.
(vii) In any case in which this Section 8(d)
provides that an adjustment shall become effective immediately after a record
date for an event, the Company may defer until the occurrence of the event
(i) issuing to the holder of any share of Series C Preferred Stock converted
after the record date and before the occurrence of the event the additional
shares of Common Stock issuable upon the conversion by reason of the
adjustment required by the event over and above the Common Stock issuable
upon such conversion before giving effect to the adjustment and (ii) paying
to the holder any amount in cash in lieu of any fractional share pursuant to
Section 8(c) above.
(e) If:
(i) the Company shall declare a dividend (or
any other distribution) on the Common Stock (other than in the ordinary
course of business (as determined by the Board of Directors in good faith)
and in excess of the stockholders' equity of the Company); or
(ii) the Company shall authorize the
granting to all of the holders of the Common Stock of rights or warrants to
subscribe for or purchase any shares of any class or any other rights or
warrants; or
(iii) there shall be any reclassification of the
Common Stock (other than a subdivision or combination of the outstanding
Common Stock and other than a change in the par value, or from par value to
no par value, or from no par value to par value), or any consolidation,
merger, or statutory share exchange to which the Company is a party and for
which approval of any stockholders of the Company is required, or any sale or
transfer of all or substantially all the assets of the Company or;
(iv) there shall be a voluntary or an
involuntary dissolution, liquidation or winding up of the Company;
then, the Company shall cause to be filed with the conversion agent, and shall
cause to be mailed to the holders of shares of the Series C Preferred Stock at
their addresses as shown on
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the stock books of the Company, at least 15 days prior to the applicable date
hereinafter specified in (A) or (B) below as applicable, a notice stating (A)
the date on which a record is to be taken for the purpose of the dividend
distribution or rights or warrants, or, if a record is not to be taken, the
date as of which the holders of Common Stock of record to be entitled to the
dividend, distribution or rights or warrants are to be determined or (B) the
date on which the reclassification, consolidation, merger, statutory share
exchange, sale, transfer, dissolution, liquidation or winding up is expected
to become effective, and the date as of which it is expected that holders of
Common Stock of record shall be entitled to exchange their shares of Common
Stock for securities or other property deliverable upon the reclassification,
consolidation, merger, statutory share exchange, sale, transfer, dissolution,
liquidation or winding up. Failure to give any such notice or any defect in
the notice shall not affect the legality or validity of the proceedings
described in this Section 8(e).
(f) (i) The Company covenants that it will at all times
reserve and keep available, free from preemptive rights, out of the aggregate of
its authorized but unissued shares of Common Stock or its issued shares of
Common Stock held in its treasury, or both, for the purpose of effecting
conversions of the Series C Preferred Stock, the full number of shares of Common
Stock deliverable upon the conversion of all outstanding shares of Series C
Preferred Stock not theretofore converted. For purposes of this Section 8(f),
the number of shares of Common Stock which shall be deliverable upon the
conversion of all outstanding shares of Series C Preferred Stock shall be
computed as if at the time of computation all the outstanding shares were held
by a single holder.
(ii) Before taking any action which would
cause an adjustment reducing the Conversion Price below the then par
value (if any) of the shares of Common Stock deliverable upon conversion of
the Series C Preferred Stock, the Company will take any Company action which
may, in the opinion of its counsel, be necessary in order that the Company
may validly and legally issue fully paid and non-assessable shares of Common
Stock at the adjusted Conversion Price.
(iii) The Company will list the shares of Common
Stock required to be delivered upon conversion of the Series C Preferred
Stock, prior to the delivery, upon each national securities exchange, the
Nasdaq National Market or any similar system of automated dissemination of
securities prices, if any, upon which the outstanding Common Stock is listed
or accepted for quotation at the time of delivery.
(iv) Prior to the delivery of any securities
which the Company shall be obligated to deliver upon conversion of the
Series C Preferred Stock, the Company will endeavor, in good faith and as
expeditiously as possible, to comply with all federal and state laws and
regulations thereunder requiring the registration of those securities with,
or any approval of or consent to the delivery thereof by, any governmental
authority.
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(g) The Company will pay any and all documentary stamp or
similar issue or transfer taxes payable in respect of the issue or delivery
of shares of Common Stock on conversion of the Series C Preferred Stock
pursuant hereto PROVIDED, HOWEVER, that the Company shall not be required to
pay any tax which may be payable in respect of any transfer involved in the
issue or delivery of shares of Common Stock in a name other than that of the
holder of the Series C Preferred Stock to be converted and no such issue or
delivery shall be made unless and until the person requesting the issue or
delivery has paid to the Company the amount of any such tax or has
established, to the satisfaction of the Company, that the tax has been paid.
(h) In the event the Company shall (x) effect any capital
reorganization or reclassification of its shares or (y) consolidate or merge
with or into any other Company (other than a consolidation or merger in which
the Company is the surviving Company and each share of Common Stock
outstanding immediately prior to such consolidation or merger is to remain
outstanding immediately after such consolidation or merger) or (z) sell,
lease or transfer substantially all of its assets to any other person or
entity for a consideration consisting in whole or in part of equity
securities of such other Company, the holders of shares of Series C Preferred
Stock shall, receive upon conversion thereof, in lieu of each share of Common
Stock into which the Series C Preferred Stock would have been convertible
prior to such transaction, the same kind and amount of stock and other
securities, cash or property as such holder would have been entitled to
receive upon such transaction if such holder had held the Common Stock
issuable upon conversion of the Series C Preferred Stock immediately prior to
such transaction. The Company may not become a party to any such transaction
unless the terms thereof are consistent with the foregoing.
9. LIMIT ON OWNERSHIP OF SERIES C PREFERRED STOCK; EXCESS PREFERRED
SHARES. Shares of Series C Preferred Stock shall be subject to the applicable
Limit and other provisions of Article NINTH of the Charter of the Company and to
the following additional provisions set forth herein. Subject to the authority
of the Board of Directors set forth in said Article NINTH, the Limit applicable
to shares of the Series C Preferred Stock shall be the number of shares of
Series C Preferred Stock that is equal to 9.8% of the then outstanding shares of
Series C Preferred Stock or, if fewer, the number of shares of Series C
Preferred Stock that, if then converted by the holder into shares of Common
Stock as provided in Section 8, would make such holder or any other person the
owner of a number of shares of Common Stock that would exceed the Limit
applicable to Common Stock as set forth in Section 9.3.2.1 of the Charter of the
Company; PROVIDED, HOWEVER, that National Health Investors, Inc. ("NHI"), the
initial purchaser of the shares of Series C Preferred Stock (but not any other
holders of shares of Series C Preferred Stock) shall be exempt from the Limit
applicable to the outstanding shares of Series C Preferred Stock as set forth in
Section 9.3.2.2 of the Charter of the Company and NHI may own greater than 9.8%
of the outstanding shares of Series C Preferred Stock; PROVIDED, FURTHER, that
NHI remains subject to the Limit applicable to the shares of Common Stock as set
forth in Section 9.3.2.1 of the Charter of the Company whereby NHI may not own
more than the aggregate number of shares of Common Stock and shares of Series
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C Preferred Stock that, if then converted by NHI into shares of Common Stock,
would make NHI or any other person the owner of a number of shares of Common
Stock that would exceed the Limit applicable to Common Stock as set forth in
said Article NINTH.
FOURTH: These Articles Supplementary have been approved by the
Board of Directors in the manner and by the vote required by law.
FIFTH: The undersigned President of the Company acknowledges these
Articles Supplementary to be the corporate act of the Company and, as to all
matters or facts required to be verified under oath, the undersigned
President of the Company acknowledges that to the best of his knowledge,
information and belief, these matters and facts are true in all material
respects and that this statement is made under the penalties for perjury.
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IN WITNESS WHEREOF, LTC PROPERTIES, INC., has caused these
Articles Supplementary to be executed under seal in its name and on its behalf
by its President and attested to by its Secretary on this 2nd day of September,
1998.
LTC PROPERTIES, INC.
By: /s/ James J. Pieczynski
-------------------------------------
Title: President and Chief Financial Officer
Attest: /s/ Pamela J. Privett
-------------------------------------
Title: Secretary
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EXHIBIT 10.1
- --------------------------------------------------------------------------------
TRANSFER AND REPURCHASE AGREEMENT
by and between
LTC Properties, Inc.
and
LTC REMIC IV Corporation
---------------------------------------
Dated as of
April 20, 1998
- --------------------------------------------------------------------------------
<PAGE>
THIS TRANSFER AND REPURCHASE AGREEMENT, dated as of April 20,
1998, by and between LTC Properties, Inc., a Maryland corporation ("LTC" or the
"Originator"), and LTC REMIC IV Corporation, a Delaware corporation (together
with its permitted assigns, the "Company").
WITNESSETH:
WHEREAS, the Company, a corporation organized under the laws of
Delaware, is a wholly owned subsidiary of LTC; and
WHEREAS, LTC will sell, transfer, convey and assign (the
"Transfer") to the Company all of its right, title and interest in, to and under
certain mortgage loans (the "Mortgage Loans") secured by first liens on
properties that provide health care and/or long-term nursing or assisted living
care, listed on the Mortgage Loan Schedule attached as Exhibit A hereto and all
of its right, title and interest in, to and under the LTC Commercial Mortgage
Pass-Through Certificates, Series 1993-1, Class E (the "Mortgage Certificates");
and
WHEREAS, LTC, in consideration for the Transfer of the Mortgage
Loans and Mortgage Certificates to the Company, will receive $116,940,335 in
cash and the Class F, Class G, Class R, Class LR, Class X-1 and Class X-2
Certificates having a principal balance of $34,245,541 which LTC will permit the
Company or a wholly-owned subsidiary of LTC to retain; and
WHEREAS, the Company will convey the Mortgage Loans and Mortgage
Certificates to a trust (the "Trust") formed pursuant to the Pooling and
Servicing Agreement (as defined below) on or about the date hereof and will
retain certain interests in the Mortgage Loans and Mortgage Certificates to the
extent provided in the Pooling and Servicing Agreement; and
WHEREAS, the Trust will issue pass-through certificates (the
"Certificates") which in the aggregate will represent the entire beneficial
ownership interest in the assets of the Trust, which assets will consist of the
Mortgage Loans, Mortgage Certificates and certain related assets; and
WHEREAS, it is a condition to the issuance of the Certificates
that LTC shall be required to repurchase the Mortgage Loans or Mortgage
Certificates under the circumstances and subject to the conditions set forth
herein and in the Pooling and Servicing Agreement.
NOW, THEREFORE, for and in consideration of the premises and the
mutual covenants hereinafter contained, the parties hereto covenant and agree as
follows:
ARTICLE I
DEFINITIONS
As used herein, the following terms shall have the meanings
herein specified unless the context otherwise requires. Defined terms in this
Agreement shall include in the singular number the plural and in the plural
number the singular. Capitalized terms used and not otherwise defined herein
shall have the respective meanings ascribed to such terms in the Pooling and
Servicing Agreement.
"AGREEMENT" shall mean this Transfer and Repurchase Agreement as
the same may from time to time hereafter be modified, supplemented or amended.
"APPRAISED VALUE" shall mean with respect to any Mortgaged
Property, the appraised value
<PAGE>
thereof based upon the appraisal made or used by LTC in connection with the
origination of the related Mortgage Loan.
"BORROWER" shall mean any obligor under a Note.
"BUSINESS DAY" shall mean any day other than a Saturday, a Sunday
or a day on which banking institutions in the city of Chicago, Illinois (for so
long as LaSalle National Bank is the Trustee) or Philadelphia, Pennsylvania or
New York, New York (so long as GMAC Commercial Mortgage Corporation is the
Master Servicer) are authorized or obligated by law, executive order or
governmental decree to be closed, or LTC Properties, Inc., the Master Servicer
or the Trustee is closed.
"CODE" shall mean the Internal Revenue Code of 1986, any
successor statute thereto, and any temporary or final regulations of the United
States Department of the Treasury from time to time promulgated thereunder.
"COLLATERAL" shall mean all property (including the real property
listed on Exhibit A hereto) and interests in property now owned or hereafter
acquired in or upon which a lien has been or is purported or intended to have
been granted to the Trust under the Transaction Documents.
"DISQUALIFYING CONDITION" shall have the meaning assigned thereto
in Section 3.2(a)(xliii) hereof.
"ENVIRONMENTAL CONDITION" shall mean any condition or
circumstance that (i) may pose an imminent or substantial endangerment to the
public health or welfare or the environment, (ii) may result in a release or
threatened release of any Hazardous Materials, or (iii) may give rise to any
environmental claim or demand.
"GROUND LEASE" shall have the meaning assigned thereto in Section
3.2(a)(xxix) hereof.
"MORTGAGE LOAN SCHEDULE" shall mean Exhibit A to this Agreement.
"NET LEASE" shall mean with respect to any Mortgage Loan, a lease
covering substantially all of the related Mortgaged Property pursuant to which
the related tenant is obligated to pay (i) a minimum fixed rental substantially
sufficient, as of the date of origination of such Mortgage Loan, to pay in full
each related Monthly Payment on such Mortgage Loan (other than any Balloon
Payment), and (ii) all other charges commonly associated with the operation and
maintenance of such Mortgaged Property (other than exterior maintenance of
buildings and adjacent land and improvements located thereon), including,
without limitation, real estate taxes and assessments, insurance and structural
and non-structural repairs and maintenance. In the case of any Mortgage Loan
secured by more than one Mortgaged Property, the term "Net Lease" shall refer to
each Net Lease relating to each such Mortgaged Property.
"NURSING FACILITIES" shall mean Mortgaged Properties operating as
(i) skilled nursing facilities or (ii) assisted living facilities.
"PERSON" shall mean any individual, corporation, limited
liability company, partnership, joint venture, firm, association, joint-stock
company, trust, unincorporated organization or government or any agency
political subdivision thereof.
"POOLING AND SERVICING AGREEMENT" shall mean the Pooling and
Servicing Agreement dated as of May , 1998 by and among the Company, as
Depositor, LaSalle National Bank, as Trustee, GMAC Commercial Mortgage
Corporation, as Master Servicer and LTC, as Special Servicer.
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"QUALIFIED MORTGAGE" A Mortgage Loan that is a "qualified
mortgage" within the meaning of Code Section 860G(a)(3) (but without regard to
the rule in Treasury Regulation l.860G-2(f)(2) that treats a defective
obligation as a qualified mortgage, or any substantially similar successor
provision) and applicable Treasury Regulations promulgated pursuant thereto.
"QUALIFIED TITLE INSURER" shall mean any title insurer specified
on Exhibit B hereto.
"REPURCHASE PRICE" shall mean, with respect to (a) any Mortgage
Loan to be purchased or repurchased during any Prepayment Period pursuant to
this Agreement or the Pooling and Servicing Agreement, an amount, calculated by
the Master Servicer, or the Special Servicer, as applicable, equal to:
(i) the unpaid principal balance of such Mortgage Loan as of the
Due Date as to which a payment of principal was last made by
the Borrower; PLUS
(ii) unpaid accrued interest from the Due Date as to which
interest was last paid by the Borrower up to the Due Date in
the Due Period related to the same Determination Date as the
Prepayment Period in which the purchase or repurchase is to
occur at a rate equal to the Mortgage Interest Rate
applicable from time to time on the unpaid Principal Balance
of such Mortgage Loan; PLUS
(iii) any unreimbursed Servicer Advances on such Mortgage Loan,
plus interest thereon at the Advance Rate; PLUS
(iv) expenses reasonably incurred or to be incurred by the Master
Servicer, the Special Servicer or the Trustee in respect of
the breach or defect giving rise to the repurchase
obligation, including any expenses arising out of the
enforcement of the repurchase obligation; and
(b) the Mortgage Certificates to be purchased or repurchased
during any Prepayment Period pursuant to this Agreement or the Pooling and
Servicing Agreement, an amount to be calculated by the Master Servicer equal to
the unpaid principal amounts of such Mortgage Certificates on the date such
repurchase occurs plus accrued and unpaid interest through the last day of the
Interest Accrual Period in which such repurchase occurs, plus unpaid and
outstanding expenses for such Mortgage Certificates.
"TRANSACTIONS" shall mean the transactions contemplated by the
Transaction Documents.
"TRANSACTION DOCUMENTS" shall mean this Agreement, the Pooling
and Servicing Agreement and all other documents to which LTC or the Company is a
party which relate to the transfer of the Mortgage Loans and Mortgage
Certificates to the Company or the Trust or to the issuance of the Certificates.
ARTICLE II
ASSIGNMENT; PURCHASE PRICE
(a) LTC concurrently with the execution hereof, does hereby sell,
transfer, assign, set over and otherwise convey to the Company (i) all the
right, title and interest of LTC in and to the Mortgage Loans identified on
Exhibit A hereto, including all rights to payment in respect thereof under the
Notes and any and all related agreements, title insurance policies and any
security interest thereunder (whether in real or personal property or other
Collateral and whether tangible or intangible) and any guaranty or letter of
credit relating thereto and (ii) all the right, title and interest of LTC in and
to the Mortgage Certificates, without recourse and without
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<PAGE>
warranty of any kind except as specifically set forth herein. The parties
intend that the above conveyance of the Mortgage Loans, Mortgage Certificates
and the related rights and property effected in the preceding paragraph
constitute an absolute transfer of such property by the Originator to the
Company. If such conveyance is deemed, however, to be a pledge of security for
a loan or the conveyance is found to not be effective, LTC hereby grants to the
Company, to secure its obligation to pay the Purchase Price, a first priority
security interest in all of LTC's right, title and interest in and to the
Mortgage Loans identified on the Mortgage Loan Schedule and the Mortgage
Certificates as of the Cut-off Date, including, without limitation, all interest
and principal due on or after the Cut-off Date (including any amounts received
by LTC before the Cut-off Date but due on or after the Cut-off Date), together
with LTC's right, title and interest in any related primary mortgage or other
insurance policies and any escrow, reserve, or other comparable accounts in
respect of the Mortgage Loans.
(b) In consideration for the transfer of the Mortgage Loans and
Mortgage Certificates to the Company, LTC will receive $116,940,335 in cash and
the Class F, Class G, Class R, Class LR, Class X-1 and Class X-2 Certificates,
having an aggregate principal balance of $34,245,541 (PROVIDED, THAT, the Class
X-1 and Class X-2 Certificates have no outstanding principal balance and are
only entitled to interest payments), which LTC will permit the Company or a
wholly-owned subsidiary of LTC to retain (such cash amount, together with the
Certificates, the "Purchase Price") which represents the purchase price for the
Mortgage Loans and Mortgage Certificate minus certain fees and expenses of
Goldman Sachs & Co. as initial purchaser of certain classes of the Certificates.
ARTICLE III
CORPORATE REPRESENTATIONS, WARRANTIES AND COVENANTS;
REPURCHASE OR SUBSTITUTION EVENTS
Section 3.1 CORPORATE REPRESENTATIONS, WARRANTIES AND COVENANTS.
As a condition to the execution and delivery of the Pooling and Servicing
Agreement and the completion of the Transactions contemplated thereby, LTC and
the Company make the following representations and warranties, which shall
survive the execution and delivery of this Agreement and all other Transaction
Documents.
(a) LTC represents and warrants that, as of the Closing Date (i)
it is duly authorized to execute and deliver this Agreement, to enter into the
Transactions and to perform its obligations hereunder and has taken all
necessary action to authorize such execution, delivery and performance, (ii) the
Person signing this Agreement on its behalf is duly authorized to do so on its
behalf and this Agreement has been duly executed and delivered by it, (iii) it
has obtained all authorizations of any governmental body required in connection
with this Agreement and the Transactions and such authorizations are in full
force and effect, (iv) the execution, delivery and performance of this Agreement
and the Transactions will not violate any law, ordinance, charter, by-law or
rule applicable to it or any material agreement or order or decree by which it
is bound or by which any of its assets are affected, (v) there is no action,
suit or proceeding against, or investigation of, it pending or threatened,
before any court, administrative agency or other tribunal which, either
individually or in the aggregate, (A) asserts the invalidity of this Agreement,
(B) seeks to prevent the consummation of any of the Transactions or (C) which
would materially and adversely affect the performance by it of its obligations
under, or the validity or enforceability of, this Agreement and (vi) this
Agreement constitutes a legal, valid and binding agreement of it, enforceable
against it in accordance with its terms, subject to applicable bankruptcy,
fraudulent conveyance, insolvency, 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 in equity or at law).
(b) The Company has ensured and will continue to ensure
that: (a) its funds and other
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<PAGE>
assets are identifiable and are not commingled with those of any Affiliate and
that it maintains bank accounts, corporate records and books of account separate
and apart from those of any Affiliate; (b) it pays from its assets all
obligations and indebtedness of any kind incurred by it; and (c) the business
and affairs of the Company are managed by or under the direction of its Board of
Directors. The assets and liabilities of the Company and its Affiliates,
including LTC, are and will continue to be readily ascertainable and subject to
segregation without requiring substantial time or expense to effect and account
for such segregated assets and liabilities.
(c) The Company conducts and will continue to conduct its
business solely in its own name so as not to mislead others as to the identity
of the company with which those others are concerned; LTC does not conduct its
business in the name of the Company or otherwise act in a manner that would lead
others to believe that they are dealing with the Company or its assets rather
than LTC and its assets. Without limiting the generality of the foregoing, all
oral and written communications including, without limitation, letters,
invoices, purchase orders, contracts, statements and applications, have been and
will be made solely in the name of the Company if they relate to the Company and
solely in the name of LTC if they relate to LTC. The Company and LTC have
separate stationery and other business forms. The Company has and will continue
to conduct its business from an office separate from that of LTC.
(d) The Company and LTC each is adequately capitalized for the
businesses in which it is engaged or in which it may become engaged. The
Company will not declare dividends to LTC if declaring dividends would result in
inadequate capitalization for the Company. Each of the Company and LTC will at
all times ensure that its capitalization is adequate in light of its business
and purpose. The Company will continue to provide for its own operating
expenses and liabilities from its own funds, and such expenses and liabilities
will not be paid by LTC, except that certain of the organizational expenses of
the Company have been paid by LTC. In addition, from time to time LTC may make
capital contributions to the Company to enable the Company to acquire certain
securities; any such capital contributions will be reflected as such on the
books and records of both LTC and the Company, and will be treated as capital
contributions for tax, accounting and other relevant purposes.
(e) The Company maintains, and will continue to maintain, cash
management systems separate from those of LTC. General overhead and
administrative expenses of LTC will not be charged or otherwise allocated to the
Company and such expenses of the Company will not be charged or otherwise
allocated to LTC (other than the organizational expenses referred to above).
There will be no guarantees made by the Company with respect to obligations of
LTC and there will be no guarantees made by LTC with respect to obligations of
the Company. Accordingly, the separate assets and liabilities of the Company
are and will continue to be readily ascertainable from those of LTC.
(f) The Company maintains corporate records distinct and
separately identifiable from the corporate records of LTC and any other person
or entity. The Company maintains full and complete financial records distinct
and separately identifiable from the financial records of LTC or any Affiliates.
These statements and reports are prepared and maintained in accordance with
generally accepted accounting principles, susceptible to audit and audited, at
least annually, in connection with the audit of LTC by independent public
accountants, in accordance with generally accepted auditing standards. LTC
prepares and files consolidated federal tax returns and combined financial
statements all of which will include the Company. The Company keeps its funds
separate and apart from the funds of LTC and any Affiliates, and its other
assets are separately identifiable and distinguishable from the assets of LTC
and any Affiliates. The Company will prepare and issue to its creditors
financial statements separate from those of LTC.
(g) When necessary, the Company obtains proper authorization
from its directors or stockholders, as appropriate, for corporate action. The
Company acts solely in its name and through its duly authorized officers or
agents in the conduct of its businesses.
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(h) The Company and LTC each do not and will not: (a) hold
itself out as having agreed to pay or become liable for the debts of LTC, in the
case of the Company, or the Company, in the case of LTC; (b) fail to correct any
known misrepresentation with respect to the foregoing; (c) operate or purport to
operate as an integrated, single economic unit with LTC, in the case of the
Company, or with the Company, in the case of LTC; (d) seek or obtain credit or
incur any obligation to any third party based upon the assets of LTC, in the
case of the Company, or upon the assets of the Company, in the case of LTC; or
(e) induce any such third party to rely reasonably on the creditworthiness of
LTC, in the case of the Company, or the creditworthiness of the Company, in the
case of LTC. The Company maintains and will continue to maintain an
arm's-length relationship with LTC. The Company maintains and will continue to
maintain management over its daily business affairs independent from that of LTC
and free of any undue or excessive control exercised by LTC; LTC maintains, and
will continue to maintain, management over its daily business affairs
independent from that of the Company and free of any undue or excessive control
exercised by the Company.
(i) The Company, prior to or contemporaneously with the sale of
the Mortgage Loans and Mortgage Certificates, will disclose all material
transactions associated with its acquisition of the Mortgage Loans and Mortgage
Certificates and the transfer of such Mortgage Loans and Mortgage Certificates
the Trust Fund by various means, including, without limitation, the filing of
UCC-1 financing statements and other communications.
(j) The annual financial statements of LTC and the Company,
including the consolidated financial statements of LTC, will disclose the
effects of the transactions in accordance with generally accepted accounting
principles. The consolidated financial statements of LTC will contain a
footnote stating that the Mortgage Loans and Mortgage Certificates have been
sold to the Company and the assets of the Company are not available to satisfy
the obligations of LTC or its other subsidiaries. The resolutions, agreements
and other instruments underlying the subject transactions will be continuously
maintained by LTC and the Company as official records.
Section 3.2 REPURCHASE OR SUBSTITUTION EVENTS. (a) Subject to the
provisions of Section 4.1 hereof, LTC agrees to remedy any violation described
below in all material respects or to repurchase or substitute a Mortgage Loan
upon the determination, as of the Closing Date and immediately prior to the
effectiveness of the transfer effected hereby or as of such other date
specifically provided herein, that one of the following statements is not true
in any material respect and such violation has a material adverse effect on the
Certificateholders:
(i) LTC is the sole owner and holder of such Mortgage Loan;
(ii) LTC has full right and authority to sell, assign and
transfer such Mortgage Loan;
(iii) The information set forth in the Mortgage Loan Schedule is
correct in all material respects at the date or dates
respecting which such information is furnished as specified
therein (or, if no date is specified, at and as of the
Closing Date);
(iv) Such Mortgage Loan is not a participation interest in a
mortgage loan, but is a whole loan, such Mortgage Loan does
not contain terms providing for a contingent interest, and
such Mortgage Loan does not contain an equity participation;
(v) Such Mortgage Loan complies, as of the date of origination,
with, or was exempt from, applicable state or federal laws,
regulations and other requirements pertaining to usury, and
the receipt of any amounts payable as interest or otherwise
from revenues derived from the operation of the related
Mortgaged Property or in respect of any equity participation
provision of such Mortgage Loan do not violate any
applicable federal, state or local law, regulation or
other requirement pertaining to usury; any or all other
requirements of any federal, state or local law,
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including, without limitation, truth-in-lending, real estate
settlement procedures, equal credit opportunity or
disclosure laws, applicable to such Mortgage Loan were
complied with as of the date of origination of such Mortgage
Loan;
(vi) The origination, servicing and collection practices used by
LTC or any prior holder of such Mortgage Loan have been in
all material respects legal, proper and prudent and have met
customary standards utilized by originators of mortgage
loans to long-term health care facilities in the areas where
the related Mortgaged Properties are located;
(vii) Such Mortgage Loan was originated by LTC or any agent
thereof, and complies with all the material terms,
conditions and requirements of the underwriting policies of
LTC in effect at the time of origination;
(viii) LTC is transferring such Mortgage Loan free and clear of any
and all liens, pledges, charges or security interests of any
nature encumbering such Mortgage Loan other than the lien
granted pursuant to Article II hereof and such transfer is
not subject to bulk sale law;
(ix) The proceeds of such Mortgage Loan have been fully disbursed
and there is no requirement for future advances thereunder;
(x) Each of the related Notes, related Mortgages and other
agreements providing security, credit support or other
assurances in connection therewith is a legal, valid and
binding obligation of the maker thereof (subject to any
nonrecourse provisions therein and any laws applicable
thereto of similar effect, such as antideficiency or
one-form-of-action rules), enforceable in accordance with
its terms, except as such enforcement may be limited by (A)
bankruptcy, insolvency, reorganization, fraudulent
conveyance or other similar laws affecting the enforcement
of creditors' rights generally, (B) general principles of
equity (regardless of whether such enforcement is considered
in a proceeding in equity or at law), including without
limitation concepts of materiality, reasonableness, good
faith and fair dealing and the possible unavailability of
specific performance or injunctive relief, and (C) in the
case of certain personal guarantees executed in connection
with certain Mortgage Loans, the community property laws of
the states in which the persons executing such guarantees
are domiciled, and there is no valid offset, defense,
counterclaim or right to rescission with respect to such
Note, Mortgage or other agreements;
(xi) The related Assignment of Mortgage constitutes a legal,
valid and binding assignment of such Mortgage to the
Company, and the related reassignment of assignment of
leases and rents, if any, constitutes a legal, valid and
binding assignment thereof to the Company, subject to
applicable bankruptcy, insolvency, reorganization,
fraudulent conveyance, moratorium and other similar laws
affecting the enforcement of creditors' rights and remedies
generally, and subject, as to enforceability, to general
principles of equity (regardless of whether such enforcement
is considered in a proceeding in equity or at law) including
principles of commercial reasonableness, good faith and fair
dealing;
(xii) The related Mortgage (including any related security
agreement included in the definition of such term) is a
valid and enforceable first lien on the related Mortgaged
Property, (except for the Mortgage on the Mortgaged
Property related to Mortgage Loans #85A and #85B, which are
valid and enforceable first lien securing such Mortgage Loan
and a valid and enforceable second lien securing such
related Mortgage Loan), which Mortgaged Property is free and
clear of all encumbrances and liens having priority
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over, or equal to, the lien of the Mortgage, except as such
enforcement may be limited by (A) bankruptcy, insolvency,
reorganization, fraudulent conveyance or other similar laws
affecting the enforcement of creditors' rights and remedies
generally, (B) general principles of equity (regardless of
whether such enforcement is considered in a proceeding in
equity or at law), including without limitation concepts of
materiality, reasonableness, good faith and fair dealing and
the possible unavailability of specific performance or
injunctive relief, and subject only to (i) liens for real
estate taxes and special assessments not yet due and
payable, (ii) covenants, conditions and restrictions, rights
of way, easements and other matters of public record as of
the date of recording of such Mortgage, such exceptions
appearing of record being acceptable to mortgage lending
institutions generally or specifically reflected in the
appraisal made in connection with the origination of the
related Mortgage Loan, none of which materially impairs the
value of the property or materially interferes with the
benefits of the security intended to be provided by such
Mortgage, (iii) exceptions and exclusions specifically
referred to in the lender's title insurance policy described
in clause (xxiii) below, none of which materially impairs
the value of the Mortgaged Property or interferes with the
use and operation of the premises as currently contemplated
or the ability of the Borrower to make payments of principal
and interest on the related Mortgage Loan when due, (iv) a
lien on the property to ensure the reimbursement of remedial
or response costs incurred by a State or the United States
as a result of an Environmental Condition, or (v) other
matters to which like properties are commonly subject none
of which, individually or in the aggregate, materially
impairs the value of the property or materially interferes
with the use and operation of the premises as currently
contemplated or the ability of the Borrower to make payments
of principal and interest on the related Mortgage Loan when
due; PROVIDED, HOWEVER, that the Borrower may grant security
interests in specific items of personal property located on
the related Mortgaged Property (or all of the Mortgaged
Properties in the case of Mortgage Loans secured by more
than one Mortgaged property) to the lessors of or
purchase-money lenders for said personal property, so long
as such encumbrances secure obligations of the Borrower in
an aggregate amount not in excess of eight thousand dollars
($8,000) per month;
(xiii) The related Mortgage has not been waived, modified, altered,
satisfied, cancelled or subordinated in any respect or
rescinded, or the related Mortgaged Property has not been
released from the lien or other encumbrance of, and the
related Borrower has not been released from its obligations
under, such Mortgage or the related Mortgage Note, in whole
or in any part, in a manner which materially interferes with
the benefits of the security intended to be provided by such
Mortgage or the use, enjoyment, value or marketability of
the related Mortgaged Property for the purposes specified in
such Mortgage; no guarantor has been released, in whole or
in part, under the related guaranty (if any); and no
instrument has been executed that would effect any such
cancellation, subordination, rescission or release, with the
exception of the written instruments which are part of the
related Mortgage File;
(xiv) All taxes, governmental assessments or water, sewer and
municipal charges that prior to the Cut-Off Date became due
and owing in respect of, and affect, the related Mortgaged
Property, and that by filing of a notice or other
appropriate instrument by a government agency could become a
lien on such Mortgaged Property, have been paid prior to
becoming delinquent, or a collateral pledge account with an
amount sufficient to cover such payments has been
established;
(xv) Neither the Originator nor any of its agents or Affiliates
has, directly or indirectly, advanced
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funds, or received any advance of funds by a party other
than the related Borrower, for the payment of any amount
required by the related Note or the related Mortgage,
except for interest accruing from the date of the Note or
date of disbursement of the proceeds of such Mortgage Loan,
whichever is later, to the date which preceded by 30 days
the first Due Date under the related Note;
(xvi) The proceeds of such Mortgage Loan to the related Borrower
at origination did not exceed the principal amount of such
Mortgage Loan and, taking into account any lien on the
related Mortgaged Property which is senior to or of equal
seniority as such Mortgage Loan, either (A) such Mortgage
Loan is secured by an interest in real property having a
fair market value (i) at least equal to 80% of the principal
balance of such Mortgage Loan at the later of the date such
Mortgage Loan was originated (or, with respect to those
Mortgage Loans between the Originator and its subsidiaries,
at the time the Mortgage Loan will be transferred to the
Trust) or the date upon which a significant modification (as
defined in Treasury Regulation Section 1.860G-2(b) of the
Code) occurred or (ii) at least equal to 80% of the
principal balance of such Mortgage Loan at the Closing Date;
or (B) substantially all the proceeds of such Mortgage Loan
were used to acquire, improve or protect the real property
that served as the only security for such Mortgage Loan
(other than a recourse feature or other third party credit
enhancement within the meaning of Treasury Regulation
Section l.860G-2(a)(1)(ii) and no significant modification,
as defined in Treasury Regulation Section 1.860G-2(b), has
been made to such Mortgage Loan); PROVIDED, HOWEVER, that
the fair market value of the interest in real property
securing such Mortgage Loan shall be determined in
accordance with Section 1.856-3(a) of the Treasury
Regulations; PROVIDED, FURTHER, with respect to any Mortgage
Loan which provides for a partial release of the Mortgage
Property upon a partial payment of the Mortgage Loan, the
Allocable Loan Amount with respect to each property
independently would meet the 80% test described in clause
(i) of this subparagraph (xvi);
(xvii) There is no proceeding pending for the total or partial
condemnation of the related Mortgaged Property, and such
Mortgaged Property is in good repair and free and clear of
any damage that would affect materially and adversely the
value of such Mortgaged Property as security for such
Mortgage Loan or the use for which the premises were
intended;
(xviii) The related Mortgaged Property is free and clear of any
mechanics' and materialmen's liens, or liens in the nature
thereof, and no rights are outstanding that under law could
give rise to any such liens, any of which liens are or may
be senior to, or of equal priority with, the lien of the
related Mortgage, except those which are insured against by
the lender's title insurance policy referred to in clause
(xxiii) below;
(xix) None of the improvements which were included for the purpose
of determining the Appraised Value of the related Mortgaged
Property in connection with the origination of such Mortgage
Loan lies outside the boundaries and building restriction
lines of such property, no improvements on adjoining
properties materially encroach upon such Mortgaged Property,
and all improvements located on or forming a part of such
Mortgaged Property complied with applicable zoning laws
and/or set-back ordinances in force when such improvements
were placed on such Mortgaged Property except where (i)
non-compliance could not have a foreseeable material adverse
effect on such Mortgaged Property, (ii) the Mortgaged
Property has a variance or special use permit allowing the
non-compliance, or (iii) the improvements on the Mortgaged
Property were made prior to the effective date of the
applicable zoning ordinance and are therefore grandfathered;
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(xx) At the time of origination of such Mortgage Loan and as of
the date of the transfer of such Mortgage Loan by LTC
hereunder, the related Borrower, lessee and/or operator was
in possession of all material federal, state and local
governmental and regulatory approvals, licenses, permits and
other authorizations then necessary and required by
applicable law for the use of the related Mortgaged Property
and all such approvals, licenses, permits and authorizations
were valid and in full force and effect;
(xxi) If the related Mortgaged Property is subject to a lease, the
related Borrower is the owner and holder of the landlord's
interest under any lease for use and occupancy of all or any
portion of the related Mortgaged Property; the related
Mortgage and related Assignment of Leases, Rents and Profits
provides for the appointment of a receiver for rents, or
provides for rents to be paid directly to the mortgagee in
the event of default, or allows the mortgagee to enter into
possession to collect the rents; no assignments have been
made of the landlord's interest in any such lease or any
portion of the rents, additional rents, charges, issues or
profits due and payable or to become due and payable under
any such lease, which assignments are presently outstanding
and have priority over the related Mortgage or any related
Assignment of Leases, Rents and Profits given in connection
with the origination of the related Mortgage, other than as
may be disclosed in the related lender's title insurance
policy referred to in clause (xxiii) below; and the related
Borrower is the beneficial owner of the related Mortgaged
Property with the exception of Mortgage Loan #142 with
respect to which the related Borrower has a leasehold
interest in one of the related Mortgaged Properties;
(xxii) Both the Originator and the Depositor were authorized to the
extent required under applicable law to transact and do
business in the jurisdiction in which the related Mortgaged
Property is located at all times when it held such Mortgage
Loan, or any failure to be so qualified has not impaired the
validity of such Mortgage Loan;
(xxiii) The related Mortgage is covered by a lender's title
insurance policy, issued by a Qualified Title Insurer,
insuring that the related Mortgage is a valid first lien
(except for the Mortgage on the Mortgaged Property related
to Mortgage Loans #85A and #85B, which are valid and
enforceable first lien securing such Mortgage Loan, and a
valid and enforceable second lien securing such Mortgage
Loan) on such Mortgaged Property; such title insurance
policy is in full force and effect, is freely assignable
(subject to obtaining the required assignment endorsement
upon payment of premium therefor if necessary) and (subject
to any required recordation of the appropriate Assignment of
Mortgage, the obtaining of the required assignment
endorsement, if any, and the payment of the required premium
therefor) will inure to the benefit of the Trustee as
mortgagee of record; such policy is not subject to
exceptions which are not acceptable to mortgage lending
institutions generally and which are not specifically
referenced in such title insurance policy, which impairs the
value of the property or materially interferes with the use
and operation of the premises as currently contemplated or
the ability of the Borrower to make payments of principal
and interest on the related Mortgage Loan when due; and
neither the Originator nor any prior mortgagee has done, by
act or omission, anything which would materially impair the
value of the property or materially impair the use and
operation of the premises as currently contemplated or the
ability of the related Borrower to make payments of
principal and interest on the related Mortgage Loan when
due;
(xxiv) There is no material default, breach, violation or event of
acceleration existing under the related Mortgage or the
related Note or an event (other than payments due but not
yet delinquent) which, with the passage of time or with
notice and the expiration of any grace or cure period, would
constitute a material default, breach, violation or event of
acceleration; there has been no
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knowing waiver of any default, breach, violation or event of
acceleration of any of the foregoing, and no Person other
than the holder of such Note may declare an event of default
or accelerate the related indebtedness under any such
Mortgage Loan, Mortgage or Note;
(xxv) As of the Cut-Off Date, no Mortgage Loan is 30 days or more
delinquent in payment beyond its related Due Date and no
Mortgage Loan has been more than 30 days delinquent in
payment more than once during the 12 months prior to the
Cut-Off Date without giving effect to any grace period
permitted by the related Mortgage or Note;
(xxvi) The related Note or the related Mortgage contains customary
and enforceable provisions such as to render the rights and
remedies of the holder thereof adequate for the realization
against the related Mortgaged Property of the benefits of
the security (except as may be limited as described in
clause (x) above), including realization by judicial or, if
applicable, nonjudicial foreclosure, and there is no
exemption available to the Borrower which would interfere
with such right to foreclosure other than as described in
clauses (xi) and (xii) above;
(xxvii) The facility located on the related Mortgaged Property and
the operator with respect to such facility has all
certificates, licenses, permits or other authorization
required by applicable law for the operation of such
facility, and, to the extent such facility participates in
Medicaid, Medicare or other similar programs, such facility
and operator holds a valid certification for such
participation, appropriate for the level of care provided at
such facility;
(xxviii) The related Mortgaged Property is insured by a fire and
extended perils insurance policy issued by a Qualified
Insurer (as defined in the Pooling and Servicing Agreement),
providing coverage against loss or damage sustained by
reason of fire, lightning, windstorm, hail, explosion,
aircraft, vehicles and smoke, and, to the extent required as
of the date of origination by LTC consistent with its normal
commercial mortgage lending practices, against other risks
insured against by Persons operating like properties in the
locality of such Mortgaged Property including flood
insurance in the event that the related Mortgaged Property
is located within the 100-year flood zone, in an amount
which is at least equal to the lesser of the current
principal balance of such Mortgage Loan or the replacement
cost of the improvements which are a part of such Mortgaged
Property; all premium installments then due on such
insurance policy have been paid; such insurance policy
requires prior notice to the insured of termination or
cancellation, and no such notice has been received; the
related Mortgage or related Mortgage Loan documents obligate
the related Borrower to maintain all such insurance and
authorizes the mortgagee, upon such Borrower's failure to do
so, to maintain such insurance at the Borrower's cost or
expense and to seek reimbursement therefor from such
Borrower; the related Mortgage or related Mortgage Loan
documents obligate the related Borrower to apply any
insurance proceeds either to the repair and restoration of
all or part of the related Mortgaged Property, and such
Borrower or trustee appointed by such Borrower has the right
to hold and disburse such proceeds as the repair and
restoration progresses or to apply such proceeds to the
outstanding principal balance, together with any accrued
interest thereon, of the related Mortgage Loan;
(xxix) The related Borrower owns the related Mortgaged Property in
fee simple (except for Mortgage Loan #142 which is partially
secured by a leasehold interest (the "Ground Lease"), except
as title may be qualified in the related lender's title
insurance policy referred to in clause (xxiii) above, and
with respect to such Mortgage Loan #142:
(1) The Mortgage does not by its terms provide that it
will be subordinated to the lien of any other
mortgage and upon the occurrence of an event of
default under the terms of the Mortgage by the
Borrower, the mortgagee has the right to foreclose or
otherwise exercise its rights with respect to the
leasehold interest
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within a commercially reasonable time;
(2) The Ground Lease or a memorandum thereof has been
duly recorded, the Ground Lease permits the interest
of the lessee thereunder to be encumbered by the
related Mortgage, and there has not been a material
change in the terms of the Ground Lease since its
recordation, with the exception of written
instruments which are part of the related Mortgage
File;
(3) Except as indicated in the related title insurance
policy or opinion of title, the ground lessee's
interest in the Ground Lease is not subject to any
liens or encumbrances superior to, or of equal
priority with the related Mortgage, other than the
related ground lessor's related fee interest;
(4) The related Borrower's interest in the Ground Lease
is assignable to the Trustee upon notice to, but
without the consent of, the lessor thereunder (or, if
any such consent is required, it has been obtained
prior to the Closing Date) or, in the event that it
is so assigned, it is further assignable by the
Trustee and its successors and assigns upon notice
to, but without a need to obtain the consent of, such
lessor;
(5) To the best of the Originator's knowledge, as of the
Closing Date, the Ground Lease is in full force and
effect and no default has occurred under the Ground
Lease and there is no existing condition which, but
for the passage of time or the giving of notice,
would result in a default under the terms of the
Ground Lease;
(6) The Ground Lease requires the lessor thereunder to
give notice of any default by the lessee to the
mortgagee; or the Ground Lease or an estoppel letter
received by the mortgagee from the lessor further
provides that notice of termination given under the
Ground Lease is not effective against the mortgagee
unless a copy of the notice has been delivered to the
mortgagee in the manner described in such Ground
Lease;
(7) The mortgagee is permitted a reasonable opportunity
(including, where necessary, sufficient time to gain
possession of the interest of the lessee under the
Ground Lease) to cure any default under the Ground
Lease, which is curable after the receipt of notice
of any the default before the lessor thereunder may
terminate the Ground Lease;
(8) The Ground Lease has a term which extends not less
than 10 years beyond the maturity date of the related
Mortgage Loan;
(9) The Ground Lease requires the lessor to enter into a
new lease upon termination of the Ground Lease for
any reason, including rejection of the Ground Lease
in a bankruptcy proceeding; and
(10) Under the terms of the Ground Lease and the related
Mortgage, taken together, any related insurance
proceeds will be applied either to the repair or
restoration of all or part of the related Mortgaged
Property, with the mortgagee or a trustee appointed
by it having the right to hold and disburse the
proceeds as the repair or restoration progresses, or
to the payment of the outstanding principal balance
of the Mortgage Loan together with any accrued
interest thereon.
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(xxx) If the related Mortgage is a deed of trust, a trustee, duly
qualified under applicable law to serve as such, has been
properly designated and currently so serves and is named in
the deed of trust or has been substituted in accordance with
applicable law, and no fees or expenses are or will become
payable to the trustee under the deed of trust, except in
connection with a trustee's sale after default by the
related Borrower or in connection with the release of the
related Mortgaged Property or related security for such
Mortgage Loan following the payment of such Mortgage Loan in
full;
(xxxi) The related Note is not secured by any collateral except the
lien of the related Mortgage, any related Assignment of
Leases and Rents and any related security agreement,
guaranties, debt service reserves or other such instruments
of collateral, the related Mortgaged Property and the other
collateral for such Mortgage Loan do not secure any mortgage
loan that is not included in the Trust Fund on the Closing
Date;
(xxxii) No Mortgage Loan, Note or Mortgage requires the mortgagee to
release any portion of the Mortgaged Property from the lien
of the Mortgage except upon payment in full of such Mortgage
Loan at maturity or in connection with a Permitted
Prepayment of the Mortgage Loan (or in the case of Mortgage
Loans secured by more than one Mortgaged Property, payment
of a release price in connection with the sale of one or
more (but not all) of the Mortgaged Properties);
(xxxiii) To LTC's knowledge, there was no existing circumstance or
condition with respect to the related Mortgage, Mortgaged
Property, Borrower, tenant or operator of the Mortgaged
Property relating to such Mortgage Loan (giving effect to
any non-recourse provisions therein) that in LTC's
reasonable determination would cause such Mortgage Loan to
be subject to imminent default except such circumstances and
conditions which have been cured prior to the date hereof;
(xxxiv) Each related Mortgaged Property is on a separate tax parcel,
assessed for real estate tax purposes separate and apart
from any other property owned by the related Borrower or any
other Person;
(xxxv) The related Assignment of Leases and Rents creates a valid
first priority assignment of, or security interest in, the
right to receive all payments due under the related Net
Lease, if any, which right may be exercised by the mortgagee
upon the occurrence of an event of default by the related
Borrower under the terms of the related Mortgage;
(xxxvi) The related Note does not provide for a grace period that
exceeds fifteen Business Days during which remittance by the
related Borrower of any scheduled Monthly Payment for such
Mortgage Loan may be deferred without the payment of any
default interest or late charge therefor, and there is no
difference for any period between the amount of interest
accrued on such Mortgage Loan and the amount of interest
payable thereon;
(xxxvii) In the event of a foreclosure under the related Mortgage,
any related Net Lease, if any, will either (i) be
extinguished by reason of being subordinate to the related
Mortgage, without any non-disturbance or attornment
obligations; or (ii) continue in full force and effect,
either because such Net Lease is superior in time and has
not been subordinated, or because non-disturbance and
attornment obligations have been given;
(xxxviii) There is no action pending or, to LTC's knowledge,
threatened, to terminate the related facility's
participation in the Medicaid or Medicare program, and the
execution of any Trans-
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action Documents will not adversely affect the facility's
participation in such programs;
(xxxix) The related Mortgage or the related Note contains no
provision limiting or restricting the right or ability of
LTC to assign, transfer or convey such Mortgage or Note to
any other person or entity;
(xl) Interest with respect to 17 of the Mortgage Loans is accrued
on the basis of a 360-day year consisting of twelve 30-day
months and interest with respect to the remaining 23
Mortgage Loans is accrued on the basis of a 365-day year;
(xli) No Mortgage Loan or Note permits the related Borrower to
incur or maintain a second lien on the related Mortgaged
Property without the prior consent of the related mortgagee;
(xlii) To the best of the Originator's knowledge, there is no
pending action, suit, proceeding, arbitration or
governmental investigation against the related Borrower or
the related Mortgaged Property which could have a material
effect on the interests of the Certificateholders, with the
exception of certain pending litigation against Retirement
Care Associates, which directly or through its affiliates
operates or manages the Mortgaged Properties securing
Mortgage Loans #106, #107, #140, #160 and #189;
(xliii) Any escrow deposits and payments relating to a Mortgage Loan
are under the control of the Originator or the Depositor and
all amounts required to be deposited in any escrow accounts
with respect to each Mortgage Loan by the related Borrowers
have been deposited;
(xliv) As to each Nursing Facility which constitutes a skilled
nursing facility;
(1) To the best of LTC's knowledge, each Nursing Facility
and each Nursing Facility operator complies with all
laws, regulations, quality and safety standards, and
requirements of the applicable state Department of
Health (each a "DOH") and all other state or federal
governmental authorities;
(2) To the best of LTC's knowledge, all governmental
licenses, permits, regulatory agreements or other
approvals or agreements required for the operation of
each Nursing Facility are held by the applicable
Borrower in the name of the Borrower and are in full
force and effect, including without limitation, a
valid certificate of need ("CON") or similar
certificate, license, or approval issued by the DOH
for the requisite number of beds, and approved
provider status in any approved provider payment
program (collectively, the "Licenses");
(3) The Licenses, including without limitation, the CON:
(A) may not, under the terms of the related loan
documents, be, and to the best of LTC's
knowledge, have not been, transferred to any
location other than the Nursing Facility; and
(B) to the best of LTC's knowledge, have not been
pledged as collateral security for any other
loan or indebtedness as of the origination date
for such Mortgage Loan;
(4) So long as the Certificates remain outstanding, the
Originator will not consent to allow
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any Borrower to:
(A) amend or otherwise reduce a Nursing Facility's
authorized bed capacity and/or the number of
beds approved by the DOH; or
(B) replace or transfer all or any material portion
of any Nursing Facility's beds to another site
or location;
(5) To the best of LTC's knowledge, each Nursing Facility
is not the subject of any pending action by any state
or federal regulatory agency which might result in
the revocation or loss of the Licenses;
(6) To the best of LTC's knowledge, each Nursing Facility
is in compliance with all requirements for
participation in Medicare and Medicaid, including
without limitation, the Medicare and Medicaid Patient
Protection Act of 1987;
(7) To the best of LTC's knowledge, no notice of any
violation has been received from a government agency
that would, directly or indirectly, or with the
passage of time:
(A) have a material adverse impact on any
Borrower's ability to accept and/or retain
patients;
(B) modify, limit or annul any Borrower's Licenses;
or
(C) affect any Borrower's continued participation
in the Medicaid or Medicare programs, or any
successor programs thereto;
(8) To the best of LTC's knowledge, no material physical
plant waivers of licensure standards exist at any of
the Nursing Facilities;
(9) To the best of LTC's knowledge, no Nursing Facility
had a Level [A] violation which was not resolved
prior to the origination of the Mortgage Loan; and
(10) To the best of LTC's knowledge, there are no current
or pending Medicaid or Medicare recoupment efforts at
any of the Nursing Facilities;
(11) To the best of the Originator's knowledge, at the
time the related Mortgage Loan was originated, all
material licenses, including without limitation, the
related CON, are held free from restrictions or known
conflicts which would materially impair the use or
operation of the Nursing Facility;
(12) Each Mortgage Loan contains restrictions against
rescinding, withdrawing, revoking, amending,
modifying, supplementing, or otherwise altering the
nature, tenor or scope of the licenses for the
related Nursing Facility;
(13) To the best of the Originator's knowledge, at the
time the related Mortgage Loan was originated, each
related Nursing Facility was in conformance in all
material respects with all insurance, reimbursement
and cost reporting requirements, and, to the extent
required, had a current provider agreement which was
in full force and effect under
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Medicare and Medicaid;
(14) To the best of the Originator's knowledge, at the
time the related Mortgage Loan was originated, there
was no revocation, suspension, termination,
probation, restriction, limitation, or nonrenewal
affecting any borrower, operator, or Nursing Facility
or any participation or provider agreement with any
third-party payor, including Medicare, Medicaid, Blue
Cross and/or Blue Shield, and any other private
commercial insurance managed care and employee
assistance program to which any operator was subject;
(15) With the exception of Mortgage Loans #106, #107,
#140, #160 and #189, at the time the related Mortgage
Loan was originated, the Originator had no actual
knowledge that any borrower had pledged its
receivables as collateral security for any other loan
or indebtedness;
(16) The Originator has no actual knowledge that any
existing agreement material to the management or
operation of any related Nursing Facility is not in
full force or effect or that there is any breach or
default under any such agreement by any party
thereto.
(xlvii) There is no condition or circumstance existing as a result
of, or arising from, the presence of Hazardous Materials on
a Mortgaged Property such that the Mortgage Loan secured by
the affected Mortgaged Property would be ineligible, solely
by reason of such condition, for purchase by FNMA under the
terms of Section 501.04 of the Guide (assuming such Mortgage
Loan were secured by multifamily residential property),
including a condition or circumstance that would constitute,
solely by reason of such condition or circumstance, a
material violation of applicable federal, state or local law
in effect as of the Closing Date (such condition described
in this clause, a "Disqualifying Condition"); and
(xlviii) Each Mortgage Loan and Mortgage Certificate is a "qualified
mortgage" within the meaning of Section 860(G) of the code
(without regard to Section 1.860G-2(f)(2) of the Treasury
Regulations).
(b) LTC agrees to remedy any violation described below in all material respects
or to repurchase the Mortgage Certificates upon the determination, as of the
Closing Date and immediately prior to the effectiveness of the transfer effected
hereby if one of the following statements is not true in any respect and such
violation has a material adverse affect on the interests of the
Certificateholders:(i) LTC has marketable title to, and was the sole owner and
beneficial record holder of, such Mortgage Certificates, (ii) LTC has full power
and authority to sell and assign such Mortgage Certificates free and clear of
any and all liens, pledges, charges and security interests created by or through
the Company, and (iv) when such Mortgage Certificates are transferred in
accordance with the provisions of this Agreement, the Trustee will be the
beneficial and record owner thereof.
ARTICLE IV
MORTGAGE LOAN AND MORTGAGE CERTIFICATES
REPURCHASES OR SUBSTITUTIONS
Section 4.1 MORTGAGE LOAN REPURCHASES OR SUBSTITUTIONS AND
MORTGAGE CERTIFICATE REPURCHASES. (a) If (i)(x) upon the existence of any
violation of any representation or warranty described in Section
3.2(a)(xlvii) hereof with respect to any Mortgage Loan except for subsection
3.2(xlvii) (referred to herein as an "event") which event materially and
adversely affects the interests of the Certificateholders or (y) any
documenta-
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tion described in Section 2.1 of the Pooling and Servicing Agreement relating to
any Mortgage Loan shall be missing or defective, as identified in the Trustee's
Exception Report pursuant to the Pooling and Servicing Agreement, and such
absence or defect materially and adversely affects the interests of the
Certificateholders; and (ii) LTC shall not have cured in all material respects
such event, omission or defect within ninety (90) days of discovery of such
event, omission or defect, then (iii) LTC shall, at its option, either
repurchase such Mortgage Loan or substitute a new mortgage loan meeting and
subject to the requirements of Section 2.2(b) of the Pooling and Servicing
Agreement (a "Substitute Mortgage Loan") for the Mortgage Loan to which such
event, omission or defect relates, and in either case, as provided in clause (c)
below, within such ninety (90) day period.
If there exists any violation of any representation or warranty
described in Section 3.2(b) hereof with respect to the Mortgage Certificates and
LTC shall not have remedied in all material respects such violation within
ninety (90) days of discovery of such violation, then LTC shall repurchase such
Mortgage Certificates at a price equal to the Repurchase Price applicable to the
Mortgage Certificates.
The repurchase or substitution obligation described in this
paragraph will constitute the sole remedy of the Certificateholders or the
Trustee, on behalf of the Certificateholders, with respect to the conditions
described in this paragraph (a).
(b) If, as of the Closing Date of a Mortgage Loan, the
representation and warranty contained in Section 3.2(xlvii) was not true and
correct as to the related Mortgaged Property LTC shall, within 90 days of
receipt from the Master Servicer, the Special Servicer or the Trustee of a
written request and of the certifications described in (iii) below, at LTC's
option, either (x) cure such Disqualifying Condition or (y) repurchase the
affected Mortgage Loan or Mortgage Loans on a whole loan servicing-released
basis at the Repurchase Price in the manner provided in Section 2.2(b) of the
Pooling and Servicing Agreement, provided that each of the following conditions
is satisfied:
(i) Such Mortgage Loan is at least 60 days delinquent and no action
has been taken to initiate foreclosure proceedings or to accept a
deed in lieu of foreclosure and the Special Servicer has not
taken possession of, or taken over the operation of, the related
Mortgaged Property, and the Special Servicer shall have delivered
to LTC a certification as to the foregoing;
(ii) The Special Servicer shall have delivered to LTC and the Trustee,
at the expense of the Trust Fund, an Environmental Assessment
indicating the presence of a Disqualifying Condition; and
(iii) The Master Servicer and the Special Servicer shall each provide a
written certification to LTC that the Special Servicer has acted
in compliance with the servicing standard set forth in Section
3.1 of the Pooling and Servicing Agreement and has not, by any
action, created, caused or contributed to a Disqualifying
Condition.
The repurchase obligation described in this paragraph will
constitute the sole remedy of the Certificateholders or the Trustee, on behalf
of the Certificateholders, with respect to a Disqualifying Condition. LTC shall
not be responsible for any Disqualifying Condition which may arise on a
Mortgaged Property after the Closing Date.
(c) If LTC elects to repurchase a Mortgage Loan or is required
to repurchase the Mortgage Certificates in accordance with the terms and
conditions set forth herein and in the Pooling and Servicing Agreement, the
repurchase shall be for an amount equal to the Repurchase Price applicable to
such Mortgage Loan or the Mortgage Certificates, as applicable, as of the date
of repurchase. If LTC elects to substitute a Substitute Mortgage Loan
hereunder, such substitution shall be effected under the terms and conditions,
and subject to the limitations, provided in Section 2.2(b) of the Pooling and
Servicing Agreement, including (i) the
17
<PAGE>
requirement that LTC deliver to the Company or the Trustee, as the case may be,
for each such Mortgage Loan each of the documents set forth in Section 2.1 of
the Pooling and Servicing Agreement and such documents as are requested by the
Company or the Trustee and (ii) the receipt by the Trustee of the prior written
consent from the Rating Agency that such substitution of a Mortgage Loan will
not result in the qualification, downgrade or withdrawal of the rating then
assigned to any Class of Certificates then outstanding.
(d) In the case of a Substitute Mortgage Loan, LTC will provide
the Rating Agency with an Environmental Assessment prepared in accordance with
the requirements of the Pooling and Servicing Agreement with respect to the
Mortgaged Property or Mortgaged Properties securing such Substitute Mortgage
Loan. In addition, any substitution of a Mortgage is subject to the receipt by
the Trustee of written confirmation by the Rating Agency that such substitution
will not result in a qualification, downgrade or withdrawal of the rating then
assigned to any Class of Certificates then outstanding.
The Substitute Mortgage Loan shall have characteristics such that
the events set forth in Section 3.2 herein (other than Section 3.2(xxxiv)) do
not exist as of the date of substitution and would not have existed had such
Substitute Mortgage Loan originally been a Mortgage Loan and shall be subject to
the remedies set forth in this Section 4.1.
ARTICLE V
MISCELLANEOUS
Section 5.1 NOTICES. Except as otherwise expressly provided
herein, all notices, requests and demands to or upon the respective parties
hereto to be effective shall be in writing and shall be deemed to have been duly
given or made upon receipt at the addresses specified below, or to such other
addresses as may be designated by any party in a written notice to the other
parties hereto.
If to LTC, as follows:
LTC Properties, Inc.
300 Esplanade Drive, Suite 1860
Oxnard, CA 93030
Attention: Andre C. Dimitriadis
with copies thereof to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Attention: Warren T. Buhle
and
LTC Properties, Inc.
300 Esplanade Drive, Suite 1860
Oxnard, CA 93030
Attention: Pamela J. Privett
Senior Vice President and General Counsel
18
<PAGE>
If to the Company, as follows:
LTC REMIC IV Corporation
300 Esplanade Drive, Suite 1860
Oxnard, CA 93030
Attention: James J. Pieczynski
with copies thereof to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Attention: Warren T. Buhle
and
LTC REMIC IV Corporation
300 Esplanade Drive, Suite 1860
Oxnard, CA 93030
Attention: Raad Shawaf
Vice President and Assistant General Counsel
Section 5.2 SUCCESSORS AND ASSIGNS; ASSIGNMENTS. This Agreement
shall be binding upon and inure to the benefit of LTC, the Company and their
respective successors and assigns, except that LTC shall not assign or transfer
(by operation of law or otherwise) any of its rights or obligations under this
Agreement without the prior written consent of the Company and the Trustee and
any assignment hereof by LTC without such prior written consent shall be null
and void for all purposes; PROVIDED, HOWEVER, no such consent shall be required
if prior written confirmation has been obtained from the Rating Agency to the
effect that such assignment or transfer would not result in the qualification,
downgrade or withdrawal of the rating then assigned by the Rating Agency to any
Class of Certificates then outstanding. LTC hereby acknowledges and agrees that
the Company is assigning to the Trustee all of its right, title and interest in
and to this Agreement for the benefit of the Certificateholders pursuant to the
Pooling and Servicing Agreement. The rights of the Company hereunder are hereby
assigned to the Trustee which shall be assigned to a third party beneficiary
hereof.
Section 5.3. AMENDMENTS AND WAIVERS. Neither this Agreement nor
any terms hereof or thereof may be amended, supplemented, modified or waived
except by means of written instrument executed by each of the parties hereto and
the Trustee.
Section 5.4. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND
BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO THE
PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAW).
Section 5.5 EFFECTIVENESS. This Agreement shall become effective
upon the execution and delivery of this Agreement by LTC on the Closing Date.
Section 5.6 HEADINGS DESCRIPTIVE. The headings of the several
sections and subsections of this Agreement are inserted for convenience only and
shall not in any way affect the meaning or construction of any provision of this
Agreement.
Section 5.7 MARSHALLING; RECAPTURE. The Company shall not be
under any obligation to marshal
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<PAGE>
any assets in favor of LTC or any other party. To the extent the Company
receives any payment by or on behalf of LTC, which payment or any part thereof
is subsequently invalidated, declared to be fraudulent or preferential, set
aside or required to be repaid to LTC or its estate, trustee, receiver,
custodian or any other party under any bankruptcy law, state or federal law,
common law or equitable cause, then to the extent of such payment or repayment,
the obligation or part thereof which has been paid, reduced or satisfied by the
amount so repaid shall be reinstated by the amount so repaid and shall be
included within the liabilities of LTC to the Company as of the date such
initial payment, reduction or satisfaction occurred.
Section 5.8 SEVERABILITY. In case any provision or obligation
under this Agreement or the other Transaction Documents shall be invalid,
illegal or unenforceable in any jurisdiction, the validity, legality and
enforceability of the remaining provisions or obligations, or of such provision
or obligation in any other jurisdiction, shall not in any way be affected or
impaired thereby.
Section 5.9 CAPITALIZATION. Capitalized terms used in this
Agreement that are not defined herein shall have their respective meanings set
forth in the Pooling and Servicing Agreement.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized representatives to execute and deliver this Agreement as of the date
first above written.
LTC PROPERTIES, INC.
By: /s/ PAMELA J. PRIVETT
---------------------------------
Name: Pamela J. Privett
Title: Senior V.P. and General Counsel
LTC REMIC IV CORPORATION
By: /s/ PAMELA J. PRIVETT
---------------------------------
Name: Pamela J. Privett
Title: Senior V.P. and General Counsel
Accepted by:
GMAC COMMERCIAL MORTGAGE CORPORATION
By: /s/ KATHRYN MARQUARDT
---------------------------------
Name: Kathryn Marquardt
Title: Senior President
<PAGE>
Exhibit A
MORTGAGE LOAN SCHEDULE
<PAGE>
Exhibit B
QUALIFIED TITLE INSURERS
[1. Chicago Title Insurance Company
2. Commonwealth Title Insurance Company
3. Lawyers Title Insurance Company
4. Stewart Title Guaranty Company
5. Alamo Title Insurance of Texas
6. First American Title Insurance Company
7. Attorneys' Title Insurance Fund, Inc.]
<PAGE>
Exhibit 10.2
---------------------------------------------------------
LTC COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1998-1
----------------------------
PURCHASE AGREEMENT
Dated May 11, 1998
----------------------------
---------------------------------------------------------
<PAGE>
LTC COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1998-1
PURCHASE AGREEMENT
May 11, 1998
Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
Ladies and Gentlemen:
LTC REMIC IV 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 April 20, 1998 (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 (i) 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")
and (ii) the LTC Commercial Mortgage Pass-Through Certificates, Series 1993-1,
Class E (the "Mortgage Certificates"), 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 April 20, 1998 (the "Pooling Agreement"),
with LaSalle National Bank, as trustee (the "Trustee"), 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 April, 20 1998 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 Fund") whose assets will consist of
the Mortgage Loans, the Mortgage Certificates and other related assets. The
Mortgage Loans have an aggregate unpaid principal balance of approximately
$129,266,430 and the Mortgage Certificate have a principal balance of
$26,382,110.83 as of the close of business on April 20, 1998 (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. 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 or the Mortgage Certificates 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:
<PAGE>
(i) A preliminary offering circular dated April 30, 1998
(the "Preliminary Offering Circular") and a final offering circular dated
May 11, 1998 (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 thernon, 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 the Agreements will
conform to the respective descriptions 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 Date. 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 and Mortgage Certificates 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;
2
<PAGE>
(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 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, in the case of LTC, 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;
(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 and Class LR Certificates) will
qualify as "regular interests" in the Upper-Tier REMIC and each Class of
Lower-Tier Interests will qualify as "regular interests" in the Lower-Tier
REMIC, in each case, within the meaning of the Code, and the Class R and
Class LR Certificates will be the "residual interest" (within the meaning
of the Code) in the Upper-Tier REMIC and the Lower-Tier REMIC,
respectively; and
(xii) Assuming compliance by the Purchaser of the
representations and warranties contained herein, the offering and sale of
the Offered Certificates are exempt from the registration re-
3
<PAGE>
quirements of the 1933 Act and 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 and Mortgage Certificates to the Company pursuant to the Transfer
Agreement, LTC or its affiliates will own full legal and equitable title to
each Mortgage Loan and Mortgage Certificate free and clear of any lien,
mortgage, pledge, charge, encumbrance, adverse claim or other security
interest. The transfer of the Mortgage Loans and Mortgage Certificates 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 Mortgage Certificates; 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, Mortgage
Certificates 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 and Mortgage Certificates to the Trust Fund pursuant to the Pooling
Agreement, the Company will own full legal and equitable title to each
Mortgage Loan and Mortgage Certificate free and clear of any lien,
mortgage, pledge, charge, encumbrance, adverse claim or other security
interest. The transfer of the Mortgage Loans and Mortgage Certificates 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 and Mortgage Certificates 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 and Mortgage Certificates 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, Mortgage Certificates 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, WARRANTIES AND COVENANTS OF THE PURCHASER. The
Purchaser represents, warrants and covenants 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 (nor has it previously solicited any offers to buy any Offered
Certificate from, or offer to sell any Offered Certificates to any person)
unless (i) the Purchaser reasonably believes that at such time such person and
each other person for whom such person is acting are
4
<PAGE>
"qualified institutional buyers" within the meaning of Rule 144A under the 1933
Act or an exemption from registration provided by Rule 144 under the 1933 Act is
available, and (ii) the Purchaser reasonably believes that any purchase of
Offered Certificates by such person in clause (i) 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 the person shall not
be (1) a person that is an employee benefit plan or other plan subject to the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or
Section 4975 of the Code, or (2) an entity whose underlying assets include plan
assets by reason of a plan's investment in such entity (within the meaning of
the Department of Labor Regulations, Section 2510.3-101), or (3) acting on
behalf of such plan or using "plan assets", unless an applicable exemption to
Title 29 of the U.S. Code of Federal Regulations (the "Plan Asset Regulations")
exists. The Purchaser understands that any such employee benefit plan or other
plan, or any such person acting on behalf of or using the assets of any such
plan are prohibited from acquiring the Offered Certificates.
(b) The Purchaser is a qualified institutional buyer within the
meaning of Rule 144A under the 1933 Act.
(c) The Purchaser is not an employee benefit plan or other plan
subject to the fiduciary responsibility provisions of ERISA or Section 4975 of
the Code.
(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.
The Purchaser shall not use or formally distribute any ABS Term Sheet,
Structured Term Sheet or Collateral Term Sheet (as such term is defined in
Section 9(a) herein) relating to the issuance and sale of the Offered
Certificates without the prior written consent of LTC and the Company.
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)
$82,491,000 aggregate principal amount of 6.029% Class A Certificates (the
"Class A Certificates"), (ii) $6,226,000 aggregate principal amount of 6.170%
Class B Certificates (the "Class B Certificates"), (iii) $10,896,000 aggregate
principal amount of 6.314% Class C Certificates (the "Class C Certificates"),
(iv) $9,338,000 aggregate principal amount of 6.960% Class D Certificates (the
"Class D Certificates"), (v) $12,452,000 aggregate principal amount of 7.792%
Class E Certificates (the "Class E Certificates" and, together with the Class A,
Class B, Class C and Class D 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 May 14, 1998, 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 LLP, 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. On the Closing Date, the Company shall
deliver to the Trustee on behalf of The Depository Trust Company, against
payment of the Purchase Price, one global certificate for the Class A
Certificates in the denomination of $82,491,000, one global certificate for the
Class B Certificates in the denomination of $6,266,000, one global certificate
for the Class C Certificates in the denomination of
5
<PAGE>
$10,896,000, and one global certificate for the Class D Certificates in the
denomination of $9,338,000, and one global certificate for the Class E
Certificates in the denomination of $12,452,000, each registered in the name of
Cede & Co., as nominee of DTC. If the 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 Date at
the offices of Skadden, Arps, Slate, Meagher & Flom LLP, 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 make no further amendment or any supplement to the
Offering Circular without the consent of the Purchaser promptly after reasonable
notice thereof (which consent will not be unreasonably withheld or delayed); and
to advise the Purchaser promptly of any such amendment or supplement after such
Closing Date 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 date on
which the distribution of the Offered Certificates has been completed as
determined by the Purchaser, but in no event later than 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 Date, 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 if the sale of the Certificates and the sale of any
such securities issued would in the Company's reasonable judgment be integrated
in a single offering for purposes of the 1933 Act; 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
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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;
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 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
reasonable legal fees, expenses and disbursements of Skadden, Arps, Slate,
Meagher & Flom LLP; 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 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 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 and Mortgage Certificates 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 Ernst & Young LLP, certified public accountants,
attached hereto as Schedule II;
(iv) The Purchaser shall have received an opinion 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;
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(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. 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 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 commercial reasonable-
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<PAGE>
ness, 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. 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 and Class E
Certificates to the Purchaser and the reoffer, resale and delivery of
the Class A, Class B, Class C, Class D and Class E 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;
(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) Such counsel have participated in conferences with
officers and other representatives of the Company, 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 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 and it being further understood that such counsel has not
reviewed any Mortgage Loan Files for any of the Mortgage Loans,
Certificate Mortgage Loans, Mortgaged Properties, the mortgaged
properties related to the Certificate Mortgage Loans, or offering
circular relating to the Certificate Mortgage Loans and Certificate
Mortgaged Properties and express no view with respect to information
or data regarding the Mortgage Loans or Certificate Mortgage Loans
included in or appended as exhibits in 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) Assuming compliance with the Pooling and Servicing
Agreement and further assuming that the Mortgage Certificates ate
regular interest in a REMIC as of the Closing Date the Trust Fund will
qualify for treatment for Federal income tax purposes as two separate
real
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<PAGE>
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 H 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, Class HL 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
of "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:
(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 and Mortgage Certificates (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 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 or Mortgage Certificate except as
disclosed in the applicable title insurance policies and related
documentation delivered on the Closing Date.
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<PAGE>
(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 and
Mortgage Certificates, as to which we express no opinion), (iii)
result in the creation or imposition of any lien, charge or
encumbrance upon the Mortgage Loans or Mortgage Certificates, 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);
(c) The transfer, assignment and conveyance of the
Mortgage Loans and Mortgage Certificates 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
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 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 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.
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(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 Standard & Poor's Ratings Services ("S&P") 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 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," the Class B Certificates shall have been rated not less
than "AA", the Class C Certificates shall have been rated not less than
"A", the Class D Certificates shall have been rated not less than "BBB",
and the Class E Certificates shall have been rated not less than "BB", in
each case, by S&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 Purchaser's judgment 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 judgment, materially
impairs the
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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
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 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 as if such letter were applicable to a non-public offering of
securities), 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 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 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.
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(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 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 judgment (i) includes an
unconditional release of the indemnified arty 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 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 o 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
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<PAGE>
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: Mr. Rolf Edwards, facsimile: (212) 357-5505, (b) if to
the Company, to LTC REMIC IV Corporation, 300 Esplanade Avenue, Suite 1860,
Oxnard, CA 93030, Attention: Mr. Darrell Struck, facsimile: (805) 981-8663;
and (c) if to the Originator or LTC, to LTC Properties, Inc., 300 Esplanade
Drive, Suite 1860, Oxnard, CA 93030 Attention: Mr. Darrell Struck, 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 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.
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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 IV CORPORATION
By: /s/ PAMELA J. PRIVETT
----------------------------
Name: Pamela J. Privett
Title: Senior V.P. and General Counsel
LTC PROPERTIES, INC.
By: /s/ PAMELA J. PRIVETT
----------------------------
Name: Pamela J. Privett
Title: Senior V.P. and General Counsel
Accepted as of the date hereof:
GOLDMAN, SACHS & CO.
By: /s/ ROLF EDWARDS
----------------------------
Name: Rolf Edwards
Title: Attorney In-fact
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<PAGE>
SCHEDULE I TO PURCHASE AGREEMENT
Title of Offered Certificates:
LTC Commercial Mortgage Pass-Through
Certificates, Series 1998-1
Aggregate principal amount:
$82,491,000 Class A Certificates
$ 6,226,000 Class B Certificates
$10,896,000 Class C Certificates
$ 9,338,000 Class D Certificates
$12,452,000 Class E Certificates
<TABLE>
<CAPTION>
Price to Investor* Purchase Price to Purchaser*
------------------ ----------------------------
As a % of As a % of
the Principal Amount of the the Principal Amount
Offered Certificates of Offered Certificates
Class Price** Price % Price** Price %
<S> <C> <C> <C> <C>
A $80,428,725 97.5% $79,603,815 96.5%
B $ 6,039,220 97.0% $ 5,976,960 96.0%
C $10,569,120 97.0% $10,460,160 96.0%
D $ 9,057,860 97.0% $ 8,964,480 96.0%
E $12,078,440 97.0% $11,953,920 96.0%
</TABLE>
* Does not include accrued interest which will be paid from April
21, 1998 up to the Closing Date.
** The difference between the "Price to the Investor" and the
"Purchase Price to Purchaser" reflects an underwriting fee for
Goldman, Sachs & Co., equal to 100 basis points.
Specified funds for payment of purchase price:
Immediately available funds
Pooling and Servicing Agreement:
Pooling and Servicing Agreement, to be dated as of April 20, 1998, among
LTC, as depositor, GMAC Commercial Mortgage Corporation, as Master
Servicer, LaSalle National Bank, as trustee, LTC, as special servicer and,
as to certain provisions described therein, LTC, as originator.
Final Scheduled Distribution Date: May 28, 2030
I-1
<PAGE>
Interest Rate:
6.029% Class A Certificates
6.170% Class B Certificates
6.314% Class C Certificates
6.960% Class D Certificates
7.792% Class E Certificates
Interest Payment Dates:
The 28th day of each month, or if such day is not a Business Day, on the
next succeeding Business Day.
Time of Delivery: May 14, 1998
Closing Location: Skadden, Arps, Slate,
Meagher & Flom LLP
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>
SUBSERVICING AGREEMENT
THIS SUBSERVICING AGREEMENT (the "Agreement") is made as of this
fourteenth day of May, 1998 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 April 20, 1998 (the "Pooling and Servicing Agreement") among LTC REMIC IV
Corporation, as Depositor (the "Depositor"), LASALLE NATIONAL BANK, as Trustee
(the "Trustee"), 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"), and in certain LTC Commercial Mortgage
Pass-Through Certificates, Series 1993-1, Class E (the "Mortgage Certificates")
issued together with certain senior classes of certificates which senior classes
were offered pursuant to an offering circular dated July 28, 1993 (which is
referred to herein as the "Series 1993-1 Mortgage Certificates Offering
Circular"), 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 with respect to the Mortgage Loans and the Mortgage Certificates 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, insofar as such
rights and obligations pertain to the Mortgage Loans. Subservicer shall have no
rights or obligations with respect to the servicing of the Mortgage
Certificates.
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 Maryland
and is or will be in compliance with the laws of each state in which any
Mortgaged Property is located to the
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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, 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 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
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<PAGE>
this Agreement, the Subservicer shall provide to the Master Servicer in each
month during the term hereof, (i) no later than the day following the
Determination Date occurring in each such month, the information described in
EXHIBIT B attached hereto and (ii) not later than thirty (30) days after each
such Determination Date, 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 and in a form reasonably
acceptable to the Master Servicer and the Subservicer, 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 15 of each year, beginning with April
15, 1999, 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.
For the purposes hereof, the term "Subservicing Account" shall mean
any bank or trust account maintained by the Subservicer in connection with the
performance of its duties hereunder. Any such account maintained by the
Subservicer shall be maintained in the name of the Master Servicer on behalf of
the Trustee for the benefit of the Certificateholders, and shall be an Eligible
Account.
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
3
<PAGE>
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 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, the Subservicer shall be allowed to provide self-insurance with
respect to an errors and omissions insurance policy. 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 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,
whichever occurs first, 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. The
Subservicer shall notify the Master Servicer not later than the applicable
Determination Date of payments received during this two-Business Day period. 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. The Subservicer also shall remit to the
Collection Account not later than the Closing Date referred to in the Pooling
and Servicing Agreement all interest and principal held by the Subservicer with
respect to the Mortgage Loans other than interest and principal due on or prior
to the Cut-Off Date, together with all funds held in reserve or escrow accounts
or lock-box accounts or otherwise pertaining to the Mortgage Loans.
2.6 STATEMENTS AS TO COMPLIANCE. On or before April 15 of each
year, beginning April 15, 1999, 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
4
<PAGE>
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 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 (with
respect to those Mortgage Loans for which the Subservicer is Special Servicer,
pursuant to the Pooling and Servicing Agreement) 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. Notwithstanding the foregoing, the Pooling and Servicing Agreement
provides that with respect to Mortgage Loans #152, #153, #214, #215 and #216,
the Master Servicer shall act as Special Servicer, and with respect to any of
such Mortgage Loans, the Subservicer shall have no authority to act as provided
herein following the occurrence of a Servicing Transfer Event which pertains to
any such Mortgage Loan.
(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:
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(i) cause (A) a loss of REMIC status with respect to
either the Upper-Tier REMIC or Lower-Tier REMIC, or (2) a gain on the
disposition of a Qualified Mortgage which would be subject to the 100%
tax on prohibited transactions imposed by Section 86OF(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 reasonable
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 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.
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<PAGE>
(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. The Subservicer shall also be
entitled to the additional compensation referred to in Section 3.12 of the
Pooling and Servicing Agreement.
(g) Should any party ("Successor Special Servicer") other than
LTC be appointed Special Servicer for any of the Mortgage Loans, the
Subservicer, prior to the occurrence of a Servicing Transfer Event with respect
to any such Mortgage Loan, is expressly permitted to exercise all of the rights
granted under this Section 2.8 without the prior consent of the Successor
Special Servicer, and upon exercise of such rights, shall not be required to
convey to the Successor 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 promptly 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.
2.10 ADVANCES. All advances required hereunder pursuant to Section
3.22 of the Pooling and Servicing Agreement shall be made no later than two (2)
days after the related Determination Date.
2.11 MORTGAGE CERTIFICATES. Notwithstanding any provision to the
contrary herein or in the Pooling and Servicing Agreement, the Subservicer shall
have no duties or obligations with respect to the servicing of the Mortgage
Certificates and shall be paid no fee or other compensation in connection
therewith. Should the Subservicer at any time receive any funds with respect to
the Mortgage Certificates, the Subservicer shall immediately advise the Master
Servicer of such receipt and shall deposit such funds in the Collection Account.
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
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<PAGE>
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 of Prepayment
Interest Shortfalls over Prepayment Interest Excess for such Due Period, and the
Subservicing Fee also shall be reduced by an amount equal to Advance Interest
which may accrue with respect to any amount which the Subservicer is required
hereunder to advance as a P&I Advance or a Servicing Advance, and which the
Subservicer fails to so advance. 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 his 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 the Subservicer for all Servicing Advances and P&I Advances
pursuant to the Pooling and Servicing Agreement made by the Subservicer 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(iii) of the Pooling and Servicing
Agreement; and (ii) 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 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.
8
<PAGE>
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 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;
(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,
9
<PAGE>
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 primarily liable to the
Master Servicer for the duties or obligations so delegated; or
(f) If the Rating Agency shall give notice that the rating
assigned to any class of the Certificates may be downgraded or
qualified, or that such rating may be withdrawn, if the Subservicer is
not terminated.
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 any 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.
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
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<PAGE>
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 (obtained at the Subservicer's cost) 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 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
11
<PAGE>
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 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.
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<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 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 attorney'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 performance
of this Agreement or the Pooling and Servicing Agreement.
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<PAGE>
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.
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: /s/ KATHRYN MARQUARDT
--------------------------------
Name: Kathryn Marquardt
Title: Senior Vice President
LTC PROPERTIES, INC.
By: /s/ PAMELA J PRIVETT
--------------------------------
Name: Pamela J Privett
Title: Senior V.P. and General Counsel
14
<PAGE>
EXHIBIT A
SCHEDULE OF DUTIES
TO BE PERFORMED BY THE SUBSERVICER
In addition to the duties otherwise contained in the Subservicing
Agreement, but subject to the provisions of Section 2.11 thereof, 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, updated from time
to time as reasonably requested by the Master Servicer.
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 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 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 any party acting as Special Servicer with respect
to any Mortgage Loan without the prior written consent of the Master Servicer.
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7. To perform the duties of the Master Servicer set forth in Sections 3.1
(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, 3.22, 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 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 15, 1999, 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 15 of each year, beginning April 15, 1999, 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 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.
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EXHIBIT B
SCHEDULE OF SUBSERVICER REPORTS
The following reports shall be delivered to the Master Servicer by the
Subservicer in an electronic format designated by the Master Servicer:
(1) CSSA Loan Periodic File to be delivered monthly;
(2) Comparative Financial Status Report to be delivered quarterly;
(3) Operating Statement Analysis to be delivered annually; and
(4) Such other reports as may be agreed by the Master Servicer and
the Subservicer from time to time.
B-1
<PAGE>
LTC REMIC IV CORPORATION,
DEPOSITOR
GMAC COMMERCIAL MORTGAGE CORPORATION,
MASTER SERVICER
LTC PROPERTIES, INC.,
SPECIAL SERVICER AND ORIGINATOR
and
LASALLE NATIONAL BANK,
TRUSTEE
________________________________________________
POOLING AND SERVICING AGREEMENT
Dated as of April 20, 1998
________________________________________________
LTC Commercial Mortgage Pass-Through Certificates
Series 1998-1
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
----
ARTICLE I
DEFINITIONS
<S> <C> <C>
SECTION 1.1 Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 1.2 Certain Calculations.. . . . . . . . . . . . . . . . . . . . . 33
</TABLE>
ARTICLE II
DECLARATION OF TRUST FUND;
CONVEYANCE OF MORTGAGE LOANS AND MORTGAGE CERTIFICATES;
ORIGINAL ISSUANCE OF CERTIFICATES
<TABLE>
<S> <C> <C>
SECTION 2.1 Creation and Declaration of Trust Fund; Conveyance of
Mortgage Loans, Conveyance of Mortgage Certificates,
Conveyance of Other Collateral . . . . . . . . . . . . . . . . 35
SECTION 2.2 Acceptance by Custodian and Trustee; Repurchase or
Substitution for Defective Documentation or other Failure to
Validly Assign Mortgage Loans and Mortgage
Certificates . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 2.3 Representations and Warranties and Covenants of the
Depositor. . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 2.4 Execution and Delivery of Certificates; Issuance of
Uncertified Lower-Tier Interests . . . . . . . . . . . . . . . 43
SECTION 2.5 Representations, Warranties and Covenants of the Master
Servicer . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 2.6 Representations, Warranties and Covenants of the Special
Servicer . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 2.7 [RESERVED] . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 2.8 Miscellaneous REMIC Provisions.. . . . . . . . . . . . . . . . 46
SECTION 2.9 Transfer Agreement . . . . . . . . . . . . . . . . . . . . . . 47
</TABLE>
ARTICLE III
ADMINISTRATION AND SERVICING OF THE
MORTGAGE LOANS
<TABLE>
<S> <C> <C>
SECTION 3.1 Master Servicer to Act as Master Servicer; Special Servicer
to Act as Special Servicer; Administration of the Mortgage
Loans and the Mortgage Certificates. . . . . . . . . . . . . . 48
SECTION 3.2 Liability of the Master Servicer and the Special Servicer. . . 52
SECTION 3.3 Collection of Certain Mortgage Loan Payments.. . . . . . . . . 52
SECTION 3.4 Payment of Taxes, Assessments and Similar Items. . . . . . . . 53
SECTION 3.5 Collection Account, Distribution Account and Upper-Tier
Distribution Account . . . . . . . . . . . . . . . . . . . . . 54
SECTION 3.6 Permitted Withdrawals from the Collection Account. . . . . . . 55
SECTION 3.7 Investment of Funds in the Collection Account, REO Account,
the Distribution
Account and the Upper-Tier Distribution Account. . . . . . . . 57
SECTION 3.8 Maintenance of Insurance Policies and Errors and Omissions
and Fidelity
Coverage.. . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 3.9 Enforcement of Due-On-Sale Clauses; Assumption Agreements. . . 61
SECTION 3.10 Realization Upon Defaulted Mortgage Loans. . . . . . . . . . . 62
SECTION 3.11 Trustee to Cooperate; Release of Mortgage Files and Mortgage
Certificates . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 3.12 Servicing Compensation . . . . . . . . . . . . . . . . . . . . 66
SECTION 3.13 Reports to the Trustee; Collection Account Statements. . . . . 66
SECTION 3.14 Annual Statement as to Compliance. . . . . . . . . . . . . . . 67
SECTION 3.15 Annual Independent Public Accountants' Servicing Report. . . . 67
</TABLE>
i
<PAGE>
<TABLE>
<S> <C> <C>
SECTION 3.16 Actions with Respect to the Mortgage Certificates. . . . . . . 68
SECTION 3.17 Title and Management of REO Properties and REO Account
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 3.18 Sale of Defaulted Mortgage Loans and REO Properties. . . . . . 71
SECTION 3.19 Inspections. . . . . . . . . . . . . . . . . . . . . . . . . . 72
SECTION 3.20 Modifications, Waivers, Amendments and Consents. . . . . . . . 72
SECTION 3.21 Transfer of Servicing Between Master Servicer and Special
Servicer;
Record-Keeping . . . . . . . . . . . . . . . . . . . . . . . . 75
SECTION 3.22 P&I Advances . . . . . . . . . . . . . . . . . . . . . . . . . 76
SECTION 3.23 Access to Certain Documentation. . . . . . . . . . . . . . . . 78
SECTION 3.24 Authenticating Agent . . . . . . . . . . . . . . . . . . . . . 78
SECTION 3.25 Appointment of Custodians. . . . . . . . . . . . . . . . . . . 79
</TABLE>
ARTICLE IV
DISTRIBUTIONS TO CERTIFICATEHOLDERS
<TABLE>
<S> <C> <C>
SECTION 4.1 Distributions from Lower-Tier REMIC. . . . . . . . . . . . . . 80
SECTION 4.2 Distributions from Upper-Tier REMIC. . . . . . . . . . . . . . 85
SECTION 4.3 Statements to Certificateholders . . . . . . . . . . . . . . . 90
SECTION 4.4 Compliance with Withholding Requirements . . . . . . . . . . . 92
SECTION 4.5 REMIC Compliance . . . . . . . . . . . . . . . . . . . . . . . 93
SECTION 4.6 Imposition of Tax on the Upper-Tier REMIC or Lower-Tier
REMIC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
SECTION 4.7 Appraisal Reductions . . . . . . . . . . . . . . . . . . . . . 95
SECTION 4.8 Adjustment of Servicing Fees . . . . . . . . . . . . . . . . . 95
</TABLE>
ARTICLE V
THE CERTIFICATES
<TABLE>
<S> <C> <C>
SECTION 5.1 The Certificates.. . . . . . . . . . . . . . . . . . . . . . . 97
SECTION 5.2 Certificate Registrar. . . . . . . . . . . . . . . . . . . . . 99
SECTION 5.3 Registration of Transfer and Exchange of Certificates. . . . . 99
SECTION 5.4 Mutilated, Destroyed, Lost or Stolen Certificates. . . . . . .102
SECTION 5.5 Persons Deemed Owners. . . . . . . . . . . . . . . . . . . . .102
SECTION 5.6 Appointment of Paying Agent. . . . . . . . . . . . . . . . . .102
SECTION 5.7 Access to Certificateholders' Names and Addresses. . . . . . .103
SECTION 5.8 Actions of Certificateholders. . . . . . . . . . . . . . . . .103
</TABLE>
ARTICLE VI
THE DEPOSITOR, THE MASTER SERVICER AND THE SPECIAL SERVICER
<TABLE>
<S> <C> <C>
SECTION 6.1 Liability of the Depositor, the Master Servicer and the
Special Servicer . . . . . . . . . . . . . . . . . . . . . . .104
SECTION 6.2 Merger or Consolidation of the Special Servicer or the
Master Servicer. . . . . . . . . . . . . . . . . . . . . . . .104
SECTION 6.3 Limitation on Liability of the Depositor, the Master
Servicer, the Special Servicer and Others . . . . . . . .104
SECTION 6.4 Limitation on Resignation of the Master Servicer and the
Special Servicer . . . . . . . . . . . . . . . . . . . . . . .105
SECTION 6.5 Rights of the Depositor and the Trustee in Respect of the
Master Servicer and the Special Servicer . . . . . . . . . . .106
SECTION 6.6 Certain Rights of the Master Servicer and Special Servicer . .106
SECTION 6.7 Not Responsible for Recitals or Issuance of Certificates . . .108
SECTION 6.8 Depositor, Special Servicer, Master Servicer, and Trustee to
Cooperate. . . . . . . . . . . . . . . . . . . . . . . . . . .108
</TABLE>
ii
<PAGE>
ARTICLE VII
DEFAULT
<TABLE>
<S> <C> <C>
SECTION 7.1 Events of Default. . . . . . . . . . . . . . . . . . . . . . .109
SECTION 7.2 Trustee and Master Servicer to Act; Appointment of Successor .111
SECTION 7.3 Notification to Certificateholders . . . . . . . . . . . . . .112
SECTION 7.4 Other Remedies of Trustee. . . . . . . . . . . . . . . . . . .112
SECTION 7.5 Waiver of Past Events of Default . . . . . . . . . . . . . . .112
SECTION 7.6 Effects of Transfer. . . . . . . . . . . . . . . . . . . . . .112
SECTION 7.7 Trustee as Maker of Advances . . . . . . . . . . . . . . . . .112
</TABLE>
ARTICLE VIII
CONCERNING THE TRUSTEE
<TABLE>
<S> <C> <C>
SECTION 8.1 Duties of Trustee. . . . . . . . . . . . . . . . . . . . . . .114
SECTION 8.2 Certain Matters Affecting the Trustee. . . . . . . . . . . . .115
SECTION 8.3 Trustee Not Liable for Certificates, Mortgage Loans or
Mortgage Certificates. . . . . . . . . . . . . . . . . . . . .117
SECTION 8.4 Trustee May Own Certificates . . . . . . . . . . . . . . . . .118
SECTION 8.5 Limitation on Liability of Trustee . . . . . . . . . . . . . .118
SECTION 8.6 Eligibility Requirements for Trustee . . . . . . . . . . . . .118
SECTION 8.7 Resignation and Removal of the Trustee . . . . . . . . . . . .119
SECTION 8.8 Representations and Warranties of the Trustee. . . . . . . . .119
SECTION 8.9 Successor Trustee. . . . . . . . . . . . . . . . . . . . . . .120
SECTION 8.10 Merger or Consolidation of Trustee . . . . . . . . . . . . . .121
SECTION 8.11 Appointment of Co-Trustee or Separate Trustee. . . . . . . . .121
SECTION 8.12 [Reserved] . . . . . . . . . . . . . . . . . . . . . . . . . .122
</TABLE>
ARTICLE IX
TERMINATION
<TABLE>
<S> <C> <C>
SECTION 9.1 Termination. . . . . . . . . . . . . . . . . . . . . . . . . .123
</TABLE>
ARTICLE X
MISCELLANEOUS PROVISIONS
<TABLE>
<S> <C> <C>
SECTION 10.1 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . .126
SECTION 10.2 Limitation on Rights of Certificateholders . . . . . . . . . .126
SECTION 10.3 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . .126
SECTION 10.4 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . .126
SECTION 10.5 Severability of Provisions.. . . . . . . . . . . . . . . . . .128
SECTION 10.6 Notice to the Rating Agency. . . . . . . . . . . . . . . . . .128
SECTION 10.7 Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . .129
SECTION 10.8 Limitation of Liability of Certain Persons . . . . . . . . . .131
</TABLE>
iii
<PAGE>
EXHIBITS
Exhibit A-1 Form of Class A Certificate
Exhibit A-2 Form of Class B Certificate
Exhibit A-3 Form of Class C Certificate
Exhibit A-4 Form of Class D Certificate
Exhibit A-5 Form of Class E Certificate
Exhibit A-6 Form of Class F Certificate
Exhibit A-7 Form of Class G Certificate
Exhibit A-8 Form of Class X-1 Certificate
Exhibit A-9 Form of Class X-2 Certificate
Exhibit A-10 Form of Class R Certificate
Exhibit A-11 Form of Class LR Certificate
Exhibit B Information Regarding the Mortgage Loans and the Certificate
Mortgage Loans
Exhibit C Fees and Expenses of Trust Fund
Exhibit D Form of Custodial Agreement
Exhibit E Form of Subservicing Agreement
Exhibit F Form of Memorandum Regarding Mortgage Loan Modifications
Exhibit G Form of Memorandum Regarding Foreclosure and REO Properties
Exhibit H-1 Form of Transfer Affidavit for Residual Certificate(s)
Exhibit H-2 Form of Transferor Acknowledgement for Residual
Certificate(s)
Exhibit I Form of Request for Release
Exhibit J Form of Custodian's Exception Report
Exhibit K Information Regarding the Mortgaged Properties Related to
the Mortgage Loans and the Certificate Mortgage Loans
Exhibit L Form of Investment Letter
iv
<PAGE>
This POOLING AND SERVICING AGREEMENT, dated and effective as of April
20, 1998 among LTC REMIC IV Corporation, a Delaware corporation, as Depositor
(the "Depositor"), GMAC Commercial Mortgage Corporation, a California
corporation, as Master Servicer (the "Master Servicer"), LTC Properties, Inc.
("LTC"), a Maryland corporation, as a Special Servicer (a "Special Servicer"),
and LaSalle National Bank, a nationally chartered bank, as Trustee (the
"Trustee").
PRELIMINARY STATEMENT:
Terms used but not defined in this Preliminary Statement shall have the meanings
specified in Article I hereof.
The Depositor intends to sell pass-through certificates to be issued
hereunder in multiple classes which in the aggregate will evidence the entire
beneficial ownership interest in the Trust Fund consisting primarily of the
Mortgage Loans and Mortgage Certificates. As provided herein, the Trustee will
elect that the Trust Fund be treated for federal income tax purposes as two
separate real estate mortgage investment conduits within the meaning of the
Code. The Class A, Class B, Class C, Class D, Class E, Class F, Class G, Class
X-1 and Class X-2 Certificates will be designated as the "regular interests,"
and the R Certificate will be designated as the "residual interest," in the
Upper-Tier REMIC for purposes of the REMIC Provisions under federal income tax
law. The Class AL, Class BL, Class CL, Class DL, Class EL, Class FL, Class GL,
Class AR-L and Class X-1L Interests will be designated as the "regular
interests" in the Lower-Tier REMIC and the Class LR Certificate will be
designated as the "residual interest" in the Lower-Tier REMIC for purposes of
the REMIC Provisions under federal income tax law.
The following table sets forth, to the extent applicable, the Class
designation, initial Certificate Principal Amount and Pass-Through Rate for each
Class of Certificates comprising the interests in the Upper-Tier REMIC created
hereunder.
<PAGE>
<TABLE>
<CAPTION>
Initial
Certificate Pass-Through
Designation Principal Amount Rate
----------- ---------------- ------------
<S> <C> <C>
Class A $ 82,491,000 6.029%
Class B $ 6,226,000 6.170%
Class C $ 10,896,000 6.314%
Class D $ 9,338,000 6.960%
Class E $ 12,452,000 7.792%
Class F $ 7,783,000 7.910%
Class G $ 26,460,541 7.910%
Class R $ 1,000 6.029%
Class X-1 (1) (2)
Class X-2 (1) (3)
</TABLE>
(1) The Class X-1 and X-2 Certificates do not have, and are not
denominated in, a Certificate Principal Amount, but rather have Notional
Amounts and are entitled to interest distributions as provided herein.
(2) Class X-1 Accrued Interest.
(3) Class X-2 Accrued Interest.
The following table sets forth the designation, initial Certificate
Principal Amount and Pass-Through Rate for each Class of Lower-Tier Interests.
<TABLE>
<CAPTION>
Initial
Certificate Pass-Through
Designation Principal Amount Rate
- ----------- ---------------- ------------
<S> <C> <C>
Class AL $ 82,491,000 7.910%
Class BL $ 6,226,000 7.910%
Class CL $ 10,896,000 7.910%
Class DL $ 9,338,000 7.910%
Class EL $ 12,452,000 7.910%
Class FL $ 7,783,000 7.910%
Class GL $ 26,460,541 7.910%
Class AR-L $ 1,000 7.910%
Class X-1L (1) (2)
Class LR $ 1,000 7.910%
</TABLE>
(1) The Class X-1L Certificates do not have, and are not denominated
in, Certificate Principal Amounts, but rather have Notional Amounts and are
entitled to interest distributions as provided herein.
(2) Class X-1L Accrued Interest.
As of the Cut-Off Date, the Mortgage Loans and Mortgage Certificates
have an aggregate Scheduled Principal Balance equal to $155,648,540.83.
In consideration of the mutual agreements herein contained, the
Depositor, the Master Servicer, the Special Servicer and the Trustee agree as
follows:
2
<PAGE>
ARTICLE I
DEFINITIONS
SECTION 1.1 DEFINED TERMS.
Whenever used in this Agreement, the following words and phrases,
unless the context otherwise requires, shall have the meanings specified in this
Article.
"ACCREDITED INVESTOR": As defined in Section 5.3(c).
"ACCRUED CERTIFICATE INTEREST": With respect to each Distribution
Date for any Class of Regular Certificates, other than the Class X Certificates,
and the Class R and Class LR Certificates, interest for the related Interest
Accrual Period, calculated on the basis of a 360-day year consisting of twelve
30-day months, at the applicable Pass-Through Rate for such Class on the
Certificate Principal Amount of such Class; PROVIDED that solely for such
purpose any distribution to be made in reduction of the Certificate Principal
Amount of such Class of Certificates (and any Realized Losses of principal
allocated to the principal balance of each such Class) shall be deemed to have
been made as of the end of the preceding Interest Accrual Period rather than on
the Distribution Date when it is actually so made. With respect to each
Distribution Date for the Class X-1L Interests, the Class X-1 Certificates, and
Class X-2 Certificates, the "Accrued Certificate Interest" shall mean the Class
X-1L Accrued Interest, the Class X-1 Accrued Interest, or the Class X-2 Accrued
Interest, as applicable.
"ACQUISITION DATE": The date as of which beneficial ownership of a
Mortgaged Property has been acquired by the Special Servicer or the Trustee on
behalf of the Trust Fund through foreclosure, deed in lieu of foreclosure or
otherwise.
"ACT": The Securities Act of 1933, as it may be amended from time to
time.
"ADVANCE": A P&I Advance or a Servicing Advance.
"ADVANCE INTEREST": Interest accrued and unpaid on any Advance, at a
rate per annum equal to the Advance Rate.
"ADVANCE RATE": An annual rate, as such rate may be adjusted from
time to time during the term of the Advance, equal to the Prime Rate per annum.
"AFFILIATE": With respect to any specified Person, any other Person
controlling or controlled by or under common control with such specified Person.
For the purposes of this definition, "control" when used with respect to any
specified Person means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise, and the terms "controlling" and
"controlled" have meanings correlative to the foregoing. The Trustee may obtain
and rely on an Officer's Certificate of the Master Servicer, the Special
Servicer or the Depositor to determine whether any Person is an Affiliate of
such party.
"AGREEMENT": This Pooling and Servicing Agreement and all amendments
hereof and supplements hereto.
"AMOUNT HELD FOR FUTURE DISTRIBUTION": With respect to any
Distribution Date, the portion of any amount in the Collection Account
consisting of (a) all Monthly Payments received in respect of the Mortgage Loans
deposited in the Collection Account on or prior to the related Determination
Date but due during any Due Period relating to a subsequent Distribution Date,
but excluding a Monthly Payment if the principal portion thereof is
3
<PAGE>
distributable on such Distribution Date in connection with the payment of a
Balloon Payment or a Principal Prepayment and (b) any Principal Prepayment
received after the end of the related Prepayment Period.
"ANTICIPATED TERMINATION DATE": The Distribution Date on which it is
anticipated that the Trust Fund, the Upper-Tier REMIC and the Lower-Tier REMIC
will be terminated pursuant to Section 9.1(b), Section 9.1(c) or Section 9.1(d).
"APPRAISAL REDUCTION" means for any Mortgage Loan with respect to
which an appraisal or estimated valuation is performed pursuant to Section 4.7,
an amount equal to the excess of (a) the Scheduled Principal Balance of such
Mortgage Loan (or of all Mortgage Loans secured by the same Mortgaged Property,
if applicable) or the related REO Mortgage Loan (or REO Mortgage Loans, if
applicable), as the case may be, as of the related Determination Date over (b)
(i) 90% of the Appraised Value of such Mortgaged Property or REO Account
Property (or REO Account Properties, if applicable) as determined by such
appraisal less (ii) the sum of (A) to the extent not previously advanced by the
Master Servicer, the Trustee or the Special Servicer, all accrued and unpaid
interest on such Mortgage Loan (or Mortgage Loans, if applicable) at a per annum
rate equal to the Mortgage Interest Rate, (B) all unreimbursed Advances and
interest thereon in respect of such Mortgage Loan (or Mortgage Loans, if
applicable) and (C) all currently due and unpaid real estate taxes and
assessments, insurance premiums and, if applicable, ground rents of such
Mortgaged Property (or Mortgaged Properties, if applicable) or the REO Account
Property (or REO Account Properties, if applicable), as the case may be
(PROVIDED, that if the Scheduled Principal Balance of the Mortgage Loan (or
Mortgage Loans, if applicable) or REO Mortgage Loan (or REO Mortgage Loans, if
applicable), as the case may be, is less than or equal to $1,000,000, the
Special Servicer may, at its option, rely on an internal valuation of such
Mortgaged Property (or Mortgaged Properties, if applicable) rather than on its
Appraised Value). For Mortgage Loans with a Scheduled Principal Balance equal
to or less than $1,000,000, the Appraisal Reduction will be the lesser of that
calculated above or 40% of the Scheduled Principal Balance of such Mortgage
Loan. The aggregate Appraisal Reduction related to a Mortgage Loan will be
reduced to zero as of the date such Mortgage Loan (i) is paid in full,
liquidated, repurchased or otherwise disposed of, or (ii) in the case of a
Specially Serviced Mortgage Loan, when such Mortgage Loan is no longer a
Specially Serviced Mortgage Loan; PROVIDED that this exception does not apply in
the case of a Modified Mortgage Loan the payment terms of which have been
modified more than once since the Cut-Off Date.
"APPRAISAL REDUCTION ESTIMATE" As defined in Section 4.7.
"APPRAISED VALUE" means, with respect to any Mortgaged Property, the
appraised value thereof determined by an Independent MAI appraisal of the
Mortgaged Property securing such Mortgage Loan made by an Independent appraiser
selected by the Master Servicer or the Special Servicer, as applicable.
"ASSIGNMENT OF LEASES, RENTS AND PROFITS": With respect to any
Mortgaged Property, any assignment of leases, rents and profits or similar
agreement executed by the related Borrower, assigning to the mortgagee all of
the income, rents and profits derived from the ownership, operation, leasing or
disposition of all or a portion of such Mortgaged Property, in the form which
was duly executed, acknowledged and delivered, as amended, modified, renewed or
extended through the date hereof and from time to time hereafter.
"ASSIGNMENT OF MORTGAGE": An assignment of Mortgage without recourse,
notice of transfer or equivalent instrument from the related Borrower, in
recordable form, which is sufficient under the laws of the jurisdiction in which
the related Mortgaged Property is located to reflect of record the sale of the
Mortgage; PROVIDED, HOWEVER, that the Trustee or the Custodian shall not be
responsible for determining whether any assignment is legally sufficient or in
recordable form.
"ASSUMED SCHEDULED PAYMENT": With respect to any Balloon Mortgage
Loan that is delinquent in respect of its Balloon Payment (including any REO
Mortgage Loan for which the related Note provided for a Balloon Payment), an
amount deemed to be due for such Mortgage Loan with respect to each Due Period
ending on
4
<PAGE>
or after the Due Date for the Balloon Payment, which will be equal to
the Monthly Payment (or Modified Monthly Payment, in the case of a Modified
Mortgage Loan) that would otherwise have been due on such Mortgage Loan during
such Due Period had such Balloon Payment not become due, but instead such
Mortgage Loan had been restructured to provide for amortization of its Scheduled
Principal Balance immediately prior to the Due Date such Balloon Payment was due
(without taking into account any payment due on such Due Date) on a monthly
level payment basis beginning on the Due Date such Balloon Payment was due and
ending on the last day of the original amortization period for such Balloon
Mortgage Loan. The original amortization period for a Balloon Mortgage Loan is
the period over which the Mortgage Loan would have been fully amortized,
assuming that no Balloon Payment was due and that the Borrower continued to make
monthly payments equal to the Monthly Payment (or Modified Monthly Payment, in
the case of a Modified Mortgage Loan) in effect immediately prior to the Due
Date of the Balloon Payment.
"AUTHENTICATING AGENT": As defined in Section 3.24.
"AVAILABLE DISTRIBUTION AMOUNT": With respect to any Distribution
Date, Available Funds with respect to such Distribution Date plus all P&I
Advances actually made for such Distribution Date.
"AVAILABLE FUNDS": With respect to any Distribution Date, an amount
equal to (a) the sum of (i) the amount on deposit in the Collection Account as
of the close of business on the related Determination Date (after giving effect
to any withdrawals therefrom on such Determination Date pursuant to Section 3.6)
and (ii) the portion of the Net REO Proceeds deposited in the Collection Account
by the Special Servicer pursuant to Section 3.17(d) for such Distribution Date
MINUS (b) the sum of (i) the portion of the amount described in clause (a)
hereof that represents the Amount Held for Future Distribution, (ii) to the
extent not previously withdrawn, all other amounts not required to be deposited
by the Master Servicer in the Collection Account, and (iii) any other amounts
the Master Servicer is permitted to withdraw from the Collection Account
pursuant to this Agreement.
"BALLOON MORTGAGE LOAN": A Mortgage Loan which will not fully
amortize itself based on the fixed Monthly Payments by its original Maturity
Date.
"BALLOON PAYMENT": With respect to any Balloon Mortgage Loan, a final
scheduled monthly payment of principal and interest which is due under the terms
of the related Note.
"BANKRUPTCY CODE": The Bankruptcy Code, 11 U.S.C. Section 101 et
seq., as amended from time to time and any successor statute thereto.
"BASIC FEE": With respect to each Specially-Serviced Mortgage Loan
and for any Due Period, an amount equal to the product of one-twelfth of the
Basic Fee Rate and the Scheduled Principal Balance of each such Specially-
Serviced Mortgage Loan outstanding immediately prior to the application of the
Monthly Payment due on the Due Date occurring in such Due Period.
"BASIC FEE RATE": With respect to each Mortgage Loan, a per annum
rate equal to 0.01%.
"BENEFICIAL OWNER": With respect to a Class A, Class B, Class C,
Class D or Class E Certificate maintained on the book-entry records of the
Depository, the Person who is the beneficial owner of such Certificate as
reflected on the books of the Depository or on the books of a Person maintaining
an account with such Depository (directly as a Depository Participant or
indirectly through a Depository Participant, in accordance with the rules of
such Depository).
"BORROWER": Any obligor on a Note.
"BUSINESS DAY": Any day other than a Saturday, a Sunday or a day on
which banking institutions in the city of Chicago, Illinois (for so long as
LaSalle National Bank is the Trustee) or Philadelphia, Pennsylvania or
5
<PAGE>
New York City, New York (so long as GMAC Commercial Mortgage Corporation is
the Master Servicer) are authorized or obligated by law, executive order or
governmental decree to be closed, or LTC Properties, Inc., the Master
Servicer or the Trustee is closed.
"CERTIFICATE": Any Class A Certificate, Class B Certificate, Class C
Certificate, Class D Certificate, Class E Certificate, Class F Certificate,
Class G Certificate, Class X-1 Certificate, Class X-2 Certificate, Class R
Certificate or Class LR Certificate issued, authenticated and delivered
hereunder, and, unless the context clearly requires otherwise, any Class AL,
Class BL, Class CL, Class DL, Class EL, Class FL, Class GL, Class AR-L or Class
X-1L Interest.
"CERTIFICATE FACTOR": With respect to each Class of Certificates
(other than the Class X Certificates) and as of any Distribution Date, a
fraction, expressed as a decimal carried to eight places, the numerator of which
is the Certificate Principal Amount of such Class of Certificates on such
Distribution Date (less any distributions or allocations of Realized Losses in
reduction of the Certificate Principal Amount of such Class of Certificates made
on such Distribution Date) and the denominator of which is the initial
Certificate Principal Amount of such Class of Certificates set forth in the
Preliminary Statement hereto.
"CERTIFICATE MORTGAGE LOANS": The mortgage loans underlying the
Mortgage Certificates.
"CERTIFICATE PRINCIPAL AMOUNT": With respect to any Class of
Certificates (other than any Class X-1 and Class X-2 Certificates), or any Class
of Lower-Tier Interests (other than the Class X-1L Interest) (i) on or prior to
the first Distribution Date, an amount equal to the initial Certificate
Principal Amount of the related Class of Certificates, as specified in the
Preliminary Statement hereto, and (ii) thereafter as of any date of
determination, the Certificate Principal Amount of such Class at the beginning
of the Distribution Date immediately prior to such date of determination, after
giving effect to (x) the distributions of principal made thereon on such prior
Distribution Date and (y) any reductions made in connection with a Realized Loss
of principal allocable on such prior Distribution Date to such Class. The Class
X-1L Interest, the Class X-1 Certificates, and Class X-2 Certificates do not
have a Certificate Principal Amount.
"CERTIFICATE REGISTER" and "CERTIFICATE REGISTRAR": The register
maintained and the registrar appointed pursuant to Sections 5.2 and 5.3.
"CERTIFICATEHOLDER" or "HOLDER": The Person in whose name an
Outstanding Certificate is registered in the Certificate Register.
"CLASS": All of the Certificates bearing the same alphabetical and
numerical class designation.
"CLASS A CERTIFICATE": A certificate designated as "Class A" on the
face thereof, in the form of Exhibit A-1 hereto.
"CLASS A PASS-THROUGH RATE": With respect to any Interest Accrual
Period, a per annum rate equal to 6.029%.
"CLASS A SPREAD RATE": With respect to each Interest Accrual Period,
a per annum rate equal to the difference between (i) 7.910% and (ii) the Class A
Pass-Through Rate.
"CLASS AL INTEREST": An uncertificated Lower-Tier Interest having an
initial Certificate Principal Amount and Pass-Through Rate set forth in the
Preliminary Statement hereto, and which will be designated as a regular interest
in the Lower-Tier REMIC.
6
<PAGE>
"CLASS AR-L INTEREST": An uncertificated Lower-Tier Interest having
an initial Certificate Principal Amount and Pass-Through Rate set forth in the
Preliminary Statement hereto, and which will be designated as a regular interest
in the Lower-Tier REMIC.
"CLASS AR-L PRINCIPAL DISTRIBUTION AMOUNT": With respect to any
Distribution Date, an amount equal to the product of (a) the Principal
Distribution Amount for such Distribution Date reduced by the Class LR Principal
Distribution Amount for such Distribution Date and (b) a fraction, the numerator
of which is the Certificate Principal Amount on the Class AR-L Interest on the
first day of the related Interest Accrual Period and the denominator of which is
the Certificate Principal Amount of all Classes of Certificates (other than the
Class LR Certificates) on the first day of the related Interest Accrual Period.
"CLASS B CERTIFICATE": A Certificate designated as "Class B" on the
face thereof, in the form of Exhibit A-2 hereto.
"CLASS B PASS-THROUGH RATE": With respect to any Interest Accrual
Period, a per annum rate equal to 6.170%.
"CLASS B SPREAD RATE": With respect to each Interest Accrual Period,
a per annum rate equal to the difference between (i)7.910% and (ii) the Class B
Pass-Through Rate.
"CLASS BL INTEREST": An uncertificated Lower-Tier Interest having an
initial Certificate Principal Amount and Pass-Through Rate set forth in the
Preliminary Statement hereto, and which will be designated as a regular interest
in the Lower-Tier REMIC.
"CLASS C CERTIFICATE": A Certificate designated as "Class C" on the
face thereof, in the form of Exhibit A-3 hereto.
"CLASS C PASS-THROUGH RATE": With respect to any Interest Accrual
Period, a per annum rate equal to 6.314%.
"CLASS C SPREAD RATE": With respect to each Interest Accrual Period,
a per annum rate equal to the difference between (i) 7.910% and (ii) the Class C
Pass-Through Rate.
"CLASS CL INTEREST": An uncertificated Lower-Tier Interest having an
initial Certificate Principal Amount and Pass-Through Rate set forth in the
Preliminary Statement hereto, and which will be designated as a regular interest
in the Lower-Tier REMIC.
"CLASS D CERTIFICATE": A Certificate designated as "Class D" on the
face thereof, in the form of Exhibit A-4 hereto.
"CLASS D PASS-THROUGH RATE": With respect to any Interest Accrual
Period, a per annum rate equal to 6.960%.
"CLASS D SPREAD RATE": With respect to each Interest Accrual Period,
a per annum rate equal to the difference between (i) 7.910% and (ii) the Class D
Pass-Through Rate.
"CLASS DL INTEREST": An uncertificated Lower-Tier Interest having an
initial Certificate Principal Amount and Pass-Through Rate set forth in the
Preliminary Statement hereto, and which will be designated as a regular interest
in the Lower-Tier REMIC.
"CLASS E CERTIFICATE": A Certificate designated as "Class E" on the
face thereof, in the form of Exhibit A-5 hereto.
7
<PAGE>
"CLASS E PASS-THROUGH RATE": With respect to any Interest Accrual
Period, a per annum rate equal to 7.792%.
"CLASS EL INTEREST": An uncertificated Lower-Tier Interest having an
initial Certificate Principal Amount and Pass-Through Rate set forth in the
Preliminary Statement hereto, and which will be designated as a regular interest
in the Lower-Tier REMIC.
"CLASS F CERTIFICATE": A Certificate designated as "Class F" on the
face thereof, in the form of Exhibit A-6 hereto.
"CLASS F PASS-THROUGH RATE": With respect to any Interest Accrual
Period, a per annum rate equal to 7.910%.
"CLASS FL INTEREST": An uncertificated Lower-Tier Interest having an
initial Certificate Principal Amount and Pass-Through Rate set forth in the
Preliminary Statement hereto, and which will be designated as a regular interest
in the Lower-Tier REMIC.
"CLASS G CERTIFICATE": A Certificate designated as "Class G" on the
face thereof, in the form of Exhibit A-7 hereto.
"CLASS G PASS-THROUGH RATE": With respect to any Interest Accrual
Period, a per annum rate equal to 7.910%.
"CLASS GL INTEREST": An uncertificated Lower-Tier Interest having an
initial Certificate Principal Amount and Pass-Through Rate set forth in the
Preliminary Statement hereto, and which will be designated as a regular interest
in the Lower-Tier REMIC.
"CLASS LR CERTIFICATE": The residual interest in the Lower-Tier
REMIC, represented by a Certificate designated as "Class LR" on the face
thereof, in the form of Exhibit A-11 hereto.
"CLASS LR PASS-THROUGH RATE": With respect to any Interest Accrual
Period, a per annum rate equal to 6.029%.
"CLASS LR PRINCIPAL DISTRIBUTION AMOUNT": With respect to any
Distribution Date, an amount equal to the product of (a) the Principal
Distribution Amount for such Distribution Date and (b) a fraction, the numerator
of which is the Certificate Principal Amount of the Class LR Certificates on the
first day of the related Interest Accrual Period and the denominator of which is
the Certificate Principal Amount of all Classes of Certificates on the first day
of the related Interest Accrual Period.
"CLASS R CERTIFICATE": The residual interest in the Upper-Tier REMIC,
which shall be represented by a certificate designated as "Class R" on the face
thereof, in the form of Exhibit A-10 hereto.
"CLASS R PASS-THROUGH RATE": With respect to any Interest Accrual
Period, a per annum rate equal to 6.029%.
"CLASS R PRINCIPAL DISTRIBUTION AMOUNT": With respect to any
Distribution Date, an amount equal to the Class AR-L Principal Distribution
Amount for such Distribution Date.
"CLASS X CERTIFICATES": Collectively, the Class X-1L Interest, the
Class X-1 Certificates and the Class X-2 Certificates.
8
<PAGE>
"CLASS X-1 ACCRUED INTEREST": With respect to each Interest Accrual
Period, 100% of the interest accrued on the Class X-1L Interest.
"CLASS X-1 CERTIFICATE": A Certificate designated as "Class X-1" on
the face thereof, in the form of Exhibit A-8 hereto.
"CLASS X-1L ACCRUED INTEREST": With respect to each Distribution Date
and each Mortgage Loan and Mortgage Certificate, a portion of the interest
accrued on such Mortgage Loan or Mortgage Certificate during the related
Mortgage Loan Due Period or Mortgage Certificate Due Period equal to interest
accrued on such Mortgage Loan or Mortgage Certificate during such period at a
rate per annum equal to the excess of the Net Mortgage Interest Rate of such
Mortgage Loan or Mortgage Certificate, as applicable, over 7.910% (the "Class
X-1L Strip Rate"), calculated on the basis of the actual number of days for
which interest accrues on such Mortgage Loan or Mortgage Certificate during the
related Due Period according to the terms of such Mortgage Loan or Mortgage
Certificate and a 360-day year.
"CLASS X-1L INTEREST": An uncertificated Lower-Tier Interest having a
Pass-Through Rate equal to the aggregate Class X-1L Accrued Interest, and which
will be designated as a regular interest in the Lower-Tier REMIC.
"CLASS X-2 ACCRUED INTEREST": With respect to each Interest Accrual
Period, 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 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.
"CLASS X-2 CERTIFICATE": A Certificate designated as "Class X-2" on
the face thereof, in the form of Exhibit A-9 hereto.
"CLOSING DATE": May 14, 1998.
"CODE": The Internal Revenue Code of 1986, any successor statute
thereto, and any temporary or final regulations of the United States Department
of the Treasury from time to time promulgated thereunder.
"COLLECTION ACCOUNT": The trust account or accounts created and
maintained by the Master Servicer pursuant to Section 3.5(a), which shall be
entitled "LaSalle National Bank, as Trustee, in trust for Holders of LTC
Commercial Mortgage Pass-Through Certificates, Series 1998-1," and which must be
an Eligible Account.
"CORPORATE TRUST OFFICE": The corporate trust office of the Trustee
at which at any particular time its corporate trust business relating to the
Certificates shall be administered, which office at the date of the execution of
this Agreement is located at 135 South LaSalle Street, Suite 1625, Chicago,
Illinois 60674-4107, Attention: Asset-Backed Securities Trust Services Group --
LTC Commercial Mortgage Pass-Through Certificates, Series 1998-1.
"CORRESPONDING UPPER-TIER CLASS": As to each of the following
Lower-Tier Interests, the corresponding Upper-Tier Certificates, are as follows:
<TABLE>
<CAPTION>
<S> <C>
Uncertificated Lower-Tier
Corresponding Upper-Tier
INTEREST CLASS
------------------------- -------------
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
Class AL Interest. . . . . . . . . . . Class A Certificates
Class BL Interest. . . . . . . . . . . Class B Certificates
Class CL Interest. . . . . . . . . . . Class C Certificates
Class DL Interest. . . . . . . . . . . Class D Certificates
Class EL Interest. . . . . . . . . . . Class E Certificates
Class FL Interest. . . . . . . . . . . Class F Certificates
Class GL Interest. . . . . . . . . . . Class G Certificates
Class AR-L Interest. . . . . . . . . . Class R Certificates
Class X-1L Interest. . . . . . . . . . Class X-1 Certificates
</TABLE>
In addition, to the extent of the applicable Spread Rate on each of the Class
AL, Class BL, Class CL, Class DL, Class EL, Class FL, Class GL, the Class X-1
Certificates and the Class X-2 Certificates are a Corresponding Upper-Tier
Class; PROVIDED, HOWEVER, that the Class X-1 Certificates and the Class X-2
Certificates do not have a Certificate Principal Amount and shall not be taken
into consideration when comparing the Certificate Principal Amount of the
Lower-Tier Interests and the Corresponding Upper-Tier Certificates.
"CURRENT LOAN BALANCE-TO-ORIGINAL VALUE RATIO": With respect to any
Mortgage Loan, as of any date of determination, the fraction, expressed as a
percentage, the numerator of which is the outstanding principal balance of such
Mortgage Loan at such date and the denominator of which is the Value of the
related Mortgaged Property, PROVIDED, HOWEVER, that for purposes of any such
calculation relating to the REMIC Provisions of the Code, the Value of the
related Mortgaged Property shall not include any non-real property assets within
the meaning of such REMIC Provisions.
"CUSTODIAL AGREEMENT": An agreement that may be entered into among
the Trustee, the Master Servicer and a Custodian, substantially in the form of
Exhibit D hereto.
"CUSTODIAN": A custodian, which shall not be the Originator, the
Depositor or any Affiliate of any of the foregoing, appointed by the Trustee.
The initial Custodian shall be the Trustee.
"CUSTODIAN'S EXCEPTION REPORT": As defined in Section 2.2.
"CUT-OFF DATE": April 20, 1998 in the case of each Mortgage Loan and
each Mortgage Certificate. In the case of each Mortgage Loan or Mortgage
Certificate, references to outstanding principal balance "as of the Cut-Off
Date" of such Mortgage Loan or Mortgage Certificate will mean its principal
balance at the close of business on the Cut-Off Date.
"DEBT SERVICE COVERAGE RATIO": With respect to any Mortgage Loan, as
of any date of determination and for any period, the ratio of the Net Operating
Income with respect to the related Mortgaged Property or Properties for the
previous twelve months, as set forth in the most recent available operating
statements of the Borrower for the Mortgaged Property or Mortgaged Properties
delivered to the Master Servicer pursuant to Section 3.1(e), to the aggregate
Monthly Payments on the Mortgage Loan for such period. Solely for purposes of
Section 3.20(c) hereof, Debt Service Coverage Ratio shall mean, with respect to
any Mortgage Loan, the ratio of Net Operating Income for the twelve months ended
on the date of extension of a Mortgage Loan pursuant to Section
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3.20(c) to the amount of principal and interest to become due and payable on
the related Note during the twelve month period following such extension.
"DEBT SERVICE REDUCTION": With respect to any Mortgage Loan and any
Due Date, the amount of any reduction (other than a reduction resulting from a
Deficient Valuation) in the Monthly Payment for such Mortgage Loan which the
Borrower is obligated to pay on such Due Date as a result of any proceeding
under bankruptcy law or any similar proceeding; PROVIDED, HOWEVER, that in the
case of an amount that is deferred, but not forgiven, such reduction will
include only the net present value of the reduction (calculated at the Mortgage
Interest Rate).
"DEFAULTED MORTGAGE LOAN": As of any Determination Date, a Mortgage
Loan as to which a material default has occurred under the terms thereof;
PROVIDED, HOWEVER, that a Mortgage Loan shall be deemed not to be a Defaulted
Mortgage Loan unless an amount equal to at least two Monthly Payments, or any
Balloon Payment, are past due.
"DEFICIENT VALUATION": With respect to any Mortgage Loan, the excess
of (a) the then outstanding principal balance of the Mortgage Loan over (b) the
outstanding principal balance of such Mortgage Loan after a valuation by a court
of competent jurisdiction of the Mortgaged Property which reduces the amount due
on such Mortgage Loan to an amount less than the then outstanding principal
balance of and accrued interest on the Mortgage Loan plus expenses reimbursable
under the terms of the related Note, which valuation results from a proceeding
initiated under the Bankruptcy Code. If the terms of a court order in respect
of any Deficient Valuation are retroactive and provide for a reduction in the
indebtedness of a Mortgage Loan and the earlier maturity thereof, the term
Deficient Valuation shall include an additional amount equal to the excess, if
any, of (a) the amount of principal that was due on such Mortgage Loan for each
month retroactively affected (i.e., each month occurring after the effective
date of such Deficient Valuation but before the distribution of amounts in
respect of such Deficient Valuation to Certificateholders pursuant to this
Agreement), based on the original payment terms and amortization schedule of
such Mortgage Loan, over (b) the amount of principal due on such Mortgage Loan
for each such retroactive month (assuming the effect of such retroactive
application according to such Mortgage Loan's revised amortization schedule).
"DEPOSITOR": LTC REMIC IV Corporation and its successors in interest
and assigns.
"DEPOSITORY": The Depository Trust Company or a successor appointed
by the Depositor. Any successor to the Depository shall be an organization
registered as a "clearing agency" pursuant to Section 17A of the Securities
Exchange Act of 1934, as amended, and the regulations of the Securities and
Exchange Commission thereunder, and any such successor must be treated as
maintaining a book entry system for purposes of Section 163(f) of the Code.
"DETERMINATION DATE": With respect to any Distribution Date, the
twentieth day of the month in which such Distribution Date occurs (or if such
twentieth day is not a Business Day, the immediately succeeding Business Day),
commencing in May 1998.
"DIRECTLY OPERATE": With respect to any REO Property, the furnishing
or rendering of services to the tenants thereof, the management or operation of
such REO Property, the holding of such REO Property primarily for sale to
customers, or the performance of any construction work thereon or any use of
such REO Property in a trade or business conducted by the Trust Fund, in each
case, other than through an Independent Contractor; PROVIDED, HOWEVER, that the
Trustee (or the Special Servicer on behalf of the Trust Fund) shall not be
considered to Directly Operate an REO Property solely because the Trustee (or
the Special Servicer on behalf of the Trust Fund) establishes rental terms,
chooses tenants, enters into or renews leases, deals with taxes and insurance,
or makes decisions as to repairs or capital expenditures with respect to such
REO Property or undertakes any ministerial action incidental thereto.
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"DISQUALIFIED ORGANIZATION": Either (a) the United States, a State or
any political subdivision thereof, any possession of the United States, or any
agency or instrumentality of any of the foregoing (other than an instrumentality
that is a corporation if all of its activities are subject to tax and a majority
of its board of directors is not selected by any such governmental unit), (b) a
foreign government, International Organization (as defined in the Code) or
agency or instrumentality of either of the foregoing (other than an
instrumentality that is a corporation if all of its activities are subject to
tax and a majority of its board of directors is not selected by any such
governmental unit), (c) an organization that is exempt from tax imposed by
Chapter 1 of the Code (including the tax imposed by Code Section 511 on
unrelated business taxable income) on any excess inclusions (as defined in Code
Section 860E(c) (1)) with respect to the Class R or Class LR Certificates
(except certain farmers' cooperatives described in Code Section 521), (d) rural
electric and telephone cooperatives described in Code Section 1381(a)(2)(c), or
(e) any other Person so designated by the Certificate Registrar based upon
relevant legislation amending the REMIC Provisions or an Opinion of Counsel to
the effect that any Transfer to such Person may cause either the Upper-Tier
REMIC or Lower-Tier REMIC to fail to qualify as a REMIC at any time that the
Certificates are outstanding. The terms "United States," "State" and
"International Organization" shall have the meanings set forth in Code Section
7701 or any successor provisions.
"DISQUALIFYING CONDITION": A condition or circumstance existing as a
result of, or arising from, the presence of Hazardous Materials on a Mortgaged
Property such that the Mortgage Loan secured by the affected Mortgaged Property
would be ineligible, solely by reason of such condition, for purchase by FNMA
under the terms of Section 501.04 of the Guide (assuming such Mortgage Loan were
secured by multifamily residential property), including a condition or
circumstance that would constitute, solely by reason of such condition or
circumstance, a material violation of applicable federal, state or local law in
effect as of the Closing Date.
"DISTRIBUTION ACCOUNT": The separate Eligible Account or Eligible
Accounts created and maintained by the Paying Agent pursuant to Section 3.5(b),
which shall be entitled "LaSalle National Bank, as Trustee, in trust for
registered Holders of LTC Commercial Mortgage Pass-Through Certificates, Series
1998-1".
"DISTRIBUTION DATE": The twenty-eighth day of any month, or if such
twenty-eighth day is not a Business Day, the following Business Day, commencing
in May 1998.
"DUE DATE": With respect to any Distribution Date and any Mortgage
Loan or Mortgage Certificate, as the case may be, the date during the related
Due Period on which the related Monthly Payment or Balloon Payment is first due
(without giving effect to any grace period).
"DUE PERIOD": With respect to each Mortgage Loan and each Mortgage
Certificate and relating to any Distribution Date or Determination Date, the
period beginning on and including the twenty-first day of the calendar month
preceding such Distribution Date or Determination Date, and ending on and
including the twentieth day of the calendar month in which such Distribution
Date or Determination Date occurs.
"EARLY TERMINATION DETERMINATION DATE": The Determination Date in the
month in which the Anticipated Termination Date is expected to occur.
"EARLY TERMINATION NOTICE DATE": Any date as of which the aggregate
Certificate Principal Amount of the Certificates is less than 10% of the initial
aggregate Certificate Principal Amount of the Certificates.
"ELIGIBLE ACCOUNT": Either (i) an account or accounts (A) maintained
with either a federal or state chartered depository institution or trust company
(x) if the deposits are to be held in such account 30 days or more, the
long-term unsecured debt obligations of which are rated by the Rating Agency in
one of its two highest rating categories (without regard to pluses or minuses)
at all times, or (y) if the deposits are to be held in such account less than 30
days, the short-term unsecured debt obligations or commercial paper of which are
rated by the Rating Agency in one of its two highest rating categories (without
regard to pluses or minuses) or (B) if the obligations of any such institution
are not rated by the Rating Agency, or if they are rated in a category lower
than required herein,
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<PAGE>
as to which the Master Servicer or the Trustee, as applicable, has received
written confirmation from the Rating Agency that holding funds in such account
would not cause the Rating Agency to qualify, withdraw or downgrade any of its
ratings on the Certificates or (ii) a segregated trust account or accounts
maintained with the corporate trust department of a federal depository
institution or state chartered depository institution or trust company which
is subject to regulations regarding fiduciary funds on deposit substantially
similar to 12 C.F.R. Section 9.10(b), which, in each case, has corporate trust
powers, acting in its fiduciary capacity, or (iii) any other account that, as
evidenced by a written confirmation from the Rating Agency, would not, in and
of itself, cause a downgrade, qualification or withdrawal of the then current
ratings assigned to the Certificates, which may be an account maintained with
the Trustee or the Master Servicer.
"ENVIRONMENTAL ASSESSMENT": A "Phase I assessment" as described in,
and meeting the criteria of, Chapter 5 of the Guide.
"ERISA": The Employee Retirement Income Security Act of 1974, as it
may be amended from time to time.
"ERISA PLAN": As defined in Section 5.3(b)
"EVENT OF DEFAULT": As defined in Section 7.1.
"FDIC": The Federal Deposit Insurance Corporation, or any successor
thereto.
"FHLMC": The Federal Home Loan Mortgage Corporation, or any successor
thereto.
"FNMA": The Federal National Mortgage Association, or any successor
thereto.
"FINAL RECOVERY DETERMINATION": With respect to any Defaulted
Mortgage Loan, as evidenced by a certificate of a Special Servicer Officer
delivered to the Master Servicer and the Trustee, (i) the actual recovery of the
full amount of all Insurance Proceeds, Liquidation Proceeds and other payments
due or collectible in respect of such Defaulted Mortgage Loan or (ii) all
recoveries (including proceeds of the final sale of any REO Property) which the
Special Servicer, in its reasonable judgment, expects to be finally recoverable,
without regard to any obligation of the Special Servicer or the Master Servicer
to make payments from its own funds pursuant to Section 3.8(a) or 3.8(b). The
Special Servicer shall maintain records, prepared by a Special Servicer Officer,
of each Final Recovery Determination until the earlier of (i) its termination as
Special Servicer hereunder and the transfer of such records to a successor
special servicer and (ii) five years following the termination of the Trust
Fund.
"FINAL SCHEDULED DISTRIBUTION DATE": May 28, 2030.
"GUIDE": The FNMA Multifamily Seller/Servicer Guide (i) in effect as
of the Closing Date, for purposes of the definition of "Disqualifying Condition"
and (ii) as amended from time to time, for all other purposes of this Agreement.
"HAZARDOUS MATERIALS": Any dangerous, toxic or hazardous pollutants,
chemicals, wastes, medical wastes, or substances, including, without limitation,
those so identified pursuant to the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. Section 9601 et seq., or any other
environmental laws or regulations now existing, and specifically including,
without limitation, asbestos and asbestos-containing materials, polychlorinated
biphenyls ("PCBs"), radon gas, petroleum and petroleum products, urea
formaldehyde and any substances classified as being "in inventory," "usable work
in process" or similar classification which would, if classified as unusable, be
included in the foregoing definition.
"HOLDER": A Certificateholder.
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"INDEPENDENT": When used with respect to any specified Person, any
such Person who (i) does not have any direct financial interest, or any material
indirect financial interest, in any of the Originator, the Depositor, the
Trustee, the Master Servicer, the Special Servicer, or any Affiliate thereof,
and (ii) is not connected with the Originator, the Depositor, the Trustee, the
Master Servicer, the Special Servicer or any Affiliate thereof as an officer,
employee, promoter, underwriter, trustee, partner, director or Person performing
similar functions; PROVIDED, HOWEVER, that a Person shall not fail to be
Independent of the Originator, the Depositor, the Trustee, the Master Servicer,
the Special Servicer or any Affiliate thereof merely because such Person is the
beneficial owner of 5% or less of any Class of securities issued by the
Originator, the Depositor, the Master Servicer, the Special Servicer or any
Affiliate thereof, as the case may be.
"INDEPENDENT CONTRACTOR": Either (i) any Person that would be an
"independent contractor" with respect to the Trust Fund within the meaning of
Section 856(d)(3) of the Code if the Trust Fund were a real estate investment
trust (except that the ownership tests set forth in that section shall be
considered to be met by any Person that owns, directly or indirectly, 35% or
more of any Class of Certificates or 35% or more of the aggregate value of all
Classes of Certificates), provided that the Trust Fund does not receive or
derive any income from such Person and the relationship between such Person and
the Trust Fund is at arm's length, all within the meaning of Treasury Regulation
Section 1.856-4(b)(5) (except that the Master Servicer, the Trustee, or the
Special Servicer shall not be considered to be an Independent Contractor under
the definition in this clause (i) unless an Opinion of Counsel has been
delivered to the Master Servicer and the Trustee to that effect) or (ii) any
other Person (including the Master Servicer, the Trustee, and the Special
Servicer) if the Master Servicer on behalf of itself and the Trustee has
received an Opinion of Counsel to the effect that the taking of any action in
respect of any REO Property by such Person, subject to any conditions therein
specified, that is otherwise herein contemplated to be taken by an Independent
Contractor will not cause such REO Property to cease to qualify as "foreclosure
property" within the meaning of Section 860G(a)(8) of the Code (determined
without regard to the exception applicable for purposes of Section 860D(a) of
the Code) or cause any income realized in respect of such REO Property to fail
to qualify as Rents from Real Property.
"INITIAL PURCHASER": Goldman, Sachs & Co.
"INSURANCE PROCEEDS": Proceeds of any fire and hazard insurance
policy, title policy or other insurance policy relating to a Mortgage Loan or
the related Mortgaged Property (including any amounts paid by the Master
Servicer or the Special Servicer pursuant to Section 3.8), to the extent such
proceeds are not to be applied to the restoration of the related Mortgaged
Property or released to the Borrower in accordance with the express requirements
of the related Mortgage or Note or other documents included in the related
Mortgage File or in accordance with prudent and customary servicing practices.
"INTEREST ACCRUAL PERIOD": (i) With respect to any Distribution Date,
and any Class of Certificates other than the Class X-1L Interests and the Class
X-1 Certificates, the one-month period from and including the twenty-first day
of the month preceding such Distribution Date, to and including the twentieth
day of the month in which such Distribution Date occurs and (ii) with respect to
any Distribution Date and any of the Mortgage Certificates, the one-month period
from and including the twenty-first day of the month preceding such Distribution
Date to and including the twentieth day of the month in which such Distribution
Date occurs. With respect to the Class X-1L Interests and the Class X-1
Certificates, the Due Period for each Mortgage Loan and Mortgage Certificate.
Interest payable for an Interest Accrual Period for each Class of Certificates
shall be calculated on the basis of twelve 30-day months (other than the Class
X-1 Certificates which shall be calculated on the same basis as the underlying
Mortgage Loans and Mortgage Certificates) and a 360-day year.
"INTERESTED PERSON": As of any date of determination, the Master
Servicer, the Special Servicer, any Independent Contractor engaged by the
Special Servicer pursuant to Section 3.17 or any Person known to a Responsible
Officer of the Trustee to be an Affiliate of any of them.
"INVESTMENT ACCOUNT": As defined in Section 3.7(a).
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"LIQUIDATION EXPENSES": Expenses incurred by the Special Servicer in
connection with the liquidation of, enforcement of or as a result of the default
of any Defaulted Mortgage Loan or property acquired in respect thereof
(including, without limitation, legal fees and expenses, committee or referee
fees, and, if applicable, brokerage commissions and conveyance taxes) and any
Servicing Advances (and interest thereon) incurred with respect to such Mortgage
Loan or such property not previously reimbursed from collections or other
proceeds therefrom.
"LIQUIDATION PROCEEDS": The amount (other than Insurance Proceeds)
received in connection with (i) the taking of a Mortgaged Property by exercise
of the power of eminent domain or condemnation, (ii) the liquidation of a
Defaulted Mortgage Loan through a trustee's sale, foreclosure sale or otherwise,
(iii) a purchase or sale of a Mortgage Loan or an REO Property in accordance
with Section 3.18 or 9.1, or (iv) the repurchase of a Mortgage Certificate by
the Depositor pursuant to the Transfer Agreement or pursuant to Section 9.1 of
this Agreement.
"LOAN NUMBER": With respect to any Mortgage Loan, the loan number by
which such Mortgage Loan is identified on the books and records of the
Originator as set forth in the Mortgage Loan Schedule.
"LOAN-TO-VALUE RATIO": With respect to any Mortgage Loan, the
fraction, expressed as a percentage, the numerator of which is the outstanding
principal balance of such Mortgage Loan at the time of origination and the
denominator of which is the Value of the related Mortgaged Property, PROVIDED,
HOWEVER, that for purposes of any such calculation relating to the REMIC
Provisions of the Code the Value of the related Mortgaged Property shall not
include any non-real property assets within the meaning of such REMIC
Provisions.
"LOWER-TIER INTEREST": Any of the Class AL, Class BL, Class CL, Class
DL, Class EL, Class FL, Class GL, Class AR-L and Class X-1L Interests and the
Class LR Certificates.
"LOWER-TIER REMIC": One of two segregated pools of assets for which a
REMIC election has been made comprising the Trust Fund which shall consist of
(i) such Mortgage Loans as from time to time are subject to this Agreement,
together with the Mortgage Files relating thereto and the Mortgage Certificates;
(ii) all payments due on or collections in respect of the Mortgage Loans and
Mortgage Certificates due after the dates specified in Section 2.1; (iii) any
REO Property; (iv) all revenues received in respect of any REO Property; (v) the
rights of the Trustee, Master Servicer, and the 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 and any security agreements and assignments thereof;
(vii) all Assignments of Mortgages and assignments thereof; (viii) any
guaranties given as additional security for any Mortgage Loans and any real or
personal property acquired by foreclosure or deed in lieu of foreclosure upon
enforcement thereof; (ix) such amounts as shall from time to time be held in the
Collection Account, the Distribution Account and the REO Account including
reinvestment income; and (x) the proceeds of any of the foregoing (including the
cash proceeds of the sale or other disposition of any real or personal property
excluded in the foregoing clause (iv)). However, any environmental indemnity
agreements relating to the Mortgaged Properties shall not be part of the Trust
Fund or the Lower-Tier REMIC. Any such environmental indemnity shall be held by
the Custodian as security for the related Mortgage Loan on behalf of the
Certificateholders and for the benefit of the Master Servicer and the Trustee,
provided that the Master Servicer, consistent with accepted servicing practices,
shall enforce any such environmental indemnities on behalf of the Trustee and
the Certificateholders.
"LTC": LTC Properties, Inc., the Originator and Special Servicer
under this Agreement.
"MASTER SERVICER": GMAC Commercial Mortgage Corporation, a California
corporation, or any successor master servicer approved as herein provided.
"MASTER SERVICER REMITTANCE DATE": With respect to any Distribution
Date, the Business Day preceding such date.
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"MATURITY DATE": With respect to any Mortgage Certificate, November
28, 2012, and, with respect to any Mortgage Loan, the date on which the last
payment of principal is due and payable under the related Note (including any
such date which shall have been extended by the Special Servicer), as set forth
in the Mortgage Loan Schedule, but without giving effect to (i) any acceleration
of the principal of such Mortgage Loan or (ii) any grace period permitted by the
related Note or any other document in the Mortgage File.
"MEDICAID": Title XIX of the Social Security Act.
"MEDICARE": Title XVIII of the Social Security Act.
"MODIFIED MORTGAGE LOAN": Any Mortgage Loan the terms of which have
been modified, waived, or amended in accordance with the provisions hereof.
"MODIFIED MONTHLY PAYMENT": The Monthly Payment due under the
modified terms of any Modified Mortgage Loan.
"MONTHLY PAYMENT": With respect to (i) any Mortgage Loan and any Due
Period, the scheduled monthly payment of principal and interest at the Mortgage
Interest Rate, excluding any Balloon Payment, on such Mortgage Loan that is
payable by a Borrower in such Due Period under the related Note; PROVIDED, that
with respect to an REO Mortgage Loan, the Monthly Payment is the scheduled
monthly payment of principal and interest that would otherwise have been payable
in the related Due Period had the related Note not been discharged, determined
as set forth above and on the assumption that all other amounts, if any, due
thereunder are paid when due; and, PROVIDED, FURTHER, that in the case of a
Mortgage Loan the terms of which have been modified in accordance herewith, the
Monthly Payment shall be the Modified Monthly Payment, and (ii) the Mortgage
Certificates and any Due Period, the actual payments of interest and principal,
including principal prepayments, that are received on the Mortgage Certificates
in such Due Period.
"MORTGAGE": The mortgage, deed of trust or other instrument creating
a first lien on, or first priority security interest in, one or more Mortgaged
Properties securing a Note, together with any rider, addendum or amendment
thereto, as amended from time to time.
"MORTGAGE CERTIFICATES": The Series 1993-1 LTC Commercial Mortgage
Pass-Through Certificates, Class E, with a pass-through rate of 9.78% per annum
and an outstanding principal balance as of the Cut-Off Date of $26,382,110.83.
"MORTGAGE CERTIFICATE INTEREST ACCRUAL PERIOD": For the Mortgage
Certificates, the period for which interest included in each Monthly Payment
accrues.
"MORTGAGE FILE": With respect to any Mortgage Loan, the mortgage
documents listed in Section 2.1(i)-(ix), (xi)-(xvi), (xviii) and (xix)
pertaining to such particular Mortgage Loan and any additional documents
required to be added to such Mortgage File pursuant to this Agreement.
"MORTGAGE INTEREST RATE": (i) With respect to any Mortgage Loan, for
any Interest Accrual Period, the per annum rate at which interest accrues on
such Mortgage Loan for such period, as determined pursuant to the related Note,
and (ii) with respect to the Mortgage Certificates for any Mortgage Certificate
Interest Accrual Period, the pass-through rate at which interest accrues on such
Mortgage Certificates for such period.
"MORTGAGE LOAN": Any of the commercial mortgage loans transferred and
assigned to the Trustee pursuant to Section 2.1 to the extent set forth in such
Section 2.1 and from time to time held in the Trust Fund, the Mortgage Loans
originally so transferred, assigned and held being identified on the Mortgage
Loan Schedule as of the Closing Date. Such term shall also include any Mortgage
Loan so transferred after it becomes a REO Mortgage Loan and any related REO
Account Mortgage Loan.
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"MORTGAGE LOAN SCHEDULE": As of any date, the list of Mortgage Loans
on such date, such list as of the Closing Date being attached hereto as Exhibit
B, which list shall set forth information with respect to each Mortgage Loan,
including, but not limited to the following:
(a) the name of the Borrower;
(b) the Loan Number;
(c) the street address, city, state and zip code in which the
related Mortgaged Property or Properties are located;
(d) the type of underlying Mortgaged Properties;
(e) the Mortgage Interest Rate as of the Cut-Off Date, and in the
event such Mortgage Loan provides for one or more resets of
such rate, the date or dates of such reset and such reset rate
or rates;
(f) the date of origination;
(g) the original term and the original amortization term;
(h) the Maturity Date;
(i) the original principal balance;
(j) the current loan balance per Mortgaged Property;
(k) the Due Date of each Monthly Payment on each Mortgage Loan;
(l) the Monthly Payment;
(m) the Scheduled Principal Balance as of the Cut-Off Date;
(n) the Loan-to-Value Ratio in effect as of the Cut-Off Date;
(o) the occupancy information relating to the Mortgaged Properties
securing the Mortgage Loans, as of the date of the most recent
year end financial statements of the related Borrower;
(p) the Debt Service Coverage Ratio;
(q) the Net Debt Service Coverage Ratio;
(r) the result of a fraction, the numerator of which is the
outstanding principal balance of such Mortgage Loan as of the
Cut-Off Date and the denominator of which is the number of
beds available in the related Mortgaged Properties; and
(s) the periods during which optional prepayment is not permitted.
The Mortgage Loan Schedule shall also set forth the total of the
amounts described under clause (j) above for all the Mortgage Loans. The
Mortgage Loan Schedule may be in the form of more than one list,
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collectively setting forth all of the information required. The Mortgage
Loan Schedule shall be amended from time to time in accordance with the
provisions of this Agreement.
"MORTGAGED PROPERTY" OR "MORTGAGED PROPERTIES": An underlying
property or properties securing a Mortgage Loan, including any REO Property or
REO Account Property, consisting of a fee simple estate (with the exception of
one mortgaged property which is secured in whole by the interest of the related
Borrower as a lessee or sub-lessee under a ground lease of real estate but not
by the related fee interest in such Mortgaged Property) in a parcel of land,
together with all improvements thereon, each of which operates as a facility
that offers long-term nursing home care together with any personal property,
fixtures, leases, and other property or rights pertaining thereto.
"NET DEBT SERVICE COVERAGE RATIO": With respect to any Mortgage Loan,
as of any date of determination and for any period, the ratio of Net Operating
Income produced by the related Mortgaged Property or Properties for such period
(annualized if such period is less than one year) MINUS an assumed management
fee equal to 5% of the net revenues of the related facility, divided by the
aggregate Monthly Payments on the Mortgage Loan for such period.
"NET LIQUIDATION PROCEEDS": The excess of Liquidation Proceeds
received with respect to any Mortgage Loan or Mortgage Certificate over the
amount of Liquidation Expenses incurred with respect thereto.
"NET MORTGAGE INTEREST RATE": (i) With respect to any Mortgage Loan
for any Due Period, the Mortgage Interest Rate for such Mortgage Loan less the
Servicing Fee Rate, the Trustee Fee Rate, and (ii) with respect to any Mortgage
Certificate for any Mortgage Certificate Interest Accrual Period, the pass-
through rate for the Mortgage Certificates minus the Servicing Fee Rate and the
Trustee Fee Rate.
"NET OPERATING INCOME": The net revenue derived from the use and
operation of a Mortgaged Property or Mortgaged Properties less operating
expenses (such as utilities, administrative expenses, repairs, maintenance and,
if applicable, labor and food, medical and laundry supplies) excluding fixed
expenses (defined as interest, depreciation, amortization, rent and management
fees).
"NET PREPAYMENT INTEREST EXCESSES": With respect to any Due Period
and with respect to the Mortgage Loans, the excess of the aggregate Prepayment
Interest Excesses for such Due Period over the aggregate Prepayment Interest
Shortfalls for such Due Period.
"NET PREPAYMENT INTEREST SHORTFALL": With respect to any Due Period
and with respect to the Mortgage Loans, the excess of the aggregate Prepayment
Interest Shortfalls for such Due Period over the sum of the aggregate Prepayment
Interest Excesses for such Due Period and the portion of the Servicing Fee
available to offset such Prepayment Interest Shortfalls pursuant to Section
4.8(b) hereof.
"NET REO PROCEEDS": Subject to Section 1.2 (iii)(B) and 1.2(v), with
respect to each REO Account Property and any Prepayment Period, any amount
withdrawn from the REO Account and deposited into the Collection Account
pursuant to Section 3.17(d) with respect to such REO Account Property and such
Prepayment Period.
"NEW LEASE": Any lease of REO Property entered into on behalf of the
Trust Fund, including any lease renewed or extended on behalf of the Trust Fund,
if the Trust Fund has the right to renegotiate the terms of such lease.
"NONRECOVERABLE ADVANCE": Any Servicing Advance or P&I Advance, plus
interest accrued thereon at the Advance Rate, made or proposed to be made in
respect of a Mortgage Loan, which, if made, in the
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reasonable business judgment of the Master Servicer or the Trustee, as
applicable, will not or would not, as applicable, be ultimately recoverable,
together with all unreimbursed Advances (plus interest accrued thereon at the
Advance Rate) made prior to such date with respect to the related Mortgage Loan
(or the related REO Property) from future payments and collections on the
related Mortgage Loan or from proceeds from the operation or sale of the
related Mortgaged Property or REO Property. The determination by the Master
Servicer or the Trustee, as applicable, that an Advance is a Nonrecoverable
Advance shall be evidenced by an Officer's Certificate to that effect delivered
to the Trustee no later than the second Business Day preceding each
Distribution Date in the case of the Master Servicer and delivered to the
Depositor in the case of the Trustee, setting forth such determination of
nonrecoverability and the procedure and considerations of the Master Servicer
or any subservicer, as applicable, forming the basis of such determination
(which may include but shall not be limited to information, to the extent
available, such as related income and expense statements, occupancy status
property inspections, Master Servicer or Special Servicer inquiries, and may
include an internal or external appraisal performed in accordance with MAI
standards and methodologies on the related Mortgage Loan or Mortgaged Property,
and which may include, without limitation, considerations relating to any
environmental conditions with respect to the related Mortgaged Property).
"NON-U.S. PERSON": A Person that is not (i) a citizen or resident of
the United States, (ii) a corporation, partnership or other entity created or
organized in or under the laws of the United States or any political subdivision
thereof, (iii) an estate whose income from sources without the United States is
includable in gross income for United States federal income tax purposes
regardless of the source of its income, or (iv) a trust with respect to which a
court within the United States is able to exercise primary supervision over its
administration and one or more United States fiduciaries have the authority to
control all of its substantial decisions..
"NOTE": With respect to any Mortgage Loan as of any date of
determination, the note or other evidence of indebtedness of a Borrower under
such Mortgage Loan, including any amendments or modifications, or any renewal or
substitution notes, as of such date.
"NOTICE OF TERMINATION": Any of the notices given to the Trustee by
the Master Servicer or any Holder of a Class LR Certificate pursuant to Section
9.1(b), 9.1(c) or 9.1(d).
"NOTIONAL AMOUNT": For purposes of the definition of the term
"Outstanding" with respect to the Class X-1L Interest and the Class X-1
Certificates, an amount equal to the then aggregate Scheduled Principal Balance
of the Mortgage Loans and Mortgage Certificates and with respect to the Class
X-2 Certificates, an amount equal to the sum of the Certificate Principal
Amounts of the Class AL, Class BL, Class CL and the Class DL Interests.
"OFFICER'S CERTIFICATE": A certificate signed by the Chairman of the
Board, the Vice Chairman of the Board, the President, a Vice President, an
Assistant Vice President, the Treasurer, the Secretary, one of the Assistant
Treasurers or Assistant Secretaries, any Trust Officer or other officer of the
Master Servicer, the Trustee or the Special Servicer, as the case may be,
customarily performing functions similar to those performed by any of the above
designated officers and also with respect to a particular matter, any other
officer to whom such matter is referred because of such officer's knowledge of
and familiarity with the particular subject, or an authorized officer of the
Depositor, and delivered to the Depositor, the Trustee, the Master Servicer
and/or the Special Servicer, as the case may be.
"OPINION OF COUNSEL": A written opinion of counsel, who may, without
limitation, be counsel for the Depositor, the Master Servicer or the Special
Servicer, as the case may be, acceptable to the Trustee, except that any opinion
of counsel relating to (a) qualification of the Lower-Tier REMIC and the
Upper-Tier REMIC as two separate REMICs or the imposition of tax under the REMIC
Provisions on any income or property of the Upper-Tier REMIC or Lower-Tier
REMIC, (b) compliance with the REMIC Provisions (including application of the
definition of "Independent Contractor") or (c) a resignation of the Master
Servicer or the Special Servicer pursuant
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to Section 6.4 must be an opinion of counsel who is Independent of the
Originator, the Depositor, the Trustee, the Master Servicer and the Special
Servicer (without giving effect to the proviso to the definition of the term
"Independent").
"OPTIMAL WIND-DOWN DATE": With respect to (i) any Mortgage Loan, two
years prior to the Final Scheduled Distribution Date, and (ii) with respect to
the Mortgage Certificates two years prior to the Maturity Date of the Mortgage
Certificates.
"ORIGINATOR": LTC and its successors in interests and assigns.
"OUTSTANDING": A Class of Certificates (other than the Class X, Class
R and Class LR Certificates), for which the Certificate Principal Amount thereof
is greater than zero. Each Class of Class X Certificates is "Outstanding" when
the Notional Amount thereof is greater than zero. The Class R and Class LR
Certificates will be "Outstanding" until the Trust Fund is terminated pursuant
to this Agreement. Solely for the purpose of giving any consent or taking any
action pursuant to this Agreement, any Certificate registered in the name of the
Depositor, the Master Servicer, or the Special Servicer or any Person known to a
Responsible Officer of the Trustee to be an Affiliate of any thereof shall be
deemed not to be Outstanding, and the Voting Rights to which it is entitled
shall not be taken into account in determining whether the requisite percentage
of Voting Rights necessary to effect any such consent or take any such action
has been obtained, except that any such Certificates shall be deemed to be
Outstanding and shall have Voting Rights with respect to any matter requiring
consent or action on a Class-by-Class basis if and to the extent that all of the
Certificates of the particular Class are registered in the name of any such
Person or Persons.
"OUTSTANDING CLASS INTEREST SHORTFALL": As to any Distribution Date
subsequent to the initial Distribution Date and any Class of Certificates, the
sum of (a) the excess, if any, of (i) the sum of (A) the Accrued Certificate
Interest in respect of such Class for the preceding Distribution Date and (B)
the Outstanding Class Interest Shortfall of such Class as of such preceding
Distribution Date (in both cases before giving effect to any distributions made
thereon on such Distribution Date) over (ii) the aggregate amount in respect of
interest distributed to such Class on such preceding Distribution Date, and (b)
one month's interest accrued on the amount of such excess at the then applicable
Pass-Through Rate of such Class (except in the case of the Class X-1L Interest,
the Class X-1 Certificates or the Class X-2 Certificates), to the extent
permitted by applicable law. The Outstanding Class Interest Shortfall with
respect to any Class of Certificates as of the initial Distribution Date is
zero.
"OWNERSHIP INTEREST": Any record or beneficial interest in a Class R
or Class LR Certificate.
"P&I ADVANCE": With respect to any Mortgage Loan, any amount required
to be advanced by the Master Servicer or the Trustee pursuant to Section 3.22 in
respect thereof.
"PASS-THROUGH RATE" OR "PASS-THROUGH RATES": The rate identified in
the Preliminary Statement hereto as the "Pass-Through Rate" for any Class of
Lower-Tier Interests or Certificates except that in the case of the Class X-1L
Interest, the Class X-1 Certificates and the Class X-2 Certificates, the Pass-
Through Rate shall refer to the Class X-1L Accrued Interest, the Class X-1
Accrued Interest or the Class X-2 Accrued Interest, as the case may be.
"PAYING AGENT": Initially, the Trustee and any other paying agent
appointed pursuant to Section 5.6.
"PERCENTAGE INTEREST": With respect to a Class A, Class B, Class C,
Class D, Class E, Class F, Class G, Class R or Class LR Certificate, the
fraction of the Class evidenced by such Certificate, expressed as a percentage
(carried to thousandths of a percent, if necessary), the numerator of which is
the initial Certificate
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Principal Amount represented by such Certificate and the denominator of which
is the aggregate initial Certificate Principal Amount of all of the Certificates
of such Class. With respect to a Class X-1 or Class X-2 Certificate, the
fraction of the Class evidenced thereby, expressed as a percentage (carried
to thousandths of a percent, if necessary), as stated on the face of such
Certificate.
"PERMITTED INVESTMENTS": Any one or more of the following obligations
or securities, regardless of whether issued by the Depositor, the Master
Servicer, the Special Servicer, the Trustee or any of their respective
Affiliates and having at the time of purchase, or at such other time as may be
specified, the required ratings, if any, provided for in this definition:
(i) direct obligations of, or guaranteed as to timely payment of
principal and interest by, the United States or any agency or
instrumentality thereof, provided that such obligations are backed
by the full faith and credit of the United States of America;
(ii) direct obligations of, or guaranteed as to timely payment of
principal and interest by, FHLMC, FNMA or the Federal Farm Credit
System, provided that any such obligation is qualified by the
Rating Agency as an investment of funds backing securities having a
rating equal to the highest long-term debt ratings, or such lower
rating as will not result in the qualification, downgrade or
withdrawal of the rating or ratings then assigned by the Rating
Agency to the then rated Classes of Certificates, as evidenced in
writing by the Rating Agency;
(iii) demand and time deposits in or certificates of deposit of, or
bankers' acceptances issued by, any bank or trust company, savings
and loan association or savings bank, provided that, in the case of
obligations that are not fully FDIC-insured deposits, the
commercial paper and/or long-term unsecured debt obligations of
such depository institution or trust company (or in the case of the
principal depository institution in a holding company system, the
commercial paper or long-term unsecured debt obligations of such
holding company) is rated by the Rating Agency in its highest
long-term rating categories (or, in the case of demand and time
deposits, a rating of A-1+ by S&P), or such lower rating as will
not result in the qualification, downgrade or withdrawal of the
rating or ratings then assigned by the Rating Agency to the
then-rated Classes of Certificates, as evidenced in writing by the
Rating Agency;
(iv) general obligations of or obligations guaranteed by any state of
the United States or the District of Columbia receiving the highest
long-term debt ratings by the Rating Agency, or such lower rating
as will not result in the qualification, downgrade or withdrawal of
the rating or ratings then assigned by the Rating Agency to the
then-rated classes of Certificates, as evidenced in writing by the
Rating Agency;
(v) commercial or finance company paper (including both non-interest-
bearing discount obligations and interest-bearing obligations
payable on demand or on a specified date not more than one year
after the date of issuance thereof) that is rated by the Rating
Agency in its highest short-term unsecured rating category and is
issued by a corporation the outstanding senior long-term debt
obligations of which are then rated by the Rating Agency in its
highest long-term unsecured rating categories or such lower rating
as will not result in the qualification, downgrade or withdrawal of
the rating or ratings then assigned by the Rating Agency to the
then rated Classes of Certificates as evidenced in writing by the
Rating Agency;
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(vi) certain qualified guaranteed investment contracts which are
obligations of an insurance company or other corporation having an
insurance claims paying ability or long-term unsecured debt rating
in the highest categories for such securities by the Rating Agency
or such lower rating as will not result in the qualification,
downgrade or withdrawal of any rating or ratings then assigned by
the Rating Agency to the then-rated Classes of Certificates as
evidenced in writing by the Rating Agency;
(vii) repurchase obligations with respect to any security described in
clause (i) or (ii) above entered into with a depository institution
or trust company (acting as principal) meeting the rating standards
described in clause (iii) above;
(viii) securities bearing interest or sold at a discount that are issued
by any corporation incorporated under the laws of the United States
of America or any state thereof and rated by the Rating Agency in
its highest long-term unsecured rating categories; PROVIDED,
HOWEVER, that securities issued by any such corporation will not be
Permitted Investments to the extent that investment therein would
cause the then outstanding principal amount of securities issued by
such corporation that are then held as part of the Collection
Account, the Distribution Account or the REO Account to exceed 20%
of the aggregate principal amount of all Permitted Investments then
held in the Collection Account, the Distribution Account and the
REO Account;
(ix) units of taxable money market funds which funds are regulated
investment companies and seek to maintain a constant net asset
value per share and have been rated "AAA" by S&P or have been
designated in writing by the Rating Agency as Permitted Investments
with respect to this definition;
(x) if previously confirmed in writing to the Master Servicer by the
Rating Agency, any other demand, money market or time deposit, or
any other obligation, security or investment that will not result
in a qualification, downgrade or withdrawal of the rating then
assigned to the Certificates, provided that such investment is a
"cash flow investment" for purposes of the REMIC Provisions of the
Code (as evidenced by an Opinion of Counsel); and
(xi) such other obligations as are acceptable as Permitted Investments
to the Rating Agency as confirmed in writing to the Master Servicer
by the Rating Agency, that will not result in a qualification,
downgrade or withdrawal of rating or ratings then assigned to the
Certificates;
PROVIDED, that (A) such obligation or security qualifies as a "cash flow
investment" pursuant to Code Section 860G(a) (6); (B) no obligation or security
shall be a Permitted Investment if (i) such instrument or security evidences a
right to receive only interest payments or (ii) for instruments which are
prepayable or callable, the stated interest rate on such investment is in excess
of 120% of the yield to maturity produced by the price at which such investment
was purchased (iii) such investment shall not be purchased at a price greater
than par; PROVIDED, FURTHER, if rated, the obligation should not have an "r"
highlighter affixed to its rating and its terms should include a predetermined
fixed dollar amount of principal due at maturity that cannot vary or change.
Interest may either be fixed or variable. Interest should be tied to a single
interest rate index plus a single fixed spread (if any), and move
proportionately with that index; and (C) no such Permitted Investment shall have
a maturity of greater than 365 days.
"PERMITTED TRANSFEREE": With respect to a Class R Certificate or
Class LR Certificate, any Person or agent thereof other than (a) a Disqualified
Organization, (b) any other Person so designated by the Certificate
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Registrar based upon an Opinion of Counsel to the effect that the Transfer of
an Ownership Interest to such Person may cause the Upper-Tier REMIC or
Lower-Tier REMIC to fail to qualify as a REMIC at any time that the
Certificates or uncertificated Lower-Tier Interests are outstanding, and (c)
a Person that is a Non-U.S. Person, unless such Non-U.S. Person (i) holds the
Class R Certificate or Class LR Certificate in connection with the conduct of
a trade or business within the United States and has furnished the transferor
and the Certificate Registrar with an effective Internal Revenue Service Form
4224 or (ii) has delivered to both the transferor and the Certificate Registrar
an opinion of a nationally recognized tax counsel to the effect that the
Transfer of the Class R Certificate or Class LR Certificate to it is in
accordance with the requirements of the Code and the regulations promulgated
thereunder and that such Transfer of the Class R Certificate or Class LR
Certificate will not be disregarded for federal income tax purposes.
"PERSON": Any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"PREPAYMENT INTEREST EXCESS": With respect to any Mortgage Loan that
was subject to a full or partial Principal Prepayment during any Prepayment
Period, which Principal Prepayment was applied to such Mortgage Loan following
the Due Date for such Mortgage Loan occurring during such Prepayment Period, the
amount of interest received on such Principal Prepayment at the Mortgage
Interest Rate for such Mortgage Loan from such Due Date, to the extent
collected.
"PREPAYMENT INTEREST SHORTFALL": With respect to any Mortgage Loan
that was subject to a Principal Prepayment during any Prepayment Period, which
Principal Prepayment was applied to such Mortgage Loan prior to the Due Date for
such Mortgage Loan occurring during such Prepayment Period, the amount of such
interest that would have accrued at the Mortgage Interest Rate then in effect
for such Mortgage Loan on the amount of such Principal Prepayment during the
period from and including the date as of which such Principal Prepayment was
applied to such Mortgage Loan to and excluding such Due Date.
"PREPAYMENT PERIOD": With respect to any Distribution Date or
Determination Date, the period beginning on and including the twenty-first day
of the calendar month preceding such Distribution Date or Determination Date and
ending on and including the twentieth day of the calendar month in which such
Distribution Date or Determination Date occurs.
"PREPAYMENT PREMIUM": With respect to any Mortgage Loan, any premium,
penalty or yield maintenance payment paid or payable, as the context requires,
by the related Borrower in connection with any Principal Prepayment.
"PRIME RATE": With respect to any applicable Distribution Date, the
prime lending rate in effect from time to time and published in The Wall Street
Journal on such Distribution Date.
"PRINCIPAL BALANCE": At the time of any determination, the principal
balance of a Mortgage Loan or Mortgage Certificate remaining to be paid at the
close of business on the Cut-Off Date after deduction of all principal payments
or distributions, as applicable, due or distributable on or before the Cut-Off
Date whether or not paid (or, in the case of a Substitute Mortgage Loan included
in the Trust Fund pursuant to Section 2.2(b), at the close of business as of the
date of substitution) reduced by all amounts previously distributed to
Certificateholders that are allocable to payments in respect of principal or
distributions in respect of principal, as applicable, on such Mortgage Loan or
Mortgage Certificate (including the principal portion of Advances).
"PRINCIPAL DISTRIBUTION AMOUNT": For any Distribution Date, the sum,
for all the Mortgage Loans or Mortgage Certificates, as applicable, of:
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(i) the principal component of all Monthly Payments (other than
Balloon Payments) and Assumed Scheduled Payments which become
due during the related Due Period on the Mortgage Loans
(ii) to the extent not included in the preceding clause, the
Scheduled Principal Balance of any Mortgage Loan that, as of
the Due Date in the month preceding the month in which such
Distribution Date occurs, except in the case of Mortgage Loans
having a Due Date on the first day of a month, in which case
the relevant date shall be the Due Date in the month in which
the Distribution Date occurs (or as of the Cut-Off Date, in
the case of the first Distribution Date), either was purchased
or repurchased from the Trust Fund pursuant to Section 2.2,
2.3(d), 4.5(b) or 9.1, or as to which a Final Recovery
Determination was made during the related Prepayment Period,
reduced by the amount of Realized Losses realized in the
related Prepayment Period,
(iii) to the extent not included in the preceding clauses, the
principal component of all Balloon Payments on any Mortgage
Loan, to the extent received during the related Prepayment
Period (reduced by the principal component of all Assumed
Scheduled Payments previously advanced with respect to such
Mortgage Loan),
(iv) to the extent not included in the preceding clauses, all other
Principal Prepayments received during the related Prepayment
Period on any Mortgage Loan, net of any portion thereof
required to reimburse a P&I Advance, and
(v) the amount received by the Master Servicer during the related
Due Period in respect of principal on the Mortgage
Certificates.
"PRINCIPAL PREPAYMENT": With respect to any Mortgage Loan (other than
an REO Mortgage Loan) (i) any payment of principal made by or on behalf of the
Borrower on such Mortgage Loan which is received in advance of its scheduled Due
Date and which is not accompanied by an amount of interest representing the full
amount of scheduled interest due on any date or dates in any month or months
subsequent to the month of prepayment, (ii) the principal component of any
Insurance Proceeds or Liquidation Proceeds received with respect to such
Mortgage Loan as to which a Final Recovery Determination has not been made to
the extent not applied to pay amounts payable pursuant to Sections 1.2(ii)(a)
and 1.2(ii)(b) and (iii) the principal component of the Repurchase Price of any
Mortgage Loan that is purchased or repurchased pursuant to Section 2.2, 2.3(d),
4.5 or 9.1, but in no case in excess of the Scheduled Principal Balance thereof
(except to the extent that advances were made for the difference between the
actual Principal Balance and the Scheduled Principal Balance of a Mortgage
Loan). With respect to any REO Mortgage Loan, the Net REO Proceeds received in
any prepayment period to the extent not applied to pay amounts payable pursuant
to Sections 1.2(iii)(B)(a) and 1.2(iii)(B)(b) to the extent such amount is in
excess of the sum of the scheduled Monthly Payments or Assumed Scheduled
Payments on the related REO Mortgage Loan and the applicable Workout Fee but in
no case in excess of the Scheduled Principal Balance thereof.
"PROPERTY PROTECTION EXPENSES": Any costs and expenses incurred
pursuant to Sections 3.1(d), 3.10(a), 3.10(d), 3.10(e) and 3.17(c).
"QUALIFIED INSTITUTIONAL BUYER": The meaning given by Rule 144A under
the Act.
"QUALIFIED INSURER": An insurance company or security or bonding
company qualified to write the related insurance policy in the relevant
jurisdiction which, in the case of a hazard or flood insurance policy, shall (i)
have a "Claims Paying Rating" no less than "A", (ii) be an insurer whose
obligations are guaranteed or backed by a company having a Claims-Paying Rating
no less than "A", or (iii) have the highest rating then assigned to the most
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senior Class of Certificates outstanding at the time by the Rating Agency or
otherwise be acceptable as a Qualified Insurer to the Rating Agency as confirmed
in writing by the Rating Agency; PROVIDED HOWEVER that at no time shall such
rating be less than "BBB".
"QUALIFIED MORTGAGE": A Mortgage Loan that is a "qualified mortgage"
within the meaning of Code Section 860G(a)(3) (but without regard to the rule in
Treasury Regulation Section 1.860G-2(f)(2) that treats a defective obligation as
a qualified mortgage, or any substantially similar successor provision) and
applicable Treasury Regulations promulgated pursuant thereto.
"RATING AGENCY": S&P and successors thereto. If such agencies or
successors thereto are no longer in existence, "Rating Agency" shall be such
nationally recognized statistical rating agency or other comparable Person
designated by the Trustee, notice of which designation shall be given to the
Depositor, Master Servicer and Special Servicer. References herein to the
second highest rating category of a Rating Agency shall mean A or better in the
case of S&P and in the case of any other Rating Agency shall mean such second
highest rating category or better without regard to any plus or minus or any
numerical qualifier.
"REAL PROPERTY": Land or improvements thereon such as buildings or
other inherently permanent structures thereon (including items that are
structural components of the buildings or structures), in each such case as such
terms are used in the REMIC Provisions.
"REALIZED LOSS": With respect to (a) each Mortgage Certificate, a
realized loss of principal or interest allocated thereto pursuant to the Pooling
and Servicing Agreement, dated as of July 20, 1993, among LTC REMIC Corporation,
Bankers Trust Company, LTC, and Union Bank, as amended and supplemented from
time to time; (b) with respect to each Mortgage Loan as to which a Final
Recovery Determination has been made during a Prepayment Period, an amount (not
less than zero) equal to:
(i) the unpaid principal balance of such Mortgage Loan; PLUS
(ii) unpaid accrued interest (exclusive of interest included in
such principal balance) at the Mortgage Interest Rate from
time to time applicable, from the Due Date as to which
interest was last paid by the Borrower up to the Due Date
occurring in such Prepayment Period, on the unpaid principal
balance of such Mortgage Loan; PLUS
(iii) any outstanding Servicing Advances and Advance Interest
payable with respect to such Mortgage Loan; MINUS
(iv) any Net REO Proceeds from the operation of any related REO
Property and the Net Liquidation Proceeds or Insurance
Proceeds, if any, received during the Prepayment Period in
which such Final Recovery Determination was made and applied
to reduce the amounts specified in clauses (i) to (iii) above
pursuant to Section 1.2; and
(c) with respect to each Mortgage Loan the terms of which were modified pursuant
to Section 3.20 hereof, the amount of any reduction in the Scheduled Principal
Balance of such Mortgage Loan.
Realized Losses on a Mortgage Loan will be allocated first to the principal
balance of that Mortgage Loan and then to interest.
"REASSIGNMENT OF ASSIGNMENT OF LEASES, PROFITS AND RENTS": As defined
in Section 2.1.
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"RECORD DATE": With respect to the first Distribution Date, the
Closing Date, and, with respect to each subsequent Distribution Date, the close
of business on the last Business Day of the month preceding the month in which
such Distribution Date occurs.
"REGULAR CERTIFICATES": Collectively, the Class AL, Class BL, Class
CL, Class DL, Class EL, Class FL, Class GL, Class AR-L and Class X-1L Interests
and the Class A, Class B, Class C, Class D, Class E, Class F, Class G, Class X-1
and Class X-2 Certificates.
"REMAINING PRINCIPAL DISTRIBUTION AMOUNT": For any Distribution Date,
the Principal Distribution Amount for such Distribution Date, MINUS the Class LR
Principal Distribution and the Class R Principal Distribution for such
Distribution Date.
"REMIC": A "real estate mortgage investment conduit" within the
meaning of Section 860D of the Code.
"REMIC PROVISIONS": Provisions of the federal income tax law relating
to real estate mortgage investment conduits, which appear at Sections 860A
through 860G of Subchapter M of Chapter 1 of the Code, and related provisions,
and temporary, final (or, when consistent with market practice, proposed)
regulations promulgated thereunder, as the foregoing are in effect (or, in the
case of proposed regulations, are proposed to be in effect) from time to time.
"RENTS FROM REAL PROPERTY": With respect to any REO Property, gross
income of the character described in Section 856(d) of the Code, which income,
subject to the terms and conditions of that Section of the Code in its present
form, does not include:
(i) except as provided in Section 856(d)(4) or (6) of the Code,
any amount received or accrued, directly or indirectly, with
respect to such REO Property, if the determination of such
amount depends in whole or in part on the income or profits
derived by any Person from such property (unless such amount
is a fixed percentage or percentages of receipts or sales and
otherwise constitutes Rents from Real Property);
(ii) any amount received or accrued, directly or indirectly, from
any Person if the Trust Fund owns directly or indirectly
(including by attribution) a 10% or greater interest in such
Person determined in accordance with Sections 856(d)(2)(B) and
(d)(5) of the Code;
(iii) any amount received or accrued, directly or indirectly, with
respect to such REO Property if any Person Directly Operates
such REO Property, other than by providing services that are
not considered to be rendered to the occupants of such REO
Property within the meaning of Treasury Regulation Section
1.512(b)-1(c)(5);
(iv) any amount charged for services that are not customarily
furnished in connection with the rental of property to tenants
in buildings of a similar class in the same geographic market
as such REO Property (whether or not such charges are
separately stated); and
(v) rent attributable to personal property unless such personal
property is leased under, or in connection with, the lease of
such REO Property and, for any taxable year of the Trust Fund
or the Upper-Tier REMIC or Lower-Tier REMIC, such rent is no
greater than 15 percent of the total rent received or accrued
under, or in connection with, the lease.
"REO ACCOUNT": As defined in Section 3.17(b).
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"REO ACCOUNT MORTGAGE LOAN": A Mortgage Loan as to which the related
Mortgaged Property is an REO Account Property.
"REO ACCOUNT PROPERTY": An REO Property or a property of which the
Special Servicer has acquired possession or is operating or that has been
abandoned by the Borrower under the related Mortgage Loan.
"REO MORTGAGE LOAN": A Mortgage Loan as to which the related
Mortgaged Property is an REO Property.
"REO PROPERTY": A Mortgaged Property as to which an Acquisition Date
has occurred.
"REPURCHASE PRICE": With respect to (a) any Mortgage Loan to be
purchased or repurchased during any Prepayment Period pursuant to Section 2.2,
2.3(d) 4.5 or 9.1, or any Defaulted Mortgage Loan or any Mortgage Loan related
to an REO Property to be sold or repurchased during any Prepayment Period
pursuant to Section 3.18, an amount, calculated by the Master Servicer, or, with
respect to any REO Property, an amount, calculated by the Special Servicer,
equal to:
(i) the unpaid Principal Balance of such Mortgage Loan as of the
Due Date as to which a payment of principal was last made by
the Borrower; PLUS
(ii) unpaid accrued interest from the Due Date as to which interest
was last paid by the Borrower up to the Due Date in the Due
Period related to the same Determination Date as the
Prepayment Period in which the purchase or repurchase is to
occur at a rate equal to the Mortgage Interest Rate applicable
from time to time on the unpaid Principal Balance of such
Mortgage Loan; PLUS
(iii) any unreimbursed Advances on such Mortgage Loan, plus interest
thereon at the Advance Rate; PLUS
(iv) expenses reasonably incurred or to be incurred by the Master
Servicer, the Special Servicer or the Trustee in respect of
the breach or defect giving rise to the repurchase obligation,
including any expenses arising out of the enforcement of the
repurchase obligation; and
(b) any Mortgage Certificate to be purchased or repurchased during
any Prepayment Period pursuant to Section 2.3(d), an amount to be calculated by
the Master Servicer equal to the unpaid principal amount of such Mortgage
Certificate on the date such repurchase occurs plus accrued and unpaid interest
through the last day of the Interest Accrual Period in which such repurchase
occurs, plus unpaid and outstanding expenses for such Mortgage Certificates.
"REQUEST FOR RELEASE": A release signed by a Servicing Officer or a
Special Servicer Officer, as the case may be, substantially in the form of
Exhibit I hereto, which shall refer to the Loan Number of the applicable
Mortgage Loan as set forth in the Mortgage Loan Schedule.
"RESPONSIBLE OFFICER": Any officer of the Trustee assigned to the
Trustee's Asset-Backed Securities Trust Services Group with direct
responsibility for the administration of this Agreement and also, with respect
to a particular matter, any other officer to whom such matter is referred
because of such officer's knowledge of and familiarity with the particular
subject, and, in the case of any certification required to be signed by a
Responsible Officer, such an officer whose name and specimen signature appears
on a list of corporate trust officers
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furnished to the Master Servicer and the Special Servicer by the Trustee,
as such list may from time to time be amended.
"RULE 144A": Rule 144A promulgated under the Act.
"S&P": Standard & Poor's Ratings Services or any successor nationally
recognized rating organization.
"SCHEDULED PRINCIPAL BALANCE": The Scheduled Principal Balance of (i)
any Mortgage Certificate as of the Cut-Off Date or any Determination Date means
the outstanding principal balance of such Mortgage Certificate as of the Cut-off
Date reduced by (a) any distribution of principal, (b) any allocation of
Realized Losses of principal and (c) any other reduction of principal on the
Mortgage Certificates, made prior thereto; and (ii) any Mortgage Loan (a) as of
the Cut-Off Date means the principal balance of such Mortgage Loan as of the
Cut-Off Date, after giving effect to any payment in respect of principal due on
or before the Cut-Off Date, irrespective of any delinquency in payment by the
related Borrower and after giving effect to any Principal Prepayments received
on or before the Cut-Off Date, and (b) as of any Determination Date, the
Scheduled Principal Balance of such Mortgage Loan as of the Cut-Off Date reduced
by (1) any Principal Prepayments and/or other unscheduled recoveries of
principal and Balloon Payments received after the Cut-Off Date and on or prior
to the last day of the related Prepayment Period, (2) any payment in respect of
principal, if any, due after the Cut-Off Date and on or before the last day of
the related Due Period, to the extent paid by the Borrower or advanced by the
Master Servicer (other than a Balloon Payment, but including the principal
portion of any Assumed Scheduled Payment that actually was advanced),
irrespective of any delinquency in payment by the Borrower, and (3) any
adjustment thereto in the amount of a Deficient Valuation (if allocable to
principal) occurring on or before the last day of the related Prepayment Period
resulting from any bankruptcy or similar proceeding. In the event that a Final
Recovery Determination with respect to a Mortgage Loan has been made during a
Prepayment Period, the Scheduled Principal Balance of such Mortgage Loan with
respect to the immediately succeeding Determination Date shall be zero.
"SERVICING ADVANCES": Advances, other than P&I Advances, with respect
to the Mortgage Loans made by the Master Servicer or the Trustee, as applicable
with respect to taxes, insurance premiums and certain other expenses to the
extent required by this Agreement to be advanced and identified herein as a
"Servicing Advance."
"SERVICING FEE": (i) With respect to each Mortgage Loan and for any
Due Period, an amount equal to the product of one-twelfth the Servicing Fee Rate
applicable to the Mortgage Loans 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, and (ii) with respect to the
Mortgage Certificates and for any Due Period, an amount equal to the product of
one-twelfth the Servicing Fee Rate applicable to the Mortgage Certificates and
the Scheduled Principal Balance of the Mortgage Certificates outstanding
immediately prior to the application of the Monthly Payment due on the Due Date
in such Due Period.
"SERVICING FEE ADJUSTMENT" means, for any Due Period, the sum of the
differences (each of which may be a negative number), one for each Mortgage Loan
listed on Exhibit B hereto, of (i) the interest that accrued on such Mortgage
Loan at the applicable Mortgage Interest Rate (net of the Class X-1L Strip Rate)
for the related Mortgage Loan Due Period and (ii) the interest that would have
accrued on such Mortgage Loan for such Mortgage Loan Due Period if interest had
accrued on such Mortgage Loan at the applicable Mortgage Interest Rate (net of
the Class X-1L Strip Rate) based on a year consisting of twelve thirty-day
months.
"SERVICING FEE RATE": With respect to each Mortgage Loan, a rate
equal to 0.065% per annum, and with respect to the Mortgage Certificates, a rate
equal to 0.020% per annum on the Scheduled Principal Balance of the Mortgage
Certificates.
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"SERVICING OFFICER": Any officer or employee of the Master Servicer
involved in, or responsible for, the administration and servicing of the
Mortgage Loans and Mortgage Certificates whose name and specimen signature
appear on a list of servicing officers or employees of the Master Servicer
furnished to the Trustee and the Special Servicer on the Closing Date by the
Master Servicer as such list may from time to time be amended.
"SERVICING TRANSFER EVENT": With respect to any Mortgage Loan, the
occurrence of any of the following events:
(i) (a) a Balloon Payment with respect to such Mortgage Loan
becomes or has become past due (taking into account any grace
period), or (b) at least two monthly payments become past due,
or (c) during the three month period ending on the Maturity
Date of the Mortgage Loan, the Borrower notifies the Master
Servicer that it will not pay the Balloon Payment on or prior
to the Maturity Date and the Master Servicer determines, in
its reasonable business judgment, as evidenced by an Officer's
Certificate, that a payment default on the Mortgage Loan is
imminent (and will not be cured within 60 days); or
(ii) a decree or order 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 (A) for the appointment
of a trustee, conservator or receiver or liquidator in any
bankruptcy, insolvency, readjustment of debt, marshalling of
assets and liabilities or similar proceedings or (B) for the
winding-up or liquidation of its affairs, shall have been
entered against the related Borrower and such decree or order
shall have remained in force undischarged or unstayed for a
period of 60 days; or
(iii) the related Borrower consents to the appointment of a trustee,
conservator or receiver or liquidator in any similar
insolvency, readjustment of debt, marshalling of assets and
liabilities or similar proceedings of or relating to the
Borrower or of or relating to all or substantially all of its
property; or
(iv) the related Borrower admits in writing its inability to pay
its debts generally as they become due, files a petition to
take advantage of any applicable bankruptcy, insolvency or
reorganization statute, makes an assignment for the benefit of
its creditors, or voluntarily suspends payment of its
obligations; or
(v) the Master Servicer receives notice of the foreclosure or
proposed foreclosure of any other lien on the related
Mortgaged Property; or
(vi) the related Mortgaged Property becomes an REO Account
Property; or
(vii) (1) the license or certificate of need to operate the related
Mortgaged Property as a nursing home, (2) the certificate of
the related Mortgaged Property to participate as a nursing
home provider in Medicare or Medicaid (and their successor
programs) or (3) the right to admit patients under Medicare or
Medicaid (and their successor programs) has been terminated,
revoked, surrendered, limited or suspended, and the Master
Servicer determines, in its reasonable business judgment as
evidenced by an Officer's Certificate, that a payment default
on such Mortgage Loan is imminent; or
(viii) the related Mortgaged Property has been cited for a material
deficiency for which its license or certification can be
revoked and which is not cured within the earlier of the time
permitted by the applicable regulatory authority or 60 days
and in connection
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therewith, the Master Servicer determines, in its reasonable
business judgment as evidenced by an Officer's Certificate,
that a payment default on such Mortgage Loan is imminent; or
(ix) the first mortgage lien and security interest granted in the
related Mortgaged Property by the related Mortgage becomes
junior to an intervening lien (other than a second lien
granted in any related Mortgaged Property, if any) that is not
removed or bonded-off within 30 days after written notice to
the related Borrower; or
(x) the related Borrower has entered into any merger,
consolidation or similar transaction, or has sold all or
substantially all of its assets (whether now or hereinafter
acquired) in violation of the related Mortgage Loan documents;
or
(xi) any of the events or conditions described in clauses (ii),
(iii), (iv) and (x) above shall have occurred with respect to
the lessee of any lease or the manager under any management
contract of the related Mortgaged Property, and in connection
therewith, the Master Servicer determines, in its reasonable
business judgment as evidenced by an Officer's Certificate,
that a payment default on such Mortgage Loan is imminent;
(xii) the Master Servicer determines that events or conditions exist
that (A) impair the ability of the Borrower to make timely
payments under such Mortgage Loan when due, (B) impair the
first lien and security interest granted by the related
Mortgage (except for the second lien in the case of the
Mortgage Loan relating to the Lexington Mortgaged Property
(Loan #85), (C) impair the use of the related Mortgaged
Property for the use intended, and in the case of each of (A),
(B), or (C), the Master Servicer determines, in its reasonable
business judgment as evidenced by an Officer's Certificate,
that a payment default on such Mortgage Loan is imminent.
With respect to Mortgage Loans #152, #153, #214, #215 and #216 only, in the
event that any of the above listed conditions exist, the Mortgage Loans shall
not be transferred to the Special Servicer, but shall be specially serviced by
the Master Servicer. With respect to items (vii), (viii), (ix), (x) and (xi)
above, the Depositor shall notify the Master Servicer of the occurrence of such
event.
"SPECIAL SERVICER": LTC, except with respect to Mortgage Loans #152,
#153, #214, #215 and #216, with respect to which the Special Servicer shall be
the Master Servicer or an eligible Special Servicer appointed by the Master
Servicer in compliance with Section 6.4, or any successor special servicer as
herein provided.
"SPECIAL SERVICER FEE": With respect to any Due Period, an amount
equal to the sum of the aggregate Basic Fees and the aggregate Workout Fees, if
any, with respect to such Due Period.
"SPECIAL SERVICER OFFICER": Any officer of the Special Servicer
involved in, or responsible for, the administration and servicing of the
Mortgage Loans whose name and specimen signature appear on a list of officers of
the Special Servicer furnished to the Trustee and the Master Servicer by the
Special Servicer on the Closing Date, as such list may from time to time be
amended.
"SPECIALLY SERVICED MORTGAGE LOAN": As defined in Section 3.1(a).
"SPREAD RATE": Any of the Class A Spread Rate, the Class B Spread
Rate, the Class C Spread Rate or the Class D Spread Rate.
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"STARTUP DAY": The day designated as such pursuant to Section 2.8(a)
hereof.
"SUBSERVICER": LTC Properties, Inc., or any successor thereto, in its
capacity as a subservicer under a subservicing agreement with the Master
Servicer, pursuant to which such subservicer shall perform the Master Servicer's
obligations under this Agreement, as specified in such subservicing agreement.
"SUBSTITUTE MORTGAGE LOAN": As defined in Section 2.2(b).
"TAX RETURNS": The federal income tax return on Internal Revenue
Service Form 1066, U.S. Real Estate Mortgage Investment Conduit Income Tax
Return, including Schedule Q thereto, Quarterly Notice to Residual Interest
Holders of REMIC Taxable Income or Net Loss Allocation, or any successor forms,
to be filed on behalf of the Upper-Tier REMIC and Lower-Tier REMIC under the
REMIC Provisions, together with any and all other information, reports or
returns that may be required to be furnished to the Certificateholders or filed
with the Internal Revenue Service or any other governmental taxing authority
under any applicable provisions of federal, state or local tax laws.
"TERMINATION DATE": The Distribution Date on which the Upper-Tier
REMIC and Lower-Tier REMIC are terminated pursuant to Section 9.1.
"TERMINATION PRICE": As defined in Section 9.1(c).
"TRANSFER": Any direct or indirect transfer or other form of
assignment of any Ownership Interest.
"TRANSFER AFFIDAVIT": As defined in Section 5.3(d).
"TRANSFER AGREEMENT": The Transfer and Repurchase Agreement dated as
of April 20, 1998 between the Originator and the Depositor, pursuant to which
the Originator has sold the Mortgage Loans and Mortgage Certificates and other
related property to the Depositor.
"TREASURY REGULATIONS": Temporary or final (or, when consistent with
market practice, proposed) regulations of the United States Department of the
Treasury.
"TRUST FUND": The corpus of the trust created hereby and to be
administered hereunder, consisting of the Lower-Tier REMIC and the Upper-Tier
REMIC.
"TRUSTEE": LaSalle National Bank, a nationally chartered bank, in its
capacity as trustee, or its successor in interest, or any successor trustee
appointed as herein provided.
"TRUSTEE FEE": With respect to each Mortgage Loan and Mortgage
Certificate, and for any Due Period, an amount equal to the product of one-
twelfth of the Trustee Fee Rate and the Scheduled Principal Balance on each
Mortgage Loan and Mortgage Certificate outstanding immediately prior to the
application of the Monthly Payment due on the Due Date in such Due Period.
"TRUSTEE FEE RATE": With respect to each Mortgage Loan and Mortgage
Certificate, a rate equal to 0.025% per annum.
"UCC": The Uniform Commercial Code as in effect in the State of New
York.
"UPPER-TIER CERTIFICATE": Any of the Class A, Class B, Class C, Class
D, Class E, Class F, Class G, Class X-1, Class X-2 or Class R Certificates.
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"UPPER-TIER DISTRIBUTION ACCOUNT": The separate Eligible Account
established and maintained by the Paying Agent pursuant to Section 3.5(b) which
shall be entitled "LaSalle National Bank, as Trustee, in trust for registered
Holders of LTC Commercial Mortgage Pass-Through Certificates, Series 1998-1."
"UPPER-TIER REMIC": One of two segregated pools of assets for which a
REMIC election has been made, which shall consist of the Lower-Tier Interests
(other than the Class LR Certificate) and such amounts as shall from time to
time be held in the Upper-Tier Distribution Account.
"VALUE": With respect to any Mortgaged Property, the appraised value
thereof as determined by the appraisal made for the Originator in connection
with the origination of the related Mortgage Loan.
"VOTING RIGHTS": With respect to any provisions hereof providing for
the action, consent or approval of the Holders of all Certificates evidencing
specified Voting Rights in the Trust Fund, (a) the aggregate Voting Rights of
the Class A, Class B, Class C, Class D and Class E, Class F, Class G, Class R
and Class LR Certificates shall be equal to 95% of the aggregate Voting Rights,
(b) the aggregate Voting Rights of each of the Class A, Class B, Class C, Class
D, Class E, Class F, Class G, Class R and Class LR Certificates shall be equal
to the product of (i) 94% and (ii) the fraction obtained by dividing the
Certificate Principal Amount of such Class by the aggregate Certificate
Principal Amounts of the Class A, Class B, Class C, Class D, Class E, Class F,
Class G, Class R and Class LR Certificates, (c) the aggregate Voting Rights of
the Class X-1 and Class X-2 Certificates shall be 5% and (d) the aggregate
Voting Rights of each of the Class X-1 and Class X-2 Certificates shall be equal
to 21/2% for each such class. With respect to any provisions hereof providing
for action, consent or approval of each Class of Certificates or specified
Classes of Certificates, each Holder of an Outstanding Certificate of a Class
will have Voting Rights in such Class equal to such Holder's Percentage Interest
in such Class.
"WORKOUT FEE": With respect to any Due Period and any Mortgage Loan
that is, at the beginning of the related Prepayment Period, or at any time
during such Prepayment Period became, a Specially Serviced Mortgage Loan (other
than a Specially Serviced Mortgage Loan purchased by the Originator by reason of
breach of representation or defective documentation which has a material adverse
effect on Certificateholders), an amount equal to (a) in the case of each such
Mortgage Loan with respect to which a Final Recovery Determination has been made
or in the case of a Specially Serviced Mortgage Loan or related REO Property
that is sold or repurchased pursuant to any provision of this Agreement during
the related Prepayment Period, the product of the Workout Fee Rate and the Net
Liquidation Proceeds (reduced by the amount of unpaid accrued interest on such
Mortgage Loan) received on such Mortgage Loan during such Prepayment Period
times a fraction, the numerator of which is such Net Liquidation Proceeds and
the denominator of which is the Scheduled Principal Balance of such Mortgage
Loan at the time of liquidation, (b) in the case of each other Specially
Serviced Mortgage Loan, the product of the Workout Fee Rate and the amount of
collections and proceeds (including Net REO Proceeds) received with respect to
such Mortgage Loan during such Prepayment Period, less the aggregate amount of
Liquidation Expenses incurred with respect thereto and not deducted from
collections or proceeds received in a previous Prepayment Period pursuant to
this clause (b).
"WORKOUT FEE RATE" As to any Mortgage Loan for which a Workout Fee is
payable with respect to any Due Period pursuant to the definition of "Workout
Fee," a per annum rate of 1.50%.
SECTION 1.2 CERTAIN CALCULATIONS.
Unless otherwise specified herein, the following provisions shall
apply:
(i) All calculations of interest on the Certificates,
Lower-Tier Interests, Trustee Fee and servicing fees
provided for herein shall be made on the basis of a
360-day year consisting of twelve 30-day months, except
to the extent specified other-
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wise. All calculations of interest with respect to any
Mortgage Loan provided for herein shall be made in
accordance with the terms of the related Note and
Mortgage or, if such documents do not specify the basis
upon which interest accrues thereon, on the basis of a
360-day year consisting of twelve 30-day months;
(ii) For purposes of this Agreement, as set forth in the
applicable Mortgage Loan, Insurance Proceeds and
Liquidation Proceeds in respect of a Mortgage Loan
shall be applied as follows: (a) first, to the
reimbursement of Servicing Advances with respect to the
related Mortgage Loan, plus Advance Interest thereon,
(b) second, to cover past due Monthly Payments (and, in
the case of Monthly Payments with respect to which a
P&I Advance was made, Advance Interest thereon), (c)
third, to the Monthly Payment or Assumed Scheduled
Payment, as applicable, for the Due Date occurring in
the Prepayment Period in which such proceeds are
received, and (d) fourth, after deduction of any
applicable Workout Fee, as a Principal Prepayment on
the related Mortgage Loan;
(iii) Notwithstanding the occurrence of the Acquisition Date
by or on behalf of the Trust Fund with respect to any
REO Property and cancellation of the related Mortgage
Loan, such Mortgage Loan shall (for purposes of all
calculations hereunder, including, without limitation,
the calculation of the Servicing Fee, except for
purposes of Section 9.1) be considered to be a Mortgage
Loan held in the Trust Fund until such time as the
related REO Property is sold by the Trust Fund.
Consistent with the foregoing, for purposes of all
calculations hereunder, so long as such Mortgage Loan
is considered to be a Mortgage Loan held in the Trust
Fund:
(A) It shall be assumed that, notwithstanding that the
indebtedness evidenced by the related Note shall
have been discharged, such Note remains
outstanding and, for purposes of determining the
Scheduled Principal Balance thereof and, in
connection with the calculation of any servicing
compensation and Trustee Fee, the unpaid principal
balance thereof, the Mortgage Interest Rate and
related amortization schedule in effect at the
time of any such acquisition of title remain in
effect, except that such schedule shall be
adjusted to reflect the application of Net REO
Proceeds received in any amount pursuant to clause
(B) below; and
(B) Net REO Proceeds with respect to a Specially
Serviced Mortgage Loan received in any Prepayment
Period shall be applied except as set forth in the
applicable Mortgage Loan as follows: (a) first,
to pay any taxes due on such Net REO Proceeds
under the REMIC Provisions, and (b) second, in the
manner set forth in clause 1.2(ii) above; and
(iv) In calculating Net REO Proceeds with respect to any REO
Account Property for any Prepayment Period, the
aggregate amount of expenses not allocable to
particular REO Account Properties charged against
amounts on deposit in the REO Account by the Special
Servicer, as permitted by the provisions of this
Agreement, since the last date on which amounts were
remitted from the REO Account to the Collection Account
shall be allocated to reduce the proceeds and
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collections received in respect of particular REO
Account Properties on a PRO RATA basis based upon the
respective Monthly Payments of the related REO Account
Mortgage Loans.
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ARTICLE II
DECLARATION OF TRUST FUND;
CONVEYANCE OF MORTGAGE LOANS
AND MORTGAGE CERTIFICATES;
ORIGINAL ISSUANCE OF CERTIFICATES
SECTION 2.1 CREATION AND DECLARATION OF TRUST FUND; CONVEYANCE OF
MORTGAGE LOANS, CONVEYANCE OF MORTGAGE CERTIFICATES,
CONVEYANCE OF OTHER COLLATERAL.
The Depositor, concurrently with the execution and delivery hereof,
does hereby irrevocably sell, transfer, assign, set over and otherwise convey
to the Trustee, without recourse, all of the right, title and interest of the
Depositor in and to the Trust Fund, to have and to hold, in trust, and the
Trustee declares that, subject to the review provided for in Section 2.2, the
Custodian on its behalf has received and shall hold the Trust Fund, as
Trustee, in trust, for the benefit and use of the Holders of the Certificates
which indirectly through the Lower-Tier Interests (or, in the case of the
Holders of the Class LR Certificates, directly) represent the entire
beneficial interest in the Trust Fund and for the purposes and subject to the
terms and conditions set forth in this Agreement, and, concurrently with such
receipt, the Trustee has caused to be authenticated and delivered to or upon
the order of the Depositor, Certificates in the authorized denominations
evidencing the entire ownership of the Lower-Tier Interests, which in turn
represent the entire ownership of the Trust Fund. The Depositor also hereby
assigns to the Trustee all of its right, title and interest in the Transfer
Agreement, the Mortgage Loans and the Mortgage Certificates, including all
rights to payment in respect thereof under the Notes and any and all related
agreements, and distributions thereon except as set forth below, and any
security interest thereunder (whether in real or personal property and
whether tangible or intangible), any guaranty relating thereto, any
environmental indemnity agreement relating to a Mortgaged Property and all
the right, title and interest of the Depositor in, to and under the Transfer
Agreement, and all other assets included or to be included in the Trust Fund
for the benefit of the Certificateholders, all without recourse and without
warranty of any kind except as specifically set forth herein. Such
assignment includes all interest and principal received or receivable by the
Depositor, the Master Servicer or the Special Servicer on or with respect to
the Mortgage Loans and Mortgage Certificates other than (i) scheduled
payments of principal and interest due on the Mortgage Loans or required to
be distributed in respect of the Mortgage Certificates on or prior to the
Cut-Off Date, (ii) Principal Prepayments received on or prior to the Cut-Off
Date and reflected in the initial Scheduled Principal Balance of the related
Mortgage Loan and (iii) any Prepayment Premiums, late fees and any other
penalties or charges.
In connection with such transfer and assignment, the Depositor does
hereby deliver to, and deposit with, the Custodian as the agent of the
Trustee (except in the case of items (x), (xiii), (xvi), (xvii) and (xviii)
below which are delivered to the Master Servicer) the following documents or
instruments with respect to each Mortgage Loan so assigned (with copies to
the Master Servicer and the Special Servicer):
(i) the original Note showing a complete chain of
endorsement from the Originator to the Depositor, and
endorsed by the Depositor without recourse and without
warranty of any kind except as specifically set forth
herein to the order of the Trustee in the following
form: "Pay to the order of LaSalle National Bank, a
nationally chartered bank, as Trustee under that
certain Pooling and Servicing Agreement dated as of
April 20, 1998 for LTC Commercial Mortgage Pass-Through
Certificates, Series 1998-1, without recourse and
without warranty of any kind, except for those
warranties made by LTC REMIC IV Corporation and set
forth in that certain Pooling and Servicing Agreement,
dated as of April 20, 1998, by and among LTC REMIC IV
Corporation, a Delaware corporation, GMAC Commercial
Mortgage Corporation, a California corporation, LTC
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Properties, Inc., a Maryland corporation, and LaSalle
National Bank, a nationally chartered bank;
(ii) the original recorded Mortgage showing the Depositor as
mortgagee or accompanied by original recorded
assignments showing a complete chain of assignment from
the Originator to the Depositor or, if any such
original Mortgage or assignment has not been returned
from the applicable public recording office, a copy
thereof certified by the Depositor to be a true and
complete copy of the original thereof submitted or, in
the case of assignments to the Depositor, to be
submitted, for recording;
(iii) an executed Assignment of each Mortgage in form
suitable for recordation in the jurisdiction in which
the Mortgaged Property is located from (a) Bankers
Trust Company of California, as custodian for Goldman
Sachs Mortgage Company under that certain Custodial
Agreement dated December 15, 1993, to the Originator,
if applicable, (b) Originator to the Depositor, and (c)
the Depositor to "LaSalle National Bank, as Trustee
under that certain Pooling and Servicing Agreement,
dated as of April 20, 1998, for LTC Commercial Mortgage
Pass-Through Certificates, Series 1998-1";
(iv) if the related security agreement is separate from the
related Mortgage, the original executed version of such
security agreement and any intervening assignments
thereof, including the assignment thereof to the
Depositor and the Trustee;
(v) a copy of the UCC-l financing statement or statements
and related continuation statements, if any, relating
to such 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 related Mortgaged Property is
located, disclosing the assignment from (a) the
Originator to the Depositor and (b) the Depositor to
the Trustee of the Depositor's security interest in the
personal property (if any) constituting security for
repayment of such Mortgage Loan;
(vi) a copy, certified as a true and complete copy by the
Originator, of each Notice Pursuant to Section 9-302 of
the Uniform Commercial Code, signed by the Trustee and
the Originator, to be delivered to the bank in which a
deposit account, if any, securing such Mortgage Loan is
maintained;
(vii) an Assignment of the escrow deposit, if any, and a
copy, certified as a true and complete copy by the
Originator, of each notice of each escrow deposit and
the assignment of the Mortgage Loan to be delivered to
the escrow agent;
(viii) the original or copy of each assumption, modification,
written assurance or substitution agreement, if any,
relating to such Mortgage Loan;
(ix) the original lender's title insurance policy, together
with any endorsements thereto (the "TITLE POLICY") or,
with respect to each Mortgage Loan as to which a title
insurance policy has not yet been issued, a lender's
title insurance commit-
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ment with a letter from the issuer of the policy
stating that all conditions to the issuance of the
policy have been satisfied;
(x) the original survey, or if the original is not
available, a copy thereof certified by the Depositor to
be a true copy thereof;
(xi) the original of any guaranty relating to such Mortgage
Loan;
(xii) if any related Assignment of Leases, Rents and Profits
is separate from the related 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
related 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);
(xiii) a copy, certified as a true and complete copy by the
Originator or, where available, an original of, each
lease and each management agreement affecting the
related Mortgaged Property and of any intervening
assignments thereof, and evidence of any recordings
thereof and any guarantees relating thereto, if
applicable;
(xiv) any subordination agreements relating to the Mortgage
Loan;
(xv) any and all amendments, modifications and supplements
to, and waivers related to, any of the foregoing;
(xvi) evidence of insurance with respect to the related
Mortgaged Property as described in Section 3.8;
(xvii) all Phase I environmental assessments, engineering
assessments, certificates of occupancy and appraisals
of the related Mortgaged Property in the possession or
prepared on behalf of the Originator or its agents or
on which the Originator is entitled to rely;
(xviii) all estoppel letters, financial statements and opinions
received from the related Borrower or tenant under the
related lease in the possession of such Seller or its
agents;
(xix) any other written agreements related to such Mortgage
Loan; and
(xx) the physical certificate representing the Mortgage
Certificates; any transferee certificates or the
documentation required to properly transfer the
Mortgage Certificates to the Trustee for the benefit of
the Certificateholders.
No later than ten (10) days following the Closing Date, the Depositor shall
cause each of the notices described in items (vi) and (vii) above to be
delivered to the addressee on such notice. No later than sixty (60) days
following the Closing Date, the Depositor shall cause to be issued (a) an
endorsement to be issued to each Title Policy, substantially in the form of a
CLTA Form 104.1 or a "Mortgage Assignment Add-On Endorsement" naming Trustee as
endorsee and, (b) with respect to any Mortgage Loan for which a Title Policy has
not yet been issued, a
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supplement to the lender's title insurance commitment pursuant to which the
issuer thereof commits to issue the Title Policy with such an endorsement.
The Depositor hereby agrees that it shall take such further action as
is reasonably required to complete the conveyance of the Mortgage Loans and
Mortgage Certificates as contemplated by this Section 2.1. With respect to the
Mortgage Loans, the Depositor also hereby delivers to the Custodian as the agent
of the Trustee a list (the "Assignments of Mortgage List") that has been
prepared by the Depositor or its agent for each Mortgage Loan, by Loan Number,
indicating the jurisdiction in which the related Assignment of Mortgage will be
submitted for recording and escrow instructions to the title companies that will
be issuing the endorsements described above, instructing each such title company
to (1) record each Assignment of Mortgage, Reassignment of Assignment of Leases
and Rents (if not otherwise included in the related Assignment of Mortgage),
UCC-2 or UCC-3 and (2) issue the endorsements to the Title Policies.
No later than 45 days following the Closing Date, the Trustee or
Custodian, as applicable, shall, to the extent possession thereof has been
delivered to the Trustee or to the Custodian, deliver to the Depositor who shall
record or cause to be recorded,(1)(a) each original Assignment of Mortgage
referred to in Section 2.1 (iii) which has not yet been submitted for recording
and, (b) each Reassignment of Assignment of Leases, Rents and Profits referred
to in Section 2.1(xii) (if not otherwise included in the related Assignment of
Mortgage) which has not yet been submitted for recordation; and (2) for filing,
each UCC-2 or UCC-3 referred to in Section 2.1(v) which has not yet been
submitted for filing. The Depositor shall promptly (and in no event later than
five Business Days following the date the related document is received from the
Depositor, in the case of clause 1(a) above and 30 days following the date the
related document is received in the case of clauses 1(b) and 2 above) submit or
cause to be submitted for recording or filing, as the case may be, at the
expense of the Depositor, in the appropriate public recording office, each such
document. In the event that any such document is lost or returned unrecorded
because of a defect therein, the Depositor shall promptly prepare a substitute
document, and thereafter direct Chicago Title Insurance Company or the Trustee
or Custodian to cause each such document to be duly recorded. Notwithstanding
anything to the contrary contained in this Section 2.1, in those instances where
the public recording office retains the original Mortgage, Assignment of
Mortgage or Reassignment of Assignment of Leases, Rents and Profits, if
applicable, after any has been recorded, the obligations hereunder of the
Depositor, Trustee or Custodian, as applicable, shall be deemed to have been
satisfied upon delivery to the Trustee or the Custodian of a copy of such
Mortgage, Assignment of Mortgage or Reassignment of Assignment of Leases, Rents
and Profits, if applicable, certified by the public recording office to be a
true and complete copy of the recorded original thereof.
All original documents relating to the Mortgage Loans which are not
delivered to the Custodian are and shall be held by the Master Servicer in trust
for the benefit of the Trustee on behalf of the Certificateholders. In the
event that any such original document is required pursuant to the terms of this
Section to be a part of a Mortgage File, such document shall be delivered
promptly to the Custodian. Any original document delivered to or held by the
Depositor that is not required pursuant to the terms of this Section to be a
part of a Mortgage File shall be delivered promptly to the Master Servicer.
It is intended that the conveyance of the Depositor's right, title and
interest in and to the Trust Fund pursuant to this Agreement shall constitute,
and shall be construed as, a purchase and sale and not a loan. However, if such
conveyance is deemed to be a loan, it is intended that the rights and
obligations of the parties to such loan shall be established pursuant to the
terms of this Agreement. The Depositor hereby grants to the Trustee a first
priority security interest in all of the Depositor's right, title and interest
in, to and under the Mortgage Loans and Mortgage Certificates, together with any
related Mortgages and Assignments of Leases, Rents and Profits, other Trust Fund
property and the other property so conveyed, whether now existing or hereafter
acquired, and the accounts and funds established by the Master Servicer and the
Trustee pursuant hereto, all payments of principal of or interest on the
Mortgage Loans and Mortgage Certificates, all other payments made in respect of
the Mortgage Loans and Mortgage Certificates and all proceeds thereof for the
benefit of the Certificateholders, to secure payment
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of the Certificates and authorizes the Trustee to make the REMIC Elections
with respect to the Trust Fund required hereunder; and this Agreement shall
constitute a security agreement under applicable law. If such conveyance is
deemed to be a loan and the trust created by this Agreement terminates prior
to the satisfaction of the claims of any Person holding any Certificates, the
security interest created hereby shall continue in full force and effect and
the Trustee shall be the collateral agent for the benefit of such Person, and
all proceeds shall be distributed as herein provided. The Depositor shall
take such actions as may be necessary to ensure that, if this Agreement were
deemed to create a security interest in the Mortgage Loans and Mortgage
Certificates, together with any related Mortgages and Assignments of Leases,
Rents and Profits, such security interest would be deemed to be a perfected
security interest of first priority under applicable law and will be
maintained as such throughout the term of this Agreement.
SECTION 2.2 ACCEPTANCE BY CUSTODIAN AND TRUSTEE; REPURCHASE OR
SUBSTITUTION FOR DEFECTIVE DOCUMENTATION OR OTHER
FAILURE TO VALIDLY ASSIGN MORTGAGE LOANS AND MORTGAGE
CERTIFICATES.
(a) If the Depositor cannot deliver or shall otherwise be unable
to assign (as set forth in an Officer's Certificate of the Depositor) validly
any Mortgage Loan to the Trustee pursuant to Section 2.1 or any other original
or certified recorded document described in Section 2.1 on the Closing Date (or
take such other action as is required in the aforesaid Officer's Certificate of
the Depositor) to the Custodian, the Depositor shall use its best efforts,
promptly upon receipt thereof and in any case not later than 45 days from the
Closing Date, to deliver such original or certified recorded documents to the
Custodian on behalf of the Trustee (unless the Depositor is delayed in making
such delivery by reason of the fact that such documents shall not have been
returned by the appropriate recording office in which case it shall notify the
Custodian and the Trustee in writing of such delay and shall deliver such
documents to the Custodian promptly upon the Depositor's receipt thereof). By
its execution and delivery of this Agreement, the Trustee acknowledges the
assignment to it of the Mortgage Loans and Mortgage Certificates in good faith
without actual notice or actual knowledge of adverse claims, liens, charges,
encumbrances or other security interests and declares that the Custodian holds
and will hold such documents and all others delivered to it constituting the
Mortgage File (to the extent the documents constituting the Mortgage File are
actually delivered to it) for any Mortgage Loan assigned to it as Trustee
hereunder in trust, upon the conditions herein set forth, for the use and
benefit of all present and future Certificateholders. The Custodian agrees, for
the benefit of the Certificateholders, to review each Mortgage File within 45
days after the later of (a) the Custodian's receipt of such Mortgage File or (b)
the execution and delivery of this Agreement, to ascertain that all documents
referred to in Section 2.1 above (in the case of the documents referred to in
Sections 2.1 (iv), (v), (vi), (vii), (viii), (ix) (in the case of any
endorsement thereto), (xi)-(xvi), (xviii) and (xix), as identified to it in
writing by the Depositor, which the Depositor hereby agrees to do promptly after
the Closing Date) and any original recorded documents referred to in the first
sentence of this Section included in the delivery of a Mortgage File have been
received, have been executed, appear to be what they purport to be, purport to
be recorded or filed (as applicable) and appear regular on their face, 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 Depositor, with a copy to the Trustee, the Master Servicer
and the Special Servicer, by providing a written report in the form attached as
Exhibit J (the "Custodian's Exception Report") and, if the Custodian finds that
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 regular on their face, 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 provisions of Section
2.3(c) shall apply to each document so identified. The Trustee and the Master
Servicer 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 the Custodian's Exception Report or for any
failure by the Depositor to use its best efforts to deliver any such document.
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The Custodian shall have no responsibility for reviewing any
Mortgage File except as expressly provided above and in Section 2.1 hereof.
Without limiting the effect of the preceding sentence, in reviewing any
Mortgage File pursuant to the preceding paragraph or Section 2.1, 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.
The Custodian holds (or in the case of the Mortgage Certificates,
will hold upon delivery thereof) that portion of the Trust Fund delivered to
the Trustee consisting of "instruments" in the case of the Mortgage Loans (as
such term is defined in Section 9-105(i) of the Uniform Commercial Code as in
effect in Illinois on the date hereof), and "certificated securities" in the
case of the Mortgage Certificates (as such term is defined in Section
8-102(a)(A4) of the Uniform Commercial Code as in effect in the State of
Illinois on the date hereof) and, except as otherwise specifically provided
in this Agreement, shall not remove such instruments or certificated
securities from Illinois unless it receives an Opinion of Counsel (obtained
and delivered at the expense of the Person requesting the removal of such
instruments from Illinois) that in the event the transfer of the Mortgage
Loans or the Mortgage Certificates to the Custodian is deemed not to be a
sale, after such removal, the Custodian on behalf of the Trustee will possess
a first priority perfected security interest in such instruments and
certificated securities.
The Trustee may enter into a Custodial Agreement pursuant to which
the Trustee will appoint a Custodian to hold the Mortgage Files in trust for
the benefit of all present and future Certificateholders; PROVIDED, HOWEVER,
that the Custodian so appointed shall in no event be the Originator, the
Depositor or any Person known to a Responsible Officer of the Trustee to be
an Affiliate of any of them; PROVIDED, FURTHER that the Trustee need not
enter into a Custodial Agreement for so long as the Trustee is the Custodian.
Prior to appointing a Custodian, the Trustee shall cause a Responsible
Officer of the Trustee to make a reasonable inquiry of appropriate officers
of the Custodian as to whether such prospective Custodian is an Affiliate of
the Originator or the Depositor. The Trustee appoints itself as the initial
Custodian hereunder.
(b) Upon discovery by the Depositor, the Master Servicer, the
Special Servicer, the Custodian (if any) or a Responsible Officer of the
Trustee that any documentation described in Section 2.1 hereof is missing or
defective in any respect and such defect has a material adverse effect on the
Mortgage Loans or the Mortgage Certificates, then pursuant to the Transfer
Agreement, the Originator shall cure such omission or defect identified on
the Custodian's Exception Report as provided in the Transfer Agreement. The
Depositor shall enforce such obligation of the Originator. In the event the
Originator fails to effect such cure within the allotted period, and such
omission or defect has materially and adversely affected the interests of the
Certificateholders, the Originator shall, as required under the Transfer
Agreement, within 90 days of discovery of the omission or defect, at its
option, (i) repurchase the affected Mortgage Certificates at a price equal to
the Repurchase Price applicable to the Mortgage Certificates upon the terms
and conditions and in the manner described in the Transfer Agreement, and
(ii) either (1) repurchase the affected Mortgage Loan at a price equal to the
Repurchase Price applicable to the Mortgage Loans upon the terms and
conditions and in the manner described in the Transfer Agreement or (2) if
within two years of the Startup Day, or such other period as may be permitted
by the REMIC Provisions, substitute for any Mortgage Loan to which such
omission or defect relates, a new mortgage loan (a "Substitute Mortgage
Loan") having such characteristics so that no repurchase or substitution
event set forth in Section 3.2 of the Transfer Agreement (other than Section
3.2(xii)) would have existed had such Substitute Mortgage Loan originally
been a Mortgage Loan. The Originator shall effect any such substitution of a
Mortgage Loan pursuant to the Transfer Agreement; PROVIDED, HOWEVER, that no
such substitution will be permitted (and accordingly a repurchase will be
required) unless the Originator receives written confirmation from the Rating
Agency that the substitution will not result in the qualification, downgrade
or withdrawal of the rating or ratings then assigned by the Rating Agency to
the then-rated
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Classes of Certificates as evidenced in writing by the Rating Agency. Any
such substitution of a Mortgage Loan shall be effected only if the Originator
shall have furnished the Trustee and the Custodian, if any, with an Opinion
of Counsel, at the expense of the Originator, that such substitution of a
Mortgage Loan shall not (i) cause a loss of the REMIC status with respect to
either the Upper-Tier REMIC or the Lower-Tier REMIC, (ii) result in the
imposition of any tax on "prohibited transactions" (imposed by Section
860F(a)(1) of the Code) or on prohibited contributions (imposed by Section
860G(d) of the Code) upon either the Upper-Tier REMIC or the Lower-Tier
REMIC, or (iii) otherwise subject either the Upper-Tier REMIC or Lower-Tier
REMIC to any federal tax, and that the Substitute Mortgage Loan is a
"qualified replacement mortgage" within the meaning of Section 860G(a)(4) of
the Code. In no event shall any Substitute Mortgage Loan have an unpaid
principal balance, as of the date of substitution, greater than the Scheduled
Principal Balance (reduced by the scheduled payment of principal due on the
Due Date in the month of substitution) of the Mortgage Loan for which it is
substituted. In addition, such Substitute Mortgage Loan shall (i) have a
Loan-to-Value Ratio less than or equal to, that of the Mortgage Loan for
which it is substituted, (ii) have a Mortgage Interest Rate no less than, and
no more than, 1% percent per annum above or below, as the case may be, the
Mortgage Interest Rate for the Mortgage Loan for which it is substituted,
(iii) have a remaining term to stated maturity not later than, and not more
than one year less than, the remaining term to stated maturity of the
substituted Mortgage Loan and (iv) be, in the reasonable determination of the
Originator, of the same type, quality and character as the substituted
Mortgage Loan as if the documentation was not defective or missing in any
material respect. If the Substitute Mortgage Loan has an unpaid principal
balance, as of the date of substitution, lower than the Scheduled Principal
Balance (reduced by the scheduled payment of principal due on the Due Date in
the month of substitution) of the Mortgage Loan for which it is substituted,
the Originator shall concurrently with such substitution deposit in the
Collection Account the amount of such difference, plus interest on such
amount at the Mortgage Interest Rate of the Mortgage Loan being replaced from
the substitution date through the last day of the Interest Accrual Period in
which such substitution date occurs.
In the case of a repurchased Mortgage Loan, property or Mortgage
Certificate pursuant to the preceding paragraph, the applicable Repurchase
Price shall be deposited by the Originator in the Collection Account pursuant
to the Transfer Agreement. In the case of a Substitute Mortgage Loan, the
Mortgage File relating thereto shall be delivered to the Custodian. The
Monthly Payment on the Substitute Mortgage Loan for the Due Date in the month
of substitution shall not be part of the Trust Fund. Upon receipt by the
Custodian and the Trustee of written notification of any required deposit
into the Collection Account signed by an officer of the Originator, and, in
the case of a Substitute Mortgage Loan, upon receipt of the new Mortgage File
and required payment, as the case may be, the Custodian shall release to the
Originator the related Mortgage File and the Trustee shall execute and
deliver or cause to be executed and delivered such instrument of transfer or
assignment furnished to it by the Originator, in each case without recourse,
as shall be necessary to vest in the Originator legal and beneficial
ownership of such substituted or repurchased Mortgage Loan or property. It
is understood and agreed that the obligation of the Originator to substitute
a new Mortgage Loan for or repurchase any Mortgage Loan, property or Mortgage
Certificate as to which such a material omission or defect in a constituent
document exists shall constitute the sole remedy respecting such omission,
defect or breach available to the Certificateholders or the Trustee on behalf
of the Certificateholders. The failure of the Custodian or the Trustee to
give any notice contemplated herein shall not affect or relieve the
Originator's obligation to repurchase any Mortgage Loan, property or Mortgage
Certificate pursuant to this Section 2.2 and the Transfer Agreement. Pursuant
to the Transfer Agreement, in the case of a Substitute Mortgage Loan, the
Originator shall provide the Rating Agency with an Environmental Assessment
prepared in accordance with Section 3.10(d) with respect to the Mortgaged
Property or Mortgaged Properties securing such Substitute Mortgage Loan. The
Custodian shall review the Mortgage File delivered to it relating to the
Substitute Mortgage Loan, within the time period and in the manner and with
the remedies specified in this Section 2.2.
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SECTION 2.3 REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
DEPOSITOR.
(a) The Depositor hereby represents and warrants to the Master
Servicer and the Trustee on behalf of itself and the
Certificateholders that as of the Cut-Off Date:
(i) the Depositor is duly organized, validly existing and
in good standing in the jurisdiction of its
incorporation and has taken all necessary action to
authorize the execution, delivery and performance of
this Agreement by it, and has the power and authority
to execute, deliver and perform this Agreement and all
the transactions contemplated hereby, including, but
not limited to, the power and authority to sell, assign
and transfer the Mortgage Loans and Mortgage
Certificates in accordance with this Agreement;
(ii) assuming the due authorization, execution and delivery
of this Agreement by each other party hereto, this
Agreement and all of the obligations of the Depositor
hereunder are the legal, valid and binding obligations
of the Depositor, enforceable in accordance with the
terms of this Agreement, except as such enforcement may
be limited by bankruptcy, fraudulent conveyance,
insolvency, reorganization, receivership, moratorium or
other laws relating to or affecting the rights of
creditors generally, or by general principles of equity
(regardless of whether such enforceability is
considered in a proceeding in equity or at law);
(iii) the execution and delivery of this Agreement and the
performance of its obligations hereunder by the
Depositor will not conflict with the charter or bylaws
of the Depositor, any provision of any law or
regulation to which the Depositor is subject, or
conflict with, result in a breach of or constitute a
default under any of the terms, conditions or
provisions of any material agreement or instrument to
which the Depositor is a party or by which it is bound,
or any order or decree applicable to the Depositor, or
result in the creation or imposition of any lien on any
of the Depositor's assets or property other than the
lien created pursuant to this Agreement. The Depositor
has obtained any consent, approval, authorization or
order of any court or governmental agency or body
required for the execution, delivery and performance by
the Depositor of this Agreement;
(iv) there is no action, suit or proceeding pending or, to
the best of the Depositor's knowledge, threatened
against the Depositor in any court or by or before any
other governmental agency or instrumentality which
would materially and adversely affect the ability of
the Depositor to carry out the transactions
contemplated by this Agreement; and
(v) upon the transfer of the Mortgage Loans and Mortgage
Certificates by the Depositor to the Trustee, the
Trustee shall either be the owner of the Mortgage Loans
and Mortgage Certificates or shall have a valid and
perfected security interest of first priority in all of
the Depositor's right, title and interest in the
Mortgage Loans and Mortgage Certificates and any
proceeds thereof.
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(b) The Depositor hereby covenants that:
(i) it will maintain books and records separate from any
other Person or entity;
(ii) it will not commingle assets with those of any other
person or entity;
(iii) it will conduct its own business in its own name;
(iv) it will maintain separate corporate, financial and
accounting records and statements;
(v) it will pay its own liabilities out of its own funds;
(vi) it will pay all fees and expenses of the Rating Agency
incurred in connection with services provided by the
Rating Agency in connection with this Agreement until
the termination hereof;
(vii) it will observe all corporate formalities;
(viii) it will maintain an arm's length relationship with its
Affiliates;
(ix) it will pay the salaries of its own employees;
(x) it will not guarantee or become obligated for the debts
of any other Person or entity or hold out its credit as
being available to satisfy the obligations of others;
(xi) it will allocate fairly and reasonably any overhead for
shared office space;
(xii) it will use separate stationery, invoices, and checks
from any other Person or entity;
(xiii) it will not pledge its assets for the benefit of any
other Person or entity;
(xiv) it will hold itself out as a separate entity;
(xv) it will not dissolve, liquidate, merge or consolidate
with, or transfer substantially all of its assets to,
any entity, unless (1) the reconstituted company is a
substantially similar entity which assumes all of the
outstanding obligations and liabilities of the
Depositor, and (2) prior written confirmation has been
obtained from the Rating Agency that such dissolution,
merger, consolidation or asset transfer will not result
in a qualification, downgrade or withdrawal of the then
current ratings assigned by the Rating Agency to the
outstanding Classes of the Certificates;
(xvi) it will not incur or assume any indebtedness, except as
permitted under this Agreement or any other agreement
executed in connection with the issuance of the
Certificates;
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(xvii) at least one of the directors of the Depositor shall at
all times be an "Independent Director," meaning a
person who shall at no time be, or have been for a
period commencing five years prior to such director's
selection to the Board of Directors, a director,
officer, supplier, direct customer or employee of, the
holder of any beneficial interest in, or a person who
has served as a trustee in bankruptcy for, the
Depositor or any Affiliate thereof;
(xviii) without the unanimous affirmative vote of all of its
directors (including the Independent Director), the
Depositor shall not (1) institute or consent to the
institution of bankruptcy or insolvency proceedings
against it, (2) dissolve, liquidate, merge or
consolidate with, or transfer substantially all of its
assets to, any entity, or (3) engage in any other
actions that bear upon whether the separate identity of
the Depositor and its Affiliates will be respected or
whether the assets of the Depositor and its Affiliates
will be consolidated; and
(xix) the purposes of the Depositor are limited to (1)
acquiring, owning, holding, selling, transferring,
assigning, pledging, financing, refinancing or
reinvesting any distributions or payments on, and
otherwise dealing with, and to form and hold, the
Mortgage Loans and the Mortgage Certificates, and (2)
establishing the Trust Fund and issuing the
Certificates.
(c) It is understood and agreed that the representations and
warranties set forth in this Section 2.3 shall survive delivery of the
respective Mortgage Files and Mortgage Certificates to the Trustee or to the
Custodian, as the case may be, until the termination of this Agreement, and
shall inure to the benefit of the Trustee. Upon discovery by the Depositor, the
Master Servicer, the Special Servicer, the Custodian or a Responsible Officer of
the Trustee (or upon written notice thereof from any Certificateholder) of a
breach of any of the representations and warranties set forth in this Section
2.3 that materially and adversely affects the Certificateholders, the Master
Servicer, the Special Servicer, the Custodian, the Trustee or the party
discovering such breach shall give prompt written notice to the other parties.
(d) Pursuant to Section 2.1, the Depositor has hereby assigned,
transferred and conveyed to the Trustee the Depositor's rights under the
Transfer Agreement, including without limitation, the representations,
warranties and covenants of the Originator therein, together with all rights
of the Depositor to require the Originator to cure any breach thereof or, at
its option, either (i) to repurchase any affected Mortgage Loan or Mortgage
Certificate or (ii) if within two years of the Startup Day, or such other
period permitted by the REMIC Provisions, substitute a new mortgage loan for
such Mortgage Loan, in either case, in the manner described in the Transfer
Agreement. The Master Servicer shall enforce such obligation of the
Originator. Any such cure, repurchase or substitution shall be made in a
manner consistent with the REMIC Provisions and shall not result in the
imposition of any tax upon either the Upper-Tier or Lower-Tier REMIC. The
Repurchase Price with respect to any repurchase described in this paragraph
and the substitute principal balance, if any, plus accrued interest thereon
and the other amounts referred to in Section 2.2(d), shall be deposited in
the Collection Account. It is understood and agreed that the obligation of
the Originator to repurchase any Mortgage Loan or Mortgage Certificate or
substitute for any Mortgage Loan or property as to which a repurchase or
substitution event has occurred and is continuing shall constitute the sole
remedy respecting such event available to Certificateholders, or to the
Trustee on behalf of Certificateholders, and such obligation shall survive
until termination of the Trust Fund hereunder.
SECTION 2.4 EXECUTION AND DELIVERY OF CERTIFICATES; ISSUANCE
OF UNCERTIFIED LOWER-TIER INTERESTS.
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The Trustee acknowledges the assignment to it of the Mortgage Loans
and of the Mortgage Certificates transferred to it and the delivery of the
Mortgage Files to the Custodian on its behalf, subject to the provisions of
Section 2.1 and Section 2.2, and, concurrently with such delivery, (i)
acknowledges the issuance of the uncertificated Lower-Tier Interests to the
Depositor in exchange for the Mortgage Loans and Mortgage Certificates and all
other assets included in the definition of the "Lower-Tier REMIC," receipt of
which is hereby acknowledged, and hereby declares that it holds the Lower-Tier
Interests (other than the Class LR Certificates) on behalf of the Upper-Tier
REMIC and Certificateholders (other than the holders of Class LR Certificates),
and (ii) has executed and delivered to or upon the order of the Depositor, in
exchange for the Lower-Tier Interests (other than the Class LR Certificates),
the Certificates (other than the Class LR Certificates) in authorized
denominations which, together with the Class LR Certificates, evidence ownership
of the entire Trust Fund.
SECTION 2.5 REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE MASTER
SERVICER.
(a) The Master Servicer, in its capacity as the Master Servicer
and as Special Servicer with respect to Mortgage Loans #153, #153, #214, #215
and #216, hereby represents, warrants and covenants that as of the Closing Date:
(i) the Master Servicer (A) is a corporation duly
organized, validly existing and in good standing under
the laws of the State of California, (B) 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
(C) has the requisite corporate power and authority to
execute, deliver and perform its obligations under this
Agreement;
(ii) the execution and delivery of this Agreement by the
Master Servicer and its performance and compliance with
the terms of this Agreement will not violate the Master
Servicer's articles of incorporation or by-laws or
constitute a material default (or an event which, with
notice or lapse of time, or both, would constitute a
material default) under, or result in the material
breach of, any material contract, agreement or other
instrument to which the Master Servicer is a party or
which may be applicable to the Master Servicer or any
of its material assets;
(iii) this Agreement, assuming due authorization, execution
and delivery by each other party hereto, constitutes a
legal, valid and binding obligation of the Master
Servicer, enforceable against it in accordance with the
terms of this Agreement, except as such enforcement may
be limited by bankruptcy, insolvency, fraudulent
conveyance, reorganization, receivership, moratorium or
other laws relating to or affecting the rights of
creditors generally or of creditors of savings or
banking institutions the accounts of which are insured
by the FDIC and by general principles of equity
including principles of commercial reasonableness, good
faith, independence and fair dealing (regardless of
whether such enforcement is considered in a proceeding
in equity or at law);
(iv) the Master Servicer is not in violation of, and the
execution and delivery of this Agreement by the Master
Servicer and its performance and compliance with the
terms of this Agreement will not constitute a violation
with respect to, any order or decree of any court or
any order or regulation of any federal, state,
municipal or governmental agency having jurisdiction,
which violation could, in the Master Servicer's
good-faith and reasonable judgment, reasonably be
expected
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to have consequences that would materially adversely
affect the performance of its duties hereunder; and
(v) no litigation is pending or, to the best of the Master
Servicer's knowledge, threatened against the Master
Servicer the outcome of which, in the Master Servicer's
good faith and reasonable judgment, could reasonably be
expected to prohibit its entering into or performing
its obligations in any material respect under this
Agreement.
(b) It is understood and agreed that the representations and
warranties set forth in this Section 2.5 shall survive delivery of the
respective Mortgage Files and Mortgage Certificates to the Trustee or to the
Custodian, as the case may be, until the termination of this Agreement, and
shall inure to the benefit of the Trustee and the Depositor. Upon discovery by
the Depositor, the Master Servicer, the Special Servicer or a Responsible
Officer of the Trustee (or upon written notice thereof from any
Certificateholder) of a breach of any of the representations and warranties set
forth in this Section 2.5, the party discovering such breach, shall give prompt
written notice to the other parties.
(c) Within 90 days of the earlier of its discovery or its receipt
of notice of breach of the representation and warranty contained in clause
(a)(i)(B) above, the Master Servicer shall cure such breach in all material
respects; PROVIDED, HOWEVER, that if the Master Servicer is diligently
attempting to cure such breach and is unable to do so within 90 days for reasons
beyond its control, the 90-day period shall be extended for so long as the
Master Servicer is diligently attempting to cure such breach in accordance with
the provisions of this Section but, in no event, shall such extended period
exceed an additional 90 days or have a material adverse effect on
Certificateholders. If the Master Servicer does not or cannot cure such breach
within the applicable period, it shall, consistent with Section 3.1, appoint a
subservicer that is in compliance with the laws of the requisite states and vest
in such entity such rights, powers, duties or obligations as are necessary under
this Agreement to permit enforcement of each affected Mortgage Loan or Mortgage
Certificate. In the event of any such extension, on or before the expiration of
the initial 90-day period, the Master Servicer shall provide an Officer's
Certificate to the Trustee setting forth the efforts being taken to cure such
breach. If the Master Servicer fails to cure a breach of the representation and
warranty contained in clause (a)(i)(B) above or appoint a subservicer within the
applicable cure period, as such period may be extended pursuant to this
paragraph, such failure shall constitute an Event of Default under Section 7.1
hereof.
SECTION 2.6 REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
SPECIAL SERVICER.
(a) LTC, as Special Servicer, hereby represents, warrants and
covenants that as of the Closing Date or by the date it is appointed Special
Servicer, as the case may be:
(i) it (A) is a corporation organized, validly existing and
in good standing under the laws of the state of its
incorporation, (B) 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 (C) has the
requisite corporate power and authority to execute,
deliver and perform its obligations under this
Agreement;
(ii) the execution and delivery of this Agreement by it and
its performance and compliance with the terms of this
Agreement will not violate its charter or by-laws or
constitute a default (or an event which, with notice or
lapse of time, or both, would constitute a default)
under, or result in the breach of (i) any material
contract, agreement or other instrument to which it is
a party, or (ii) to the best of
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the Special Servicer's knowledge, any material
contract, agreement or other instrument to which the
Special Servicer is not a party, but which may be
applicable to it or any of its assets;
(iii) this Agreement, assuming due authorization, execution
and delivery by each other party hereto, constitutes
its legal, valid and binding obligation, enforceable
against it in accordance with the terms of this
Agreement, except as such enforcement may be limited by
bankruptcy, fraudulent conveyance, insolvency,
reorganization, receivership, moratorium or other laws
relating to or affecting the rights of creditors
generally, and by general principles of equity
including principles of commercial reasonableness, good
faith, independence and fair dealing (regardless of
whether such enforcement is considered in a proceeding
in equity or at law);
(iv) it is not in violation of, and its execution and
delivery of this Agreement and its performance and
compliance with the terms of this Agreement will not
constitute a violation with respect to, any order or
decree of any court or any order or regulation of any
federal, state, municipal or governmental agency having
jurisdiction, which violation could, in the Special
Servicer's good-faith and reasonable judgment,
reasonably be expected to have consequences that would
materially affect the performance of its duties
hereunder;
(v) no litigation is pending or, to the best of its
knowledge, threatened against it the course of which
could, in the Special Servicer's good-faith and
reasonable judgment, reasonably be expected to prohibit
its entering into or performing its obligations under
this Agreement.
(b) It is understood and agreed that the representations and
warranties set forth in this Section shall survive delivery of the respective
Mortgage Files and Mortgage Certificates to the Trustee or to the Custodian
until the termination of this Agreement, and shall inure to the benefit of the
Trustee and the Depositor. Upon discovery by the Depositor, the Master
Servicer, the Special Servicer or a Responsible Officer of the Trustee (or, if
earlier, upon written notice thereof from any Certificateholder) of a breach of
any of the representations and warranties set forth in this Section 2.6, the
party discovering such breach shall give prompt written notice to the other
parties.
(c) Within 90 days of the earlier of its discovery or its receipt
of notice of breach of the representation and warranty contained in clause
(a)(i)(B) above, the Special Servicer shall cure such breach in all material
respects; PROVIDED, HOWEVER, that if the Special Servicer is diligently
attempting to cure such breach and is unable to do so within 90 days for reasons
beyond its control, the 90-day period shall be extended for so long as the
Special Servicer is diligently attempting to cure such breach in accordance with
the provisions of this Section but, in no event, shall such extended period
exceed an additional 90 days or have a material adverse effect on
Certificateholders. If the Special Servicer does not or cannot cure such breach
within the applicable period, it shall, consistent with Section 3.1, appoint a
subservicer that is in compliance with the laws of the requisite states and vest
in such entity such rights, powers, duties or obligations as are necessary under
this Agreement to permit enforcement of each affected Mortgage Loan. In the
event of any such extension, on or before the expiration of the initial 90-day
period, the Special Servicer shall provide an Officer's Certificate to the
Trustee and the Master Servicer setting forth the efforts being taken to cure
such breach. If the Special Servicer fails to cure a breach of the
representation and warranty contained in clause (a)(i)(B) above or appoint a
subservicer within the applicable cure period, as such period may be extended
pursuant to this paragraph, such failure shall constitute an Event of Default
under Section 7.1 hereof.
SECTION 2.7 [RESERVED]
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SECTION 2.8 MISCELLANEOUS REMIC PROVISIONS.
(a) The Class A, Class B, Class C, Class D, Class E, Class F,
Class G, Class X-1 and Class X-2 Certificates are hereby designated "regular
interests" in the Upper-Tier REMIC within the meaning of Section 860G(a)(1) of
the Code, and the Class R Certificates are hereby designated the single class of
"residual interest" in the Upper-Tier REMIC within the meaning of Section
860G(a)(2) of the Code. The Class AL Interest, Class BL Interest, Class CL
Interest, Class DL Interest, Class EL Interest, Class FL Interest, Class GL
Interest, Class AR-L Interest and Class X-1L Interest are hereby designated
"regular interests" in the Lower-Tier REMIC within the meaning of Section
860G(a)(l) of the Code and the Class LR Certificates are hereby designated the
single class of "residual interest" in the Lower-Tier REMIC within the meaning
of Section 860G(a)(2) of the Code. The Closing Date is hereby designated as the
"Startup Day" of the Upper-Tier REMIC and Lower-Tier REMIC within the meaning of
Section 860G(a)(9) of the Code. The "latest possible maturity date" of the
Class A, Class B, Class C, Class D, Class E, Class F, Class G, Class X-1 and
Class X-2 Certificates and the Class AL Interest, Class BL Interest, Class CL
Interest, Class DL Interest, Class EL Interest, Class FL Interest, Class GL
Interest, Class AR-L Interest and Class X-1L Interest for purposes of Code
Section 860G(a)(1) is two (2) years following the Final Scheduled Distribution
Date. If not previously paid, all amounts owing on the Certificates shall be
due and payable on the "latest possible maturity date."
(b) The Trustee shall, for federal income tax purposes, maintain
books and records with respect to each of the Upper-Tier REMIC and Lower-Tier
REMIC on a calendar year and on an accrual basis.
(c) None of the Originator, the Depositor, the Trustee, the
Special Servicer, nor the Master Servicer shall enter into any arrangement by
which the Upper-Tier REMIC or Lower-Tier REMIC will receive a fee or other
compensation for services other than as specifically contemplated herein.
SECTION 2.9 TRANSFER AGREEMENT.
Concurrently with the execution and delivery of this Agreement, the
Depositor and the Originator have entered into the Transfer Agreement. The
rights of the Depositor under the Transfer Agreement have been assigned by the
Depositor to the Trustee pursuant to Section 2.1 hereof.
In the event that the Originator fails to perform its obligations
under the Transfer Agreement, the Trustee shall enforce its rights, as assignee
of the Depositor, against the Originator under the terms of the Transfer
Agreement to require the repurchase or replacement of the applicable Mortgage
Loan or Mortgage Certificate. There shall be no recourse to the Depositor for
any such failure by the Originator.
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ARTICLE III
ADMINISTRATION AND SERVICING OF THE
MORTGAGE LOANS AND MORTGAGE CERTIFICATES
SECTION 3.1 MASTER SERVICER TO ACT AS MASTER SERVICER; SPECIAL
SERVICER TO ACT AS SPECIAL SERVICER; ADMINISTRATION OF
THE MORTGAGE LOANS.
(a) Each of the Master Servicer and the Special Servicer, as
independent contract servicers, shall service and administer the Mortgage Loans
and REO Properties it is obligated to service pursuant to this Agreement on
behalf of the Trust Fund in the best interests of and for the benefit of all of
the holders of Certificates (as determined by the Master Servicer or the Special
Servicer in the exercise of its good faith and reasonable judgment) in
accordance with applicable law, the terms of this Agreement and the Mortgage
Loans, and to the extent not inconsistent with the foregoing, in the same manner
in which, and with the same care, skill and diligence as is normal and usual in
its general mortgage servicing and REO property management activities on behalf
of third parties or on behalf of itself, whichever is higher, with respect to
mortgage loans and REO properties that are comparable to the Mortgaged Loans for
which the Master Servicer and the Special Servicer, as applicable, is
responsible, and in each event with a view to the timely collection of all
scheduled payments of principal and interest under the Mortgage Loans or, if a
Mortgage Loan is, and continues to be, in default and if, in the good faith and
reasonable judgment of the Master Servicer or the Special Servicer, no
satisfactory arrangements can be made for the collection of the delinquent
payments, the maximization of the recovery on such Mortgage Loan to the
Certificateholders (as a collective whole) on a present value basis (the
relevant discounting of anticipated collection that will be distributable to
Certificateholders to be performed at the related Net Mortgage Interest Rate),
but without regard to:
(i) any known relationship that the Master Servicer, or
the Special Servicer, any other subservicer or any
Affiliate of the Master Servicer or the Special
Servicer or any subservicer may have with the related
Borrower;
(ii) the ownership of any Certificate by the Master
Servicer or the Special Servicer or any Affiliate of
the Master Servicer or the Special Servicer;
(iii) the Master Servicer's, the Special Servicer's or any
of their respective Affiliate's right to receive
reimbursement of costs, or the sufficiency of any
compensation for its services hereunder or with
respect to any particular transaction; or
(iv) the Master Servicer's obligation, as applicable, to
make Advances.
In the event that the Master Servicer or the Special Servicer believes that
it is unable to comply with the requirements of this Section 3.1(a) with
respect to any particular Mortgage Loan or REO Property as a result of one or
more of the factors described in the foregoing clauses (i) through (iv), it
may enter into a subservicing agreement pursuant to Section 3.1(b) pursuant
to which a subservicer shall perform its duties with respect to such Mortgage
Loan or REO Property. In such event, so long as such subservicer performs
such duties on behalf of the Master Servicer or Special Servicer, as
applicable, in accordance with the requirements of this Section 3.1(a), then
the Master Servicer or Special Servicer shall be deemed to be in compliance
therewith.
Without limiting the foregoing, subject to Section 3.21, the
applicable Special Servicer shall only be obligated to service and administer
those Mortgage Loans or REO Account Properties, as the case may be, as to
which a Servicing Transfer Event has occurred and is continuing
(collectively, the "Specially Serviced Mortgage Loans"), including any REO
Properties related thereto, but the Master Servicer shall be required to
continue to make all calculations and prepare all reports required hereunder
with respect to such Specially Serviced Mortgage Loans as if
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no Servicing Transfer Event had occurred and to render such incidental
services with respect to such Specially Serviced Mortgage Loans as are
specifically provided for herein; PROVIDED HOWEVER, the Master Servicer shall
be required to do so only if the Special Servicer provides the Master
Servicer with such information and assistance as is required by the Master
Servicer to enable it to perform its obligations pursuant to this sentence.
The Special Servicer hereby agrees to furnish such information and assistance
to the Master Servicer. Each Mortgage Loan that becomes a Specially Serviced
Mortgage Loan shall continue as such until satisfaction of the conditions
specified in Section 3.21(a). The Master Servicer shall not be required to
initiate extraordinary collection procedures or legal proceedings with
respect to any Mortgage Loan or to undertake any pre-foreclosure procedures
(including, without limitation, ordering an Environmental Assessment with
respect to any Mortgage Loan). To the extent consistent with the foregoing
and subject to any express limitations set forth in this Agreement, the
Master Servicer and the Special Servicer shall also seek to maximize the
timely and complete recovery of principal and interest on the Notes;
PROVIDED, HOWEVER, that nothing herein contained shall be construed as an
express or implied guarantee by the Master Servicer or the Special Servicer
of the collectibility of the Mortgage Loans. Subject only to the
above-described servicing standards and the terms of this Agreement and of
the respective Mortgage Loans, the Master Servicer and the Special Servicer
shall have full power and authority, acting alone or through subservicers
(subject to paragraph (c) of this Section 3.1 and to Section 3.2), to do or
cause to be done any and all things in connection with such servicing and
administration which it may deem necessary or desirable. Without limiting the
generality of the foregoing, the Master Servicer and the Special Servicer
may, and each is hereby authorized and empowered by the Trustee to, with
respect to each Mortgage Loan it is obligated to service pursuant to this
Agreement, prepare, execute and deliver, on behalf of the Certificateholders
and the Trustee or any of them, at the expense of the Trust Fund, any and all
financing statements, continuation statements and other documents or
instruments necessary to maintain the lien on each Mortgaged Property and
related collateral; and subject to Section 3.20 and the REMIC Provisions,
modifications, waivers, consents, amendments or consents to or with respect
to any documents contained in the related Mortgage File; substitutions of
collateral and any and all instruments of satisfaction or cancellation, or of
partial or full release or discharge, and all other comparable instruments,
with respect to the Mortgage Loans and the Mortgaged Properties if, in its
reasonable judgment, such action is in the best interests of the
Certificateholders in accordance with, or is required by, this Agreement.
The Master Servicer shall service and administer the Mortgage Loans it is
obligated to service pursuant to this Agreement and the applicable Special
Servicer shall service and administer the Mortgage Loans it is obligated to
service pursuant to this Agreement, in accordance with applicable law and
shall provide to the Borrowers any reports required to be provided to them
thereby. Subject to Section 3.11, the Trustee shall, upon the receipt of a
written request of a Servicing Officer of the Master Servicer or a Special
Servicer Officer, execute and deliver to the Master Servicer or the Special
Servicer any powers of attorney and other documents prepared by the Master
Servicer or the Special Servicer and necessary or appropriate (as certified
in such written request) to enable the Master Servicer or the Special
Servicer to carry out its servicing and administrative duties hereunder.
Prior to the institution of any proceeding or undertaking of any
other action by the Master Servicer or Special Servicer in the name of the
Trustee in any state, the Master Servicer or Special Servicer, as the case
may be, shall notify the Trustee in writing and not undertake any such action
or institute any such proceeding until being notified in writing by the
Trustee that such action or undertaking will not adversely affect the Trustee
under such state's "doing business" or tax laws. If the Trustee is so
adversely affected, the Trustee will appoint a co-trustee in whose name such
action or undertaking will be taken, and the cost of such co-trustee will be
an expense of the Trust Fund to the extent such cost is an "unanticipated
expense" as such term is defined in Section 1.860G-1(b)(3)(ii) of the Code,
and in all other situations shall be paid by the Trustee out of its own funds.
(b) The Trustee hereby acknowledges and accepts that the Master
Servicer and the Special Servicer may each enter into subservicing agreements
with third parties with respect to any of their respective obligations
hereunder, provided that (1) any such agreement shall be consistent with the
provisions of this Agreement in all material respects, (2) no subservicer
retained by the Master Servicer or the Special Servicer shall grant any
material modification, waiver, consent or amendment to any Mortgage Loan
unless such modification, waiver, consent, or amendment would be permitted by
this Agreement to be made by the Special Servicer pursuant to Section 3.20
and
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the REMIC Provisions and the subservicer obtains the approval of the Special
Servicer or such modification waiver, consent or amendment of any Mortgage
Loan would not have a material adverse effect on the Certificateholders and
(3) any subservicer retained by the Special Servicer shall be subject to the
approval of the Master Servicer, which approval shall not be unreasonably
withheld.
Any subservicing agreement entered into by the Master Servicer or
the Special Servicer shall provide (1) that it may be assumed or terminated
by the Trustee if it has assumed the duties of the Master Servicer or the
Special Servicer or any successor Master Servicer or successor Special
Servicer, as the case may be, without cost or obligation to the assuming or
terminating party or the Trust Fund, upon the assumption by such party of the
obligations of the Master Servicer or the Special Servicer, as the case may
be, pursuant to Section 7.2 and (2) in the case of an agreement entered into
by the Special Servicer, that it shall relate to Mortgage Loans only for so
long as they are Specially Serviced Mortgage Loans.
Any subservicing agreement, and any other transactions or services
relating to the Mortgage Loans involving a subservicer, shall be deemed to be
between the Master Servicer or the Special Servicer, as applicable, and such
subservicer alone, and the Trustee and the Certificateholders shall not be
deemed parties thereto and shall have no claims, rights, obligations, duties
or liabilities with respect to the subservicer; and no such agreement shall
relieve the Master Servicer or the Special Servicer of any of its obligations
pursuant to this Agreement. Any subservicing agreement entered into by the
Master Servicer or the Special Servicer after the Closing Date shall require,
in addition to the provisions contained in this subsection (b), that:
(1) the subservicer deposit to the Collection Account only
those amounts which are monies collected by the subservicer with respect
to the Mortgage Loans serviced under the subservicing agreement and any
investment earnings on such deposited amounts, together with any Advances
the subservicer is required to make;
(2) the subservicer remit to the Master Servicer, or
Special Servicer, as applicable, not later than three Business Days after
receipt thereof, but in no case later than two Business Days before the
Master Servicer Remittance Date, all Principal Prepayments, Balloon
Prepayments and all other collections required to be submitted pursuant to
this Agreement, to the Collection Account (all such funds shall be held in
an Eligible Account); and
(3) if any subservicer fails to remit to the Master
Servicer or Special Servicer, as applicable, any collection required to be
remitted, such subservicer shall pay interest at the Advance Rate on the
amounts not remitted.
(c) If the Trustee or any successor Master Servicer or Special
Servicer assumes the obligations of the Master Servicer or the Special Servicer
in accordance with Section 7.2, the Trustee or such successor, to the extent
necessary to permit the Trustee or such successor to carry out the provisions of
Section 7.2, shall, without act or deed on the part of the Trustee or such
successor, succeed to all of the rights and obligations of the Master Servicer
or the Special Servicer, as applicable, under any subservicing agreement entered
into pursuant to Section 3.1(b). In such event, the Trustee or the successor
Master Servicer or Special Servicer shall be deemed to have assumed all of the
Master Servicer's or the Special Servicer's interest therein and to have
replaced the Master Servicer or the Special Servicer, as applicable, as a party
to such subservicing agreement to the same extent as if such subservicing
agreement had been assigned to the Trustee or such successor Master Servicer or
Special Servicer, except that (i) the Master Servicer and the Special Servicer
shall be entitled to all fees and expenses accrued during the time that such
party has been servicing as Master Servicer or Special Servicer, as applicable,
and (ii) the Master Servicer or the Special Servicer, as applicable, shall not
have any liability or obligation under such subservicing agreement in respect of
events that occur after such succession unless so provided in such subservicing
agreement or unless such events arise out of actions or events that occurred
prior to such succession.
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In the event that the Trustee or any successor Master Servicer or
Special Servicer assumes the servicing obligations of the Master Servicer or
the Special Servicer, upon request of the Trustee or such successor, the
Master Servicer or the Special Servicer, as applicable, shall at its own
expense deliver to the Trustee or such successor (as the case may be) all
documents and records relating to any subservicing agreement and the Mortgage
Loans, Mortgage Certificates and REO Properties then being serviced
thereunder and an accounting of amounts collected and held by it, if any, and
will otherwise use its best efforts to effect the orderly and efficient
transfer of any subservicing agreement to the Trustee or the successor Master
Servicer or Special Servicer, as applicable.
(d) If the Master Servicer or Special Servicer, as the case may
be, determines with respect to any Mortgaged Property that the expenditure of
funds by the Borrower for repair or replacement costs with respect thereto is
reasonably likely to cause a payment default under the related Mortgage Loan,
the Master Servicer may (but is not obligated to) advance the cost of such
repair or replacement to or for the benefit of the Borrower on terms
determined to be reasonable under the circumstances by the Master Servicer
if, prior to making any such advance, the Master Servicer (i) determines that
such advance is not a Nonrecoverable Advance and is reasonably likely to
produce a greater recovery on a present value basis than a modification,
amendment or waiver with respect to the terms of such Mortgage Loan or the
liquidation of such Mortgage Loan in the event of such a payment default and
(ii) delivers to the Trustee an Opinion of Counsel, which shall be obtained
at the expense of the Trust Fund, and may be applicable to more than one
transaction or generally to a class or classes of transactions described
therein, to the effect that such advance will not cause (A) a loss of REMIC
status with respect to either the Upper-Tier REMIC or Lower-Tier REMIC or (B)
the Upper-Tier REMIC or Lower-Tier REMIC to be subject to any tax under the
REMIC Provisions or equivalent provisions of federal, state, local law or
ordinance. Any such advance shall be a Servicing Advance. Any such advance
by the Master Servicer plus interest thereon at the Advance Rate shall be
reimbursed from (1) future payments and collections on the related Mortgage
Loan (or the related Mortgaged Property) and (2) upon a determination that
any such advance is a Nonrecoverable Advance, from any amounts on deposit in
the Collection Account. The Master Servicer shall have no liability to the
Trust Fund, the Certificateholders or any other Person if its analysis and
determination that such advance is reasonably likely to produce a greater
recovery on a present value basis than a modification, waiver or amendment or
liquidation proves to be wrong or incorrect, so long as such analysis and
determination was made in the reasonable business judgment of the Master
Servicer.
(e) The Special Servicer shall use its reasonable efforts to
collect operating statements which should be processed within thirty days
after receipt by the Special Servicer with respect to each Mortgaged Property
on an annual basis (to the extent required to be delivered pursuant to the
terms of the related Mortgage Loan documents). In addition, in the event of
the existence of a transfer and repurchase event set forth in Section 4.1(b)
of the Transfer Agreement relating to Disqualifying Conditions, the Special
Servicer shall deliver an Environmental Assessment at the expense of the
Trust Fund, and the Master Servicer and the Special Servicer shall deliver
such certifications as are required under the Transfer Agreement.
(f) The Master Servicer, on behalf of the Trustee, shall not, to
the extent permitted by applicable law, accept any Principal Prepayment from
a Borrower, if pursuant to the terms of the related Mortgage Loan, the
mortgagee's prior consent to such Principal Prepayment is a prerequisite for
the acceptance of such Principal Prepayment.
(g) Notwithstanding the foregoing, the responsibilities
hereunder of the Master Servicer, the Special Servicer and the Trustee with
respect to the Mortgage Certificates shall be governed by the provisions of
Section 3.16 hereof.
SECTION 3.2 LIABILITY OF THE MASTER SERVICER AND THE SPECIAL
SERVICER.
Notwithstanding any subservicing agreement, any of the provisions of
this Agreement relating to agreements or arrangements between the Master
Servicer or the Special Servicer, as applicable, and any other Person
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acting as subservicer (or its agents or subcontractors) or any reference to
actions taken through the Depositor or any other Person acting as subservicer
or otherwise, each of the Master Servicer or the Special Servicer, as
applicable, shall remain obligated and primarily liable to the Trustee and
Certificateholders for the servicing and administering of the Mortgage Loans
and Mortgage Certificates it is obligated to service and administer pursuant
to this Agreement in accordance with the provisions of Section 3.1 without
diminution of such obligation or liability by virtue of such subservicing
agreements or arrangements or by virtue of indemnification from the Depositor
or any other Person acting as subservicer (or its agents or subcontractors)
to the same extent and under the same terms and conditions as if the Master
Servicer or the Special Servicer, as applicable, alone were servicing and
administering such Mortgage Loans or Mortgage Certificates; PROVIDED,
HOWEVER, that neither the Master Servicer nor the Special Servicer shall be
liable for any action taken that is not solely in the best interests of the
Certificateholders as a result of the existence or occurrence of one or more
of the factors described in clauses (i) through (iv) of the first paragraph
of Section 3.1(a) if (1) such action is taken by a subservicer appointed by
it with due care pursuant to the last sentence of such first paragraph and in
accordance with the requirements of Section 3.1(c) and (2) the Rating Agency
shall have confirmed in writing that the appointment of such subservicer will
not result in the qualification, downgrade or withdrawal of the ratings then
assigned to the Certificates. Neither the Master Servicer, nor the Special
Servicer shall be liable for actions taken or omitted to be taken with
respect to the Mortgage Certificates by the trustee, the master servicer or
the special servicer for the Mortgage Certificates, or the Trustee hereunder
pursuant to in Section 3.16 hereof. The Master Servicer and the Special
Servicer shall each be entitled to enter into an agreement with any
subservicer providing for indemnification of the Master Servicer or the
Special Servicer, as applicable, by such subservicer, and nothing contained
in this Agreement shall be deemed to limit or modify such indemnification,
but no such agreement for indemnification shall be deemed to limit or modify
this Agreement and no such indemnification shall be payable from amounts
collected with respect to the assets of the Trust Fund being subserviced
thereunder. For purposes of this section, payments made to and collections
received by subservicers with respect to a Mortgage Loan or a REO Property
shall be deemed to be received by the Master Servicer and the Special
Servicer, as applicable, when such payments and collections are received by
the related subservicer and the Master Servicer or the Special Servicer, as
applicable, shall remain liable for such payments and collections,
notwithstanding the fact that such payments and collections are not remitted
to the Master Servicer or the Special Servicer, as applicable.
It is acknowledged by the parties hereto that the Master Servicer
has been retained as contract servicer only, that the Master Servicer did not
originate or re-underwrite the Mortgage Loans, and that all information
available to the Master Servicer regarding the Mortgage Loans has been
supplied by the Originator or by others at the direction of the Originator.
As a consequence of the foregoing, the Master Servicer shall not be liable to
the Trust, the Depositor, or any Certificateholder for any loss resulting
from any deficiency or inaccuracies in the Mortgage Files as of the Cut-Off
Date or in any other information supplied to the Master Servicer.
SECTION 3.3 COLLECTION OF CERTAIN MORTGAGE LOAN PAYMENTS.
Each of the Master Servicer and the Special Servicer shall, in
accordance with the servicing standard set forth in Section 3.1(a), collect
all payments called for under the terms and provisions of the Mortgage Loans
that it is obligated to service hereunder, collect all distributions on the
Mortgage Certificates and follow such collection procedures as it generally
would follow with respect to mortgage loans comparable to the Mortgage Loans
and pass-through certificates comparable to the Mortgage Certificates held in
other portfolios or in its own portfolio, whichever servicing procedure is of
a higher standard, so long as such collection procedures are in accordance
with commercially reasonable standards and the applicable Mortgage Loan
documents. Consistent with the foregoing, the Master Servicer and the
Special Servicer may each in its discretion waive any late payment or
assumption or modification charge or penalty interest in connection with any
delinquent Monthly Payment or Balloon Payment with respect to any Mortgage
Loan which the Master Servicer or Special Servicer, respectively, is
obligated to service hereunder, but only to the extent that such waiver would
not adversely affect the REMIC status of the Upper-Tier REMIC or the
Lower-Tier REMIC, or result in the imposition of any tax upon either the
Upper-Tier or Lower-Tier REMIC under the REMIC Provisions or any similar
provisions of federal, state or local tax laws, as evidenced by an Opinion of
Counsel obtained
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at the expense of the Borrower requesting such waiver. All payments actually
made shall be applied first to the Monthly Payment and any overdue Monthly
Payments. The Master Servicer, on behalf of the Trustee, shall withhold any
consent required to be obtained by a Borrower from the mortgagee pursuant to
the related Mortgage Loan prior to making any partial or full Principal
Prepayment thereunder.
In the event that, during the three month period ending on the
Maturity Date, the related Borrower indicates an inability to pay such Balloon
Payment on or before the Maturity Date thereof, the Master Servicer may
determine that a Servicing Transfer Event as described in clause (i) of the
definition thereof has occurred if, in connection with such determination, the
Master Servicer determines, in its reasonable business judgment, that a payment
default on the Mortgage Loan is imminent.
SECTION 3.4 PAYMENT OF TAXES, ASSESSMENTS AND SIMILAR ITEMS.
(a) With respect to each Mortgage Loan other than an REO Account
Mortgage Loan, the Master Servicer shall maintain accurate records with
respect to each related Mortgaged Property reflecting the status of taxes,
assessments and other similar items that are or may become a lien on the
related Mortgaged Property and the status of insurance premiums payable with
respect thereto. With respect to each REO Account Mortgage Loan, the Special
Servicer shall maintain accurate records reflecting the status of taxes,
assessments and other similar items that are or may become a lien on the
related REO Account Property and the status of insurance premiums payable
with respect thereto (and copies of such items shall be forwarded to the
Master Servicer). From time to time as and when such bills become payable,
the Master Servicer (with respect to Mortgaged Properties other than REO
Account Properties) or the Special Servicer (with respect to REO Account
Properties) shall use its reasonable efforts consistent with the servicing
standard set forth in Section 3.1 (a) to cause the related Borrowers to
comply with the requirements of the related Mortgage Loans for payment of all
such bills with respect to such Mortgaged Properties as they first become
due. If a Borrower fails to make any such payment on a timely basis the
Master Servicer in accordance with the servicing standard set forth in
Section 3.1(a) herein and after obtaining knowledge of the Borrower's default
shall make a Servicing Advance in the amount of such shortfall unless the
Master Servicer makes a determination, in its reasonable business judgment,
that such advance, if made, would be a Nonrecoverable Advance. The Master
Servicer shall be entitled to reimbursement of the Advances made pursuant to
the preceding sentence plus Advance Interest thereon. Such Servicing Advance
shall be recovered (i) from future payments and collections with respect to
the related Mortgage Loan or REO Account Property or (ii) upon a
determination that any such advance is a Nonrecoverable Advance, from any
amounts on deposit in the Collection Account.
No costs incurred by the Special Servicer in effecting the payment
of taxes, insurance premiums and assessments on the Mortgaged Properties
shall be included in the Principal Amount of the related Mortgage Loan for
purposes of calculating distributions to Certificateholders.
SECTION 3.5 COLLECTION ACCOUNT, DISTRIBUTION ACCOUNT AND UPPER-TIER
DISTRIBUTION ACCOUNT.
(a) The Master Servicer shall establish and maintain the
Collection Account in the name of the Trustee in trust for the benefit of the
Certificateholders. The Collection Account shall be established and maintained
as an Eligible Account. The Master Servicer shall deposit into the Collection
Account, on a daily basis, or as otherwise required hereunder, and as and when
received, the following payments and collections received or made by it on or
with respect to the Mortgage Loans and Mortgage Certificates, other than
payments, if any, in respect of principal and interest on the Mortgage Loans
that are not assigned to the Trustee pursuant to Section 2.1:
(i) all payments on account of principal, including
Principal Prepayments, on the Mortgage Loans;
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(ii) all payments on account of interest on the Mortgage
Loans other than Prepayment Premiums and amounts
payable to the Master Servicer or Special Servicer
pursuant to Section 3.12 hereof;
(iii) all Insurance Proceeds and Liquidation Proceeds;
(iv) any amounts required to be deposited pursuant to
Section 3.17(d) in connection with any REO Account
Property or other Mortgaged Property;
(v) any amounts received upon the sale or other disposition
of any real or personal property acquired upon the
enforcement of the rights of the Trustee relating to a
Mortgage Loan or under any guaranty relating to a
Mortgage Loan;
(vi) any amounts received from Borrowers which represent
recoveries of (x) Property Protection Expenses or (y)
payments of taxes, insurance premiums, assessments and
other payments made pursuant to Section 3.4;
(vii) all Prepayment Interest Excess;
(viii) any amounts required to be deposited in connection with
the application of co-insurance clauses, flood damage
to REO Properties and blanket policy deductibles; and
(ix) all payments of interest and principal received with
respect to the Mortgage Certificates.
All such amounts shall be transferred by the Master Servicer in
immediately available funds to the Collection Account not later than the
earlier of (i) two Business Days after receipt by the Master Servicer and
(ii) the day preceding each Master Servicer Remittance Date. The foregoing
requirements for deposits in the Collection Account shall be exclusive, it
being understood and agreed that, without limiting the generality of the
foregoing, payments in the nature of assumption or substitution fees and
modification fees with respect to all Mortgage Loans shall not be deposited
in the Collection Account by the Master Servicer and shall not be deposited
in the REO Account by the Special Servicer, and, in each case to the extent
permitted by applicable law and Section 3.12, the Master Servicer and the
Special Servicer shall be entitled to retain any such charges and fees
received with respect to such Mortgage Loans. In the event that the Master
Servicer deposits in the Collection Account any amount not required to be
deposited therein, it may at any time withdraw such amount from the
Collection Account, any provision herein to the contrary notwithstanding.
Upon receipt of any of the foregoing amounts with respect to any
Specially Serviced Mortgage Loans other than REO Account Mortgage Loans, the
Special Servicer shall immediately remit such amounts to the Master Servicer
for deposit into the Collection Account in accordance with the second
preceding paragraph. Such amounts received with respect to any REO Account
Mortgage Loans will be deposited by the Special Servicer into the REO Account
and remitted to the Master Servicer for deposit into the Collection Account
pursuant to Section 3.17.
With respect to any such amounts required to be remitted to the
Master Servicer that are paid by check to the order of the Special Servicer,
the Special Servicer shall endorse such check to the order of the Master
Servicer and shall promptly deliver any such check to the Master Servicer by
overnight courier or comply with other reasonable instructions of the Master
Servicer with respect thereto.
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(b) The Paying Agent shall establish and maintain the
Distribution Account in the name of the Trustee in trust for the benefit of
the Lower-Tier Certificateholders. The Paying Agent shall also establish and
maintain the Upper-Tier Distribution Account in the name of the Trustee in
trust for the benefit of the Certificateholders. The Distribution Account and
the Upper-Tier Distribution Account shall be established and maintained as
Eligible Accounts. Notwithstanding anything in this Agreement to the
contrary, the Upper-Tier Distribution Account may be maintained by the Paying
Agent as a subaccount of the Distribution Account, and all distributions from
the Distribution Account to the Upper-Tier Distribution Account may consist
of deemed distributions effected by accounting entries. With respect to each
Distribution Date, the Master Servicer shall deposit into the Distribution
Account on or before the related Master Servicer Remittance Date an aggregate
amount of immediately available funds equal to the Available Funds for such
Distribution Date. In addition, on or prior to the related Master Servicer
Remittance Date, the Master Servicer shall deposit in the Distribution
Account any P&I Advances required pursuant to Section 3.22 to be so deposited
prior to the related Distribution Date. The Trustee shall notify the Master
Servicer by 3:00pm Central time on the Master Servicer Remittance Date in the
event the Trustee has not yet received such available funds and/or P&I
Advances; PROVIDED, HOWEVER, that the Master Servicer shall pay the Trustee
interest on such payment at the Prime Rate from, BUT NOT INCLUDING, the
Master Servicer Remittance Date until such payment is received by the
Trustee. The Paying Agent shall make deposits and withdrawals from the
Upper-Tier Distribution Account pursuant to Section 4.2(b). In the event
that the Master Servicer or the Special Servicer, as applicable, fails to
deliver such amounts as required, the Master Servicer or the Special
Servicer, as applicable, shall deliver to the Trustee (and the Master
Servicer in the case of the Special Servicer) a written statement describing,
on a Mortgage Loan by Mortgage Loan basis, the amounts required pursuant to
Section 3.22 to be so delivered.
(c) Funds in the Collection Account, Distribution Account or
Upper-Tier Distribution Account may only be invested in Permitted Investments
in accordance with the provisions of Section 3.7. The Master Servicer shall
give written notice to the Trustee and the Special Servicer of the location
and account number of the Collection Account and shall notify the Trustee in
writing prior to any subsequent change thereof.
SECTION 3.6 PERMITTED WITHDRAWALS FROM THE COLLECTION ACCOUNT.
The Master Servicer may make withdrawals from the Collection
Account only as described below (the order set forth below not constituting
an order of priority for such withdrawals):
(i) to pay to the Trustee, the Trustee Fee;
(ii) to transfer on or before each Master Servicer
Remittance Date to the Lower-Tier Distribution
Account, the amount required to be deposited in the
Distribution Account pursuant to Section 3.5(a);
(iii) to pay or reimburse (a) the Trustee or the Master
Servicer, for Advances other than P&I Advances,
together with Advance Interest thereon, to the extent
and at the time payable or reimbursable pursuant to
this Agreement and (b) the Trustee for expenses,
disbursements and advances pursuant to Section 8.5(b)
of this Agreement;
(iv) on each Determination Date to reimburse the Trustee or
the Master Servicer, for unreimbursed P&I Advances in
accordance with the provisions of Section 3.22 together
with interest thereon at the Advance Rate to the extent
provided in that Section;
(v) to pay on each Determination Date (a) to the Master
Servicer, as adjusted pursuant to Section 4.8, the
aggregate unpaid Servicing Fees in respect of the
immediately
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preceding Due Period; (b) to the Special Servicer, the
Basic Fee and the aggregate unpaid Workout Fee in
respect of such Due Period (but only out of
collections on and proceeds of the related Mortgage
Loans and REO Properties); and (c) to the Master
Servicer and the Special Servicer, any unpaid Servicing
Fees, Workout Fees in respect of any prior Due Period
plus interest thereon at the Advance Rate;
(vi) to pay on or before each Determination Date to the
Originator, the Master Servicer or the Special
Servicer, as the case may be, with respect to each
Mortgage Loan, Mortgage Certificate or REO Property
that has previously been purchased or repurchased from
the Trust Fund pursuant to Section 2.2, 2.3(d), 3.18,
4.6(b) or 9.1, all amounts received thereon during the
immediately preceding Prepayment Period and subsequent
to the date as of which the amount required to effect
such purchase or repurchase was determined;
(vii) at the direction of the Trustee to pay the expenses of
the Trust Fund as specified herein and not otherwise
provided for in this Section 3.6 and to pay, only from
amounts otherwise distributable to Holders of Class R
or Class LR Certificates, as the case may be, any
federal, state or local taxes imposed on the Upper-Tier
REMIC or Lower-Tier REMIC, respectively, pursuant to
Section 4.6;
(viii) to withdraw any amount deposited into the Collection
Account that was not required to be deposited therein,
including late fees and any other penalties or charges
to be retained by the Depositor;
(ix) to the extent not reimbursed pursuant to any other
clause of this Section 3.6, to reimburse the Trustee,
the Master Servicer and the Special Servicer for any
expenses or other amounts reimbursable or payable to
them under this Agreement, together with interest
thereon to the extent provided in this Agreement;
(x) to clear and terminate the Collection Account pursuant
to Section 9.1.; and
(xi) to make other payments authorized by this Agreement.
The Master Servicer shall keep and maintain separate accounting, on
a Mortgage Loan by Mortgage Loan basis, and Mortgage Certificate by Mortgage
Certificate basis, for the purpose of justifying any withdrawal from the
Collection Account pursuant to subclauses (iii), (iv), (v) and (viii) above.
The Master Servicer shall pay to the Special Servicer (or to third
party contractors at the direction of the Special Servicer) or the Trustee
from the Collection Account amounts permitted to be paid to the Special
Servicer or the Trustee therefrom promptly upon receipt of a certificate of a
Special Servicer Officer or a Responsible Officer of the Trustee, as the case
may be, describing the item and amount to which the Special Servicer or the
Trustee, as the case may be, is entitled. The Master Servicer may rely
conclusively on any such certificate and shall have no duty to re-calculate
the amounts stated therein. Each of the Special Servicer and the Master
Servicer shall keep and maintain separate accounting, on a Mortgage Loan by
Mortgage Loan basis, and Mortgage Certificate by Mortgage Certificate basis,
for the purpose of justifying any request made by it for any withdrawal from
the Collection Account.
The Trustee, the Master Servicer and the Special Servicer shall in
all cases have a right prior to the Certificateholders to any funds on
deposit in the Collection Account from time to time for the payment of the
Servicing Fee, the Trustee Fee, the Basic Fee and the Workout Fee, for the
reimbursement of P&I Advances and Servicing Advances plus interest thereon at
the Advance Rate, in each case to the extent such advances are determined to
be
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Nonrecoverable Advances, and for reimbursement of their respective expenses
hereunder (plus interest thereon to the extent provided in this Agreement) to
the extent such expenses are to be reimbursed from amounts on deposit in the
Collection Account pursuant to this Agreement (and to have such amounts paid
directly to third party contractors for any invoices approved by the Trustee,
the Master Servicer or the Special Servicer, as applicable). Any funds in
the Collection Account which are not withdrawn in satisfaction of the amounts
described in this paragraph shall be disposed of in accordance with
subsection (ii) of this Section 3.6.
SECTION 3.7 INVESTMENT OF FUNDS IN THE COLLECTION ACCOUNT,
REO ACCOUNT, THE DISTRIBUTION ACCOUNT AND
THE UPPER-TIER DISTRIBUTION ACCOUNT.
(a) The Master Servicer may direct any depository institution
maintaining the Collection Account, REO Account, the Distribution Account or
the Upper-Tier Distribution Account (each, for purposes of this Section 3.7,
an "Investment Account") to invest the funds in such Investment Account in
one or more Permitted Investments that mature no later than the Business Day
preceding the date on which such funds are required to be withdrawn from such
Investment Account pursuant to this Agreement. Any direction by the Master
Servicer to invest funds on deposit in an Investment Account shall be in
writing and shall certify that the requested investment is a Permitted
Investment which matures at or prior to the time required hereby. All such
Permitted Investments shall be held to maturity, unless payable, without
penalty, on demand. Any investment of funds in an Investment Account shall
be made in the name of the Trustee (in its capacity as such) or in the name
of a nominee of the Trustee. The Trustee or its agent, initially LaSalle
National Bank, shall have sole control (except with respect to investment
direction) over each such investment and, subject to Section 3.7(b), the
income thereon, and any certificate or other instrument evidencing any such
investment shall be delivered directly to the Trustee or its agent, initially
LaSalle National Bank together with any document of transfer, if any,
necessary to transfer title to such investment to the Trustee or its nominee.
In the event amounts on deposit in an Investment Account are at any time
invested in a Permitted Investment payable on demand, the Paying Agent (in
the case of the Distribution Account and the Upper-Tier Distribution
Account), the Master Servicer (in the case of the Collection Account) or the
Special Servicer (in the case of the REO Account) shall:
(x) consistent with any notice required to be given
thereunder, demand that payment thereon be made on the last day such
Permitted Investment may otherwise mature hereunder in an amount equal to
the lesser of (1) all amounts then payable thereunder and (2) the amount
required to be withdrawn on such date in order to make the distributions
required by this Agreement; and
(y) consistent with any notice requirements thereunder,
demand payment of all amounts due thereunder promptly upon determination
by the Paying Agent (in the case of the Distribution Account and the
Upper-Tier Distribution Account) or the Master Servicer (in the case of
the Collection Account) or the Special Servicer (in the case of the REO
Account) that such Permitted Investment no longer constitutes a Permitted
Investment.
(b) All net income and gain realized from investment of funds in
Permitted Investments deposited in the REO Account, the Distribution Account,
the Upper-Tier Distribution Account and the Collection Account shall be for the
benefit of the Master Servicer, and all losses from any such investments shall
be borne by the Master Servicer.
(c) Except as otherwise expressly provided in this Agreement, if
any default occurs in the making of a payment due under any Permitted
Investment, or if a default occurs in any other performance required under
any Permitted Investment, the Trustee may (and, subject to Sections 8.1 and
8.2(a)(iii), upon the request of Holders of Certificates representing at
least 51% of the Voting Rights of any Class, shall) take such action as may
be appropriate to enforce such payment or performance, including the
institution and prosecution of appropriate proceedings; PROVIDED, HOWEVER,
that if such default occurs in respect of a Permitted Investment under which
the Trustee, in its corporate
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capacity, is the obligor, the Trustee shall take no such action and the
Master Servicer shall be entitled to take such action as the Trustee would
otherwise be entitled to take pursuant to this Section 3.7(c). The Trustee
or the Master Servicer, as applicable, shall be entitled to reimbursement
from the Trust Fund for all costs and expenses incurred by it in the
performance of its duties under this subsection (c) promptly following its
request therefor in the form of a certificate of a Responsible Officer or
Servicing Officer, as applicable, describing such cost or expense and the
amount thereof.
SECTION 3.8 MAINTENANCE OF INSURANCE POLICIES AND ERRORS AND
OMISSIONS AND FIDELITY COVERAGE.
(a) The Master Servicer on behalf of the Trust Fund shall
maintain or cause the related Borrower to maintain for each Mortgage Loan
(other than REO Mortgage Loans) fire and hazard insurance with extended
coverage on the related Mortgaged Property with a Qualified Insurer in an
amount which is at least equal to the lesser of the then current Principal
Balance of such Mortgage Loan and the replacement cost of the improvements
which are a part of such property which would not give rise to co-insurance
requirements, but only to the extent such insurance is required to be
maintained by the Borrower pursuant to the terms of such Mortgage Loan or
such Mortgage Loan permits the mortgagee to require the Borrower to maintain
such insurance. The cost of any such insurance (as well as the amount of any
deductible, to the extent that the Trust Fund incurs a loss as a result
thereof), if not borne by the Borrower, shall be an expense of the Trust Fund
payable out of the Collection Account pursuant to Section 3.6 to the extent
such Borrower defaulted on its obligation to maintain such insurance or pay
such deductible. If any insurance required to be maintained by the Master
Servicer pursuant to this Section 3.8 is available (whether or not at
commercially reasonable rates) and is not maintained as required and any loss
which is of a type which is or which would have been covered under any such
policy occurs, (other than a loss occasioned by the termination of an
insurance policy (except at the maturity of such policy) on which the Master
Servicer, on behalf of the Trust Fund, is named as a loss payee and with
respect to which the insurer failed to notify the Master Servicer of such
termination in sufficient time prior to such termination to enable the Master
Servicer to obtain insurance conforming to such requirements), the Master
Servicer will deposit in the Collection Account from its own funds, without
right of reimbursement therefor, an amount equal to the amount of such loss
occasioned by the failure to maintain the required coverage. Any cost
incurred by the Master Servicer in maintaining the insurance required by this
paragraph to the extent that the Borrower defaults in its obligation to do so
shall be a Servicing Advance.
(b) The Special Servicer on behalf of the Trust Fund shall cause
to be maintained fire and hazard insurance with a Qualified Insurer with
extended coverage on each related REO Property in an amount which is at least
equal to the replacement cost of the improvements which are a part of such
property having a deductible not in excess of $200,000 per property. The
Special Servicer shall cause to be maintained with respect to each REO
Property public liability insurance with a Qualified Insurer providing such
coverage against such risks as the Special Servicer determines, consistent
with the servicing standard set forth in Section 3.1(a), to be in the best
interests of the Trust Fund. The cost of any such insurance with respect to
an REO Property (as well as the amount of any deductible) shall be an expense
of the Trust Fund payable out of the REO Account pursuant to Section 3.17(c)
or, if the amount on deposit therein is insufficient therefor, out of the
Collection Account pursuant to Section 3.6. Any Insurance Proceeds received
by the Special Servicer shall be deposited into the REO Account, and any
Insurance Proceeds received by the Master Servicer shall be deposited in the
Collection Account pursuant to Section 3.5, subject to withdrawal pursuant to
Section 3.6. Any cost incurred by the Special Servicer in maintaining the
insurance required by this paragraph shall be a Servicing Advance. It is
understood and agreed that no earthquake or other additional insurance other
than flood insurance is to be required of any Borrower or to be maintained by
the Master Servicer or the Special Servicer, as applicable, other than
pursuant to the terms of the related Note or Mortgage and pursuant to such
applicable laws and regulations as shall at any time be in force and as shall
require such additional insurance. If permitted by the related Note or
Mortgage, the Master Servicer shall maintain, if available, or may require
the related Borrower to maintain other forms of insurance including but not
limited to, loss of rents, endorsements, business interruption insurance and
comprehensive public liability insurance.
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If the Mortgaged Property was located at the time of origination of
the Mortgage Loan in a federally designated special flood hazard area, the
Master Servicer will cause the related Borrower to maintain or will itself
obtain flood insurance in respect thereof to the extent available and to the
extent the related Mortgage Loan requires the Borrower, or permits the
mortgagee to require the Borrower, to maintain such insurance. Such flood
insurance shall be in an amount equal to the lesser of (i) the unpaid
principal balance of the related Mortgage Loan and (ii) the greater of (a)
the maximum amount of such insurance required by the terms of the related
Note or Mortgage and (b) the maximum amount of such insurance as is available
for the related property under the national flood insurance program (assuming
that the area in which such property is located is participating in such
program). The cost of any insurance described above (as well as the amount
of any deductible), if not borne by the Borrower, shall be an expense of the
Trust Fund payable out of the Collection Account pursuant to Section 3.6. If
an REO Property was located at the time of origination of the related
Mortgage Loan in a federally designated special flood hazard area, the
Special Servicer will obtain and maintain, or shall cause to be obtained and
maintained, flood insurance in respect thereof providing substantially the
same coverage as described in the second preceding sentence. If a recovery
under a flood, fire and hazard or public liability insurance policy in
respect of an REO Property would have been available if such insurance were
available (whether or not at commercially reasonable rates) and were
maintained thereon in accordance with the standards applied to Mortgaged
Properties described herein, the Special Servicer shall either (i)
immediately remit to the Master Servicer for deposit into the Collection
Account from its own funds, without any right of reimbursement therefor, the
amount that would have been recovered or (ii) apply to the restoration and
repair of the property from its own funds, without any right of reimbursement
therefor, the amount that would have been recovered, if such application
would be consistent with the servicing standard set forth in Section 3.1(a).
Subject to customary servicing practices, each Special Servicer
agrees, with respect to the related Specially Serviced Mortgage Loans and the
Master Servicer agrees, with respect to other Mortgage Loans, to prepare and
present, on behalf of itself, the Trustee and the Certificateholders, claims
under each related insurance policy maintained pursuant to Sections 3.8(a)
and (b) in a timely fashion in accordance with the terms of such policy and
to take such reasonable steps as are necessary to receive payment or to
permit recovery thereunder. Notwithstanding anything contained herein to
the contrary, the Master Servicer and each Special Servicer shall be
obligated to present such claims only if they become aware that a claim has
not been presented by a Borrower and such insurance policies permit the
Master Servicer or the Special Servicer to present such claims.
All policies required hereunder shall name the Trustee, or the
Master Servicer on behalf of the Trustee, as loss payee.
(c) If the Master Servicer or the Special Servicer obtains and
maintains a blanket policy with a Qualified Insurer insuring against fire and
hazard losses on all or a significant portion of the Mortgaged Properties
which the Master Servicer or the Special Servicer, as applicable, services,
which blanket policy shall be maintained at the expense of the Master
Servicer or the Special Servicer, as the case may be, it shall conclusively
be deemed to have satisfied its obligations concerning the maintenance of
insurance coverage set forth in Sections 3.8(a) and (b) with respect to the
Mortgage Loans covered by such blanket policy, it being understood and agreed
that such policy may contain a deductible clause, in which case the Master
Servicer or the Special Servicer, as applicable, shall, in the event that
there shall not have been maintained on the related Mortgaged Property a
policy otherwise complying with the provisions of Sections 3.8(a) and (b),
and there shall have been one or more losses which would have been covered by
such a policy had it been maintained, immediately deposit into the Collection
Account from its own funds, without any right of reimbursement therefor, the
amount not otherwise payable under the blanket policy because of such
deductible clause to the extent that any such deductible exceeds the
deductible limitation pertaining to the policy, if any, maintained with
respect to the related Mortgage Property, or, in the absence of any such
deductible limitation, the deductible limitation which is consistent with the
servicing standard set forth in Section 3.1(a). In connection with their
respective activities as Master Servicer and Special Servicer hereunder, each
of the Master Servicer and the Special Servicer agrees to prepare and
present, on behalf of itself, the Trustee and Certificateholders, claims
under any such blanket policy
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which it maintains in a timely fashion in accordance with the terms of such
policy and to take such reasonable steps as are necessary to receive payment
or permit recovery thereunder.
(d) The Master Servicer and the Special Servicer shall each
maintain a fidelity bond in the form and amount equal to the coverage which
would be required by FNMA or FHLMC, whichever would be greater, if the Master
Servicer were servicing the Mortgage Loans for FNMA or FHLMC and, in the case
of LTC as Special Servicer, in the form and amount equal to coverage
maintained by managers managing portfolios similar to those managed by LTC,
as Special Servicer. Each of the Master Servicer and the Special Servicer
shall be deemed to have complied with this provision if one of its respective
Affiliates has such fidelity bond coverage and, by the terms of such fidelity
bond, the coverage afforded thereunder extends to the Master Servicer or the
Special Servicer, respectively. The Master Servicer and Special Servicer, as
the case may be, shall notify the Trustee as soon as practical of any
cancellation of such fidelity bond. In addition, the Master Servicer and the
Special Servicer shall each keep in force during the term of this Agreement a
policy or policies of insurance covering loss occasioned by the errors and
omissions of its officers, employees and agents in connection with its
obligations to service the Mortgage Loans hereunder. The Master Servicer
shall cause each and every subservicer for it, and the Special Servicer shall
cause each and every subservicer for it, to maintain a policy of insurance
covering errors and omissions and a fidelity bond which would meet such
requirements. Each such fidelity bond and errors and omissions policy shall
be issued by (i) an insurer having a claims-paying ability rating of at least
"A" by S&P, (ii) an insurer whose obligations are guaranteed or backed by a
company having such a claims-paying ability rating, or (iii) an insurer with
respect to which the written confirmation of the Rating Agency has been
obtained to the effect that the maintenance of a fidelity bond and errors and
omissions policy issued by such insurer will not result in the qualification,
downgrade or withdrawal of the then current ratings on the outstanding
Classes of Certificates; PROVIDED, HOWEVER, that so long as the long term
debt or deposit obligations of the Master Servicer or the Special Servicer
are rated at least "A" by S&P, the Master Servicer or the Special Servicer,
as applicable, shall be allowed to provide self-insurance with respect to an
errors and omissions insurance policy.
SECTION 3.9 ENFORCEMENT OF DUE-ON-SALE CLAUSES; ASSUMPTION
AGREEMENTS.
(a) If any Mortgage Loan contains a provision in the nature of a
"due-on-sale" clause, which by its terms:
(i) provides that such Mortgage Loan shall (or may at the
mortgagee's option) become due and payable upon the
sale or other transfer of an interest in the related
Mortgaged Property, or
(ii) provides that such Mortgage Loan may not be assumed
without the consent of the related mortgagee in
connection with any such sale or other transfer,
then, for so long as such Mortgage Loan is included in the Trust Fund, the
Master Servicer or, if such Mortgage Loan is a Specially Serviced Mortgage
Loan, the Special Servicer, on behalf of the Trust Fund, in a manner
consistent with the servicing standards set out in Section 3.1(a), may waive
or enforce any due-on-sale clause contained in the related Note or Mortgage
in a manner consistent with the servicing standards set out in Section 3.1(a)
and in the case of a waiver shall provide the Rating Agency with written
notice of such proposed waiver and obtain prior written confirmation from the
Rating Agency the taking of such action will not result in the qualification,
downgrade or withdrawal of the then current ratings assigned by the Rating
Agency to the outstanding Classes of the Certificates; PROVIDED, HOWEVER,
that such prior written confirmation of a waiver shall only be required for a
Mortgage Loan, a group of cross-collateralized Mortgage Loans, or one or more
Mortgage Loans to related Borrowers, if the aggregate outstanding principal
balance of such Mortgage Loan or groups of Mortgage Loans exceeds 5% of the
outstanding principal balance of all Mortgage Loans. The Master Servicer or
the Special Servicer, as applicable, is also authorized to take or enter into
an assumption agreement from or with the Person to whom such property has
been or is about to be conveyed, or to release the original Borrower from
liability upon the Mortgage Loan and substitute the new Borrower
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as obligor thereon; PROVIDED HOWEVER that (i) if a new Borrower is
substituted for Mortgage Loans #152, #153, #214, #215 and #216, or (ii) if
the Originator or any of its affiliates becomes the Borrower for any other
Mortgage Loan by assuming the obligations for such Mortgage Loan, the Master
Servicer or Special Servicer, as applicable, shall receive written
confirmation from the Rating Agency that such substitution or assumption
shall not result in a downgrade or withdrawal or qualification of the rating
then assigned to any Class of Certificates; PROVIDED, FURTHER, that except as
otherwise permitted by Section 3.20 and the REMIC Provisions, the terms of
any such assumption or substitution agreement shall not be materially
different from those in the original Note or Mortgage. To the extent
permitted by law, the Master Servicer or the Special Servicer, as applicable,
shall enter into an assumption or substitution agreement only if the credit
status of the prospective new borrower is in compliance with the servicing
standards set forth in Section 3.1. The Master Servicer or the Special
Servicer, as applicable, shall notify the Trustee that any such assumption or
substitution agreement has been completed and forward to the Custodian the
original of such agreement, which original shall be added by the Custodian to
the related Mortgage File, and shall, for all purposes, be considered a part
of such Mortgage File to the same extent as all other documents and
instruments constituting a part thereof. In connection with any such
assumption or substitution agreement, the Mortgage Interest Rate, principal
amount and other material payment terms of the Mortgage Loan pursuant to the
related Note shall not be changed, except as otherwise permitted by Section
3.20. Any fee collected by the Master Servicer or Special Servicer for
entering into an assumption or substitution agreement will be retained by the
Master Servicer or the Special Servicer, as applicable, pursuant to Section
3.12 hereof.
(b) If any Mortgage Loan contains a provision in the nature of a
"due-on-encumbrance" clause, which by its terms:
(i) provides that such Mortgage Loan shall (or may at the
mortgagee's option) become due and payable upon the
creation of any lien or other encumbrance on the
related Mortgaged Property or
(ii) requires the consent of the related mortgagee to the
creation of any such lien or other encumbrance on the
related Mortgaged Property,
then, for so long as such Mortgage Loan is included in the Trust Fund, the
Master Servicer or, if such Mortgage Loan is a Specially Serviced Mortgage Loan,
the Special Servicer, on behalf of the Trust Fund, shall exercise (or decline to
exercise) any right the Trustee may have as the mortgagee of record with respect
to such Mortgage Loan (x) to accelerate the payments thereon, or (y) to withhold
its consent to the creation of any such lien or other encumbrance, in a manner
consistent with the servicing standards set forth in Section 3.1(a); PROVIDED,
HOWEVER, that the Special Servicer has obtained written confirmation from the
Rating Agency that any such action will not result in the qualification,
downgrade or withdrawal of the then current ratings assigned by the Rating
Agency to the outstanding Classes of the Certificates. If the Special Servicer
decides to not exercise any such right which the Trustee may have under this
Section, it shall provide the Rating Agency with written notice of such
decision.
(c) Nothing in this Section 3.9 shall constitute a waiver of the
Trustee's right, as the mortgagee of record, to receive notice of any assumption
of a Mortgage Loan, any sale or other transfer of the related Mortgaged Property
or the creation of any lien or other encumbrance with respect to such Mortgaged
Property.
(d) Except as otherwise permitted by Section 3.20 and the REMIC
Provisions, in connection with the taking of, or the failure to take, any action
pursuant to this Section 3.9, the Master Servicer and the Special Servicer shall
not agree to modify, waive or amend, and no assumption or substitution agreement
entered into pursuant to Section 3.9(a) shall contain any terms that are
different from, any term of any Mortgage Loan or the related Note.
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SECTION 3.10 REALIZATION UPON DEFAULTED MORTGAGE LOANS.
(a) Subject to Section 3.18(a), the related Special Servicer
shall foreclose upon or otherwise comparably convert (which may include
acquisition of an REO Property) the ownership of properties securing such of
the Mortgage Loans as come into and continue in default and as to which no
satisfactory arrangements can be made for collection of delinquent payments
pursuant to Sections 3.3 or 3.20, and which are not released from the Trust
Fund pursuant to any other provision hereof, if the Special Servicer
determines, in a manner consistent with the servicing standard set forth in
Section 3.1(a), that such action would be in the best economic interest of
the Trust Fund. The Master Servicer shall advance the costs and expenses of
any such proceeding as a Servicing Advance unless the Master Servicer makes a
determination, in its reasonable business judgment, that such advance, if
made, would be a Nonrecoverable Advance. The Master Servicer shall be
entitled to reimbursement of advances made pursuant to the preceding sentence
plus interest thereon at the Advance Rate from (i) future payments and
collections with respect to the related Mortgage Loan (or the related
Mortgaged Property) and, (ii) upon a determination that such advance is a
Nonrecoverable Advance, from amounts on deposit in the Collection Account.
If the Special Servicer elects to proceed with a foreclosure in
accordance with the laws of the state where the Mortgaged Property is
located, the Special Servicer shall not be required to pursue a deficiency
judgment against the related Borrower or any other liable party if the laws
of the state do not permit such a deficiency judgment after such foreclosure
or if the Special Servicer determines, in its best judgment, that the likely
recovery if a deficiency judgment is obtained will not be sufficient to
warrant the cost, time, expense and/or exposure of pursuing the deficiency
judgment.
In the event that title to any Mortgaged Property is acquired in
foreclosure or by deed in lieu of foreclosure, the deed or certificate of
sale shall be issued to the Trustee, or to its nominee on behalf of
Certificateholders. Notwithstanding any such acquisition of title and
cancellation of the related Mortgage Loan, the provisions of Section 1.2
shall apply with respect to such Mortgage Loan.
(b) The Special Servicer shall not acquire for the benefit of
the Trust Fund any personal property pursuant to this Section 3.10 unless
either:
(i) such personal property is incidental to real property
(within the meaning of Section 856(e)(1) of the Code)
so acquired by the Special Servicer for the benefit of
the Trust Fund; or
(ii) the Special Servicer shall have requested and received
an Opinion of Counsel (obtained at the expense of the
Trust Fund) to the effect that the holding of such
personal property by the Trust Fund will not cause the
imposition of a tax on the Upper-Tier REMIC or Lower-
Tier REMIC under the REMIC Provisions or cause either
the Upper-Tier REMIC or Lower-Tier REMIC to fail to
qualify as a REMIC at any time that any Certificate or
uncertificated Lower-Tier Interest is outstanding.
(c) Notwithstanding any provision to the contrary contained in
this Agreement, the Special Servicer shall not, on behalf of the Trust Fund,
obtain title to a Mortgaged Property as a result of or in lieu of foreclosure
or otherwise, and shall not otherwise acquire possession of, or take any
other action with respect to, any Mortgaged Property if, as a result of any
such action, the Trustee, the Master Servicer, the Depositor, the Originator
or the Certificateholders, would be considered to hold title to, to be a
"mortgagee-in-possession" of or to be an "owner" or "operator" of such
Mortgaged Property within the meaning of the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended from time to
time, or any comparable law, unless the Special Servicer has previously
determined in accordance with the servicing standard set forth in Section
3.1(a), based on an
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Environmental Assessment report prepared by an Independent Person satisfying
the requirements set forth in the first sentence of Section 3.10(d), that:
(A) such Mortgaged Property is in compliance with
applicable environmental laws (in the reasonable judgment of such
Independent Person based upon all available information) or, if not, that
it would be in the best economic interest of the Trust Fund and there would
be no adverse effect on the Master Servicer, Special Servicer, Trustee,
Depositor, or Originator to take such actions as are necessary to bring
such Mortgaged Property in compliance therewith, and
(B) there are no circumstances present at such Mortgaged
Property relating to the use, management or disposal of any Hazardous
Materials for which investigation, testing, monitoring, containment,
clean-up or remediation could be required under any currently effective
federal, state or local law or regulation (in the reasonable judgment of
such Independent Person based upon all available information), or that,
if any such Hazardous Materials are present for which such action could be
required, it would be in the best economic interest of the Trust Fund and
there would be no adverse effect on the Master Servicer, Special Servicer,
Trustee, Depositor, or Originator, to take such actions with respect to the
affected Mortgaged Property.
In the event that the Environmental Assessment first obtained by
the Special Servicer with respect to a Mortgaged Property indicates that such
Mortgaged Property may not be in compliance with applicable environmental
laws or that Hazardous Materials may be present but does not definitively
establish such fact, the Special Servicer shall cause such further
environmental tests to be conducted by an Independent Person who regularly
conducts such tests as the Special Servicer shall deem prudent to protect the
interests of Certificateholders. Any such tests shall be deemed part of the
Environmental Assessment obtained by the Special Servicer for purposes of
this Section 3.10.
(d) The Environmental Assessment contemplated by Section 2.2,
3.10(c), and 3.20(h) shall have been prepared not earlier than the
twelve-month period preceding the events giving rise to the applicability of
Section 2.2, 3.10(c) or 3.20(h) by any Independent Person who regularly
conducts environmental audits for purchasers of commercial property, as
determined by the Special Servicer in a manner consistent with the servicing
standard set forth in Section 3.01(a). The Special Servicer shall advise the
Master Servicer by delivery of a certificate of a Special Servicer Officer of
the cost of preparation of an Environmental Assessment, and the Master
Servicer shall pay such cost from amounts on deposit in the Collection
Account. The Master Servicer may rely conclusively on such certificate and
shall have no duty or obligation to re-calculate the amounts stated therein.
To the extent that amounts on deposit in the Collection Account are
insufficient, the Master Servicer shall advance the amount of such
insufficiency as a Servicing Advance unless the Master Servicer makes a
determination, in its reasonable business judgment, that such advance would
be a Nonrecoverable Advance. In the event that the Master Servicer fails to
make any Servicing Advance referred to in this Section 3.10(d) other than due
to a determination that such advance would be a Nonrecoverable Advance), the
Trustee shall make such advance to the extent provided in Section 7.7.
(e) If the applicable Special Servicer determines pursuant to
Section 3.10(c)(A) that a Mortgaged Property securing a Defaulted Mortgage
Loan is not in compliance with applicable environmental laws but that it is
in the best economic interest of the Trust Fund to take such actions as are
necessary to bring such Mortgaged Property in compliance therewith, or if the
applicable Special Servicer determines pursuant to Section 3.10(c)(B) that
the circumstances referred to therein relating to Hazardous Materials are
present on a Mortgaged Property securing a Defaulted Mortgage Loan but that
it is in the best economic interest of the Trust Fund to take such action
with respect to the containment, clean-up or remediation of Hazardous
Materials affecting such Mortgaged Property as is required by law or
regulation, such Special Servicer shall take such action as it deems to be in
the best economic interest of the Trust Fund and that would not have an
adverse effect on the Master Servicer, Special Servicer, Depositor, Trustee
or Originator, but only if the Trustee has obtained an Opinion of Counsel (at
the expense of the Trust Fund) to the effect that such proposed action will
not cause (A) a loss of REMIC status with respect to either the Upper-Tier
REMIC or the Lower-Tier REMIC or (B) the Upper-Tier REMIC or the Lower-Tier
REMIC to be subject to any tax under the
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REMIC Provisions or equivalent provisions of federal, state, local law or
ordinance, and if the Trustee has mailed notice to the Certificateholders of
such proposed action, which notice shall be prepared by the Special Servicer,
and has not received, within 30 days of such notification, instructions from
the Holders of at least 25% of the aggregate Voting Rights of such
Certificates directing such Special Servicer not to take such action. Such
Special Servicer shall advise the Master Servicer by delivery of a
certificate of a Special Servicer Officer of the cost of any such compliance,
containment, clean-up or remediation, and the Master Servicer shall pay such
cost from amounts on deposit in the Collection Account. To the extent that
amounts on deposit in the Collection Account are insufficient, the Master
Servicer shall advance the amount of such shortfall unless the Master
Servicer makes a determination, in its reasonable business judgment, that
such advance, if made, would be a Nonrecoverable Advance. Such Servicing
Advance shall be made on the Master Servicer Remittance Date. The Master
Servicer shall be entitled to reimbursement of Servicing Advances made
pursuant to the preceding sentence plus interest thereon at the Advance Rate
until paid, from amounts subsequently deposited in the Collection Account.
(f) The Special Servicer shall report to the Internal Revenue
Service and to the related Borrower, in the manner required by applicable
law, the information required to be reported regarding any Mortgaged Property
that is abandoned or foreclosed. The Special Servicer shall deliver a copy
of any such report to the Master Servicer and the Trustee.
SECTION 3.11 TRUSTEE TO COOPERATE; RELEASE OF MORTGAGE FILES AND
MORTGAGE CERTIFICATES.
Upon the payment in full of any Mortgage Loan, receipt of notice of
a termination date with respect to the Mortgage Certificates, or the receipt
by the Master Servicer or the Special Servicer, as the case may be, of a
notification that payment in full has been escrowed in a manner customary for
such purposes, the Master Servicer or the Special Servicer, as the case may
be, shall immediately notify the Trustee or the Custodian by a certification
(which certification shall include a statement to the effect that all amounts
received or to be received in connection with such payment which are required
to be deposited in the Collection Account pursuant to Section 3.5 have been
remitted for deposit in the Collection Account) and shall request (i) in the
case of a Mortgage Loan, delivery to it of the related Mortgage File and (ii)
in the case of a Mortgage Certificate, delivery to the trustee under the
Mortgage Certificate underlying documents, of the physical certificate
representing the interest in the Mortgage Certificates. Upon receipt of such
certification and request, the Trustee shall promptly release or cause the
Custodian to release the related Mortgage File or physical certificates as
applicable, to the Master Servicer, the Special Servicer or the trustee under
the Mortgage Certificate underlying documents, as the case may be. If the
Master Servicer, the Special Servicer or the Trustee incurs any expenses in
connection with any instrument of satisfaction, assignment or deed of
reconveyance and is unable after reasonable attempts to obtain repayment for
such expenses from the related Borrower, it shall be entitled to
reimbursement for such expenses from the Collection Account upon
certification of the amount thereof.
From time to time upon request of the Master Servicer or the Special
Servicer and delivery to the Trustee of a Request for Release, the Trustee shall
promptly release or cause the Custodian to promptly release the related Mortgage
File (or any portion thereof) designated in such Request for Release to the
Master Servicer or the Special Servicer, as applicable. Upon (a) the return of
such Mortgage File (or portion thereof) from the Master Servicer or the Special
Servicer, as applicable, or (b) the receipt, 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 Trustee shall release, or cause the
Custodian to 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 related Mortgage File or the certificate of the
Special Servicer specified in clause (b) above.
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Upon written request of either the Master Servicer or the Special
Servicer, the Custodian shall timely furnish to the requesting Person copies of
any documents in any Mortgage File in the Custodian's possession, at the expense
of the Trust Fund.
Upon written certification of a Special Servicer Officer, the
Trustee shall, at the expense of the Trust Fund, execute and deliver to the
Special Servicer, or the Special Servicer may, pursuant to its powers and
obligations hereunder, execute and file, any court pleadings, requests for
trustee's sale or other documents prepared by the Special Servicer, its
agents or attorneys, necessary to the foreclosure or trustee's sale in
respect of a Mortgaged Property or to any legal action brought to obtain
judgment against any Borrower on the related Note or Mortgage or to obtain a
deficiency judgment, or to enforce any other remedies or rights provided by
the related Note or Mortgage or otherwise available at law or in equity.
Each such certification shall include a request that such pleadings or
documents be executed by the Trustee and a statement as to the reason such
documents or pleadings are required, and that the execution and delivery
thereof by the Trustee will not invalidate or otherwise affect the lien of
the related Mortgage except for the termination of such lien upon completion
of the foreclosure or trustee's sale.
SECTION 3.12 SERVICING COMPENSATION.
As compensation for its activities hereunder, the Master Servicer
shall be entitled to the Servicing Fee, which shall be payable from amounts
on deposit in the Collection Account as set forth in Section 3.6(v) or, in
the alternative, the Master Servicer may retain the Servicing Fee from
proceeds or collections on or with respect to Mortgage Loans and Mortgage
Certificates prior to deposit of such proceeds in the Collection Account. In
addition, the Master Servicer shall retain any late payment charges, penalty
interest, substitution, assumption or modification fees and other similar
fees. The Master Servicer's rights to the Servicing Fees (except for fees
paid to the Subservicer pursuant to a Subservicing Agreement) may not be
transferred in whole or in part except in connection with the permitted
transfer of all of the Master Servicer's responsibilities and obligations
under this Agreement.
As compensation for its activities hereunder, the applicable
Special Servicer shall be entitled to the Special Servicer Fee, and any late
payment charges, penalty interest, substitution, assumption or modification
fees and similar items with respect to such Specially Serviced Mortgaged
Loans as each such Special Servicer shall be responsible for. The applicable
Special Servicer's rights to the Special Servicer Fee may not be transferred
in whole or in part except in connection with the permitted transfer of all
of such Special Servicer's responsibilities and obligations under this
Agreement.
The Master Servicer shall pay out of its Servicing Fee any
subservicing fee payable to any subservicer, and fees payable to any other
person retained by the Master Servicer. The Master Servicer and the Special
Servicer shall each be entitled to be reimbursed from the Collection Account
for all fees and expenses of third parties incurred by it, plus interest
thereon at the Advance Rate to the date of reimbursement (including recording
fees and expenses related to financing statements, continuation statements
and other documents and instruments necessary to maintain the lien on each
Mortgaged Property) in connection with its servicing activities hereunder
(other than any subservicing fee payable to any subservicer and fees and
expenses set forth in Exhibit C, which shall be paid by the Subservicer as
long as the Subservicer is LTC, or the Depositor if any other party is the
Subservicer) including, without limitation, fees and expenses of attorneys,
appraisers, Environmental Assessment firms, third party property managers and
others (who shall have been retained by the Master Servicer or the Special
Servicer, as applicable, in accordance with the servicing standard set forth
in Section 3.1(a)) in connection with enforcement, collection, foreclosure,
management and operation of assets of the Trust Fund and fees and expenses
incurred in prosecuting and defending any litigation or adverse claims
against the Trust Fund or the assets thereof, subject to the provisions of
Section 6.3.
The Trustee, the Master Servicer, the Subservicer and the Special
Servicer, as applicable, shall be entitled to receive reimbursement of all
P&I Advances and Servicing Advances, in each case plus interest thereon at
the Advance Rate from the date such advance is made until the date of
reimbursement.
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SECTION 3.13 REPORTS TO THE TRUSTEE; COLLECTION ACCOUNT STATEMENTS.
(a) No later than thirty days following the month in which such
Distribution Date occurs the Master Servicer shall forward to the Trustee and
the Special Servicer a statement prepared by the Master Servicer setting
forth the status of the Collection Account as of the close of business on the
last day of the month related to such distribution for the preceding calendar
month, with (i) a memorandum in substantially the form of Exhibit F attached
hereto describing Mortgage Loan modifications in the related Due Period and
(ii) a memorandum substantially in the form of Exhibit G attached hereto
describing Mortgaged Properties for which a foreclosure or similar action has
been commenced or was in progress during the related Due Period; PROVIDED,
HOWEVER, that to the extent that the preparation of such reports and
memoranda is dependent upon information to be provided by the Originator, the
trustee for the Mortgage Certificates or the Special Servicer (if other than
the Master Servicer), the Master Servicer will be obligated to prepare such
reports and memoranda only to the extent that the Originator, the trustee for
the Mortgage Certificates or the Special Servicer, as applicable, provides
the Master Servicer with the information necessary to do so. The Special
Servicer and the Originator hereby agree to furnish such information to the
Master Servicer. The Trustee and its agents and attorneys may at any time
during normal business hours, upon reasonable notice, inspect and copy the
books, records and accounts of the Master Servicer with respect to the
Mortgage Loans and the performance of its duties hereunder.
(b) At or prior to 12:00 noon, New York time, on the third
Business Day prior to each Distribution Date, the Master Servicer shall
deliver to the Trustee, in CSSA format and hard copy, or such other format as
may be agreed upon by the Trustee and the Master Servicer from time to time,
a report containing information necessary to make the distributions described
in Article 4.
(c) The Master Servicer shall periodically update the
information contained in Exhibit B hereto relating to the Mortgage Loans and
the Certificate Mortgage Loans and the information contained in Exhibit K
hereto relating to the Mortgaged Properties and the mortgaged properties
related to the Certificate Mortgage Loans based on data received from the
Originator; PROVIDED, HOWEVER, that to the extent that the updating of such
information is dependent upon data to be provided by the Originator, the
Master Servicer will be obligated to update such information only to the
extent that the Originator provides the Master Servicer with the information
necessary to do so. The Originator hereby agrees to furnish such data to the
Master Servicer as such data becomes available.
SECTION 3.14 ANNUAL STATEMENT AS TO COMPLIANCE.
Each of the Master Servicer and the Special Servicer shall deliver
to the Trustee, to the Depositor and to each other on or before April 30 of
each year, beginning April 30, 1999, an Officer's Certificate stating, as to
each signatory thereof, (i) that a review of the activities of the Master
Servicer or the Special Servicer, as the case may be, during the preceding
calendar year (or such longer period from the Closing Date to the end of the
subsequent calendar year) and of its performance under this Agreement has
been made under such officer's supervision, (ii) that, to the best of such
officer's knowledge, based on such review, it 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 it proposes to take with respect thereto, (iii) that, to the best of
such officer's knowledge, each subservicer retained by it has fulfilled its
obligations under its subservicing agreement in all material respects, or, if
there has been a material default in the fulfillment of such obligations,
specifying each such default known to such officer and the nature and status
thereof, and (iv) whether it has received any notice regarding qualification,
or challenging the status, of either the Upper-Tier REMIC or Lower-Tier REMIC
as a REMIC from the Internal Revenue Service or any other governmental agency
or body.
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SECTION 3.15 ANNUAL INDEPENDENT PUBLIC ACCOUNTANTS' SERVICING
REPORT.
On or before April 30 of each year, beginning April 30, 1999, each
of the Master Servicer and the Special Servicer, at its expense, shall cause
a firm of Independent public accountants (who may also render other services
to the Master Servicer or the Special Servicer, as the case may be) which is
a member of the American Institute of Certified Public Accountants to furnish
a statement to the Trustee, to the Depositor and to the Special Servicer or
the Master Servicer, as applicable, to the effect that (i) it has obtained a
letter of representation regarding certain matters from the management of
each of the Master Servicer and the Special Servicer, as applicable, which
includes an assertion that the Master Servicer and the Special Servicer has
complied with certain minimum mortgage loan servicing standards (to the
extent applicable to commercial and multifamily mortgage loans), identified
in the Uniform Single Attestation Program for Mortgage Bankers established by
the Mortgage Bankers Association of America, with respect to the servicing of
commercial and multifamily mortgage loans during the most recently completed
calendar year and (ii) on the basis of an examination conducted by such firm
in accordance with standards established by the American Institute of
Certified Public Accountants, such representation is fairly stated in all
material respects, subject to such exceptions and other qualifications that
may be appropriate. In rendering its report such firm may rely, as to
matters relating to the direct servicing of commercial and multifamily
mortgage loans by Subservicers, upon comparable reports of firms of
independent certified public accountants rendered on the basis of
examinations conducted in accordance with the same standards (rendered within
one year of such report) with respect to those Subservicers.
SECTION 3.16 ACTIONS WITH RESPECT TO THE MORTGAGE CERTIFICATES.
(a) Notwithstanding any other provisions herein to the contrary:
(i) With respect to the Mortgage Certificates, the Trustee
shall:
(A) direct the trustee for the Mortgage Certificates
to make all payments of interest and principal
with respect to the Mortgage Certificates to the
Master Servicer for deposit in the Collection
Account;
(B) remit to the Master Servicer for deposit in the
Collection Account any payments of principal and
interest with respect to the Mortgage Certificates
which the Trustee may receive from any party other
than the Master Servicer; and
(C) in the event of any default with respect to the
Mortgage Certificates by the trustee, the master
servicer or any special servicer having
responsibility therefor, including, without
limitation, any failure to make payments or submit
reports with respect thereto, take action as
provided in paragraph (b) below of this Section
3.16, and neither the Master Servicer nor the
Special Servicer shall have any responsibility
with respect thereto;
(ii) The Master Servicer's responsibility with respect to
the Mortgage Certificates shall be to:
(A) deposit in the Collection Account all funds
received from the trustee for the Mortgage
Certificates; and
(B) forward to the Trustee all reports which the
Master Servicer receives from the trustee for the
Mortgage Certificates;
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(iii) No subservicer shall be engaged with respect to the
Mortgage Certificates;
(iv) The Special Servicer shall have no responsibility with
respect to the Mortgage Certificates; and
(v) Neither the Master Servicer, the Special Servicer nor
the Trustee shall have any obligation to make P&I
Advances or Servicing Advances or have any
responsibility with regards to prepayment interest
shortfalls with respect to the Mortgage Certificates.
(b) In the event that any action is required to be taken, or any
right is to be exercised, by the Trustee as the holder of the Mortgage
Certificates under the Pooling and Servicing Agreement, dated as of July 20,
1993, among LTC REMIC Corporation, LTC, Bankers Trust and Union Bank (as
amended and supplemented from time to time) pursuant to which the Mortgage
Certificates were issued, the Trustee shall so notify the Certificateholders of
the most subordinate Class of Certificates then outstanding and, acting upon the
direction of the majority of the Certificateholders of such Class who have
furnished instructions to the Trustee no later than three Business Days prior to
the date by which the Trustee is required to take any proposed action, and so
long as the Trustee has been indemnified to its reasonable satisfaction by such
Certificateholders with respect to such action, the Trustee shall, at the
expense of the Trust Fund, act with respect to the Mortgage Certificates in
accordance with such instructions.
SECTION 3.17 TITLE AND MANAGEMENT OF REO PROPERTIES AND REO ACCOUNT
PROPERTIES.
(a) In the event that title to any Mortgaged Property is
acquired for the benefit of Certificateholders, by foreclosure, by deed in
lieu of foreclosure or upon abandonment or reclamation from bankruptcy, the
deed or certificate of sale shall be taken in the name of the Trustee, or its
nominee, on behalf of the Trust Fund. The Special Servicer, on behalf of the
Trust Fund, shall dispose of any REO Property within three years or such
other period permitted by the Code after the Trust Fund acquires ownership of
such REO Property for purposes of Section 860G(a)(8) of the Code, unless (i)
the Special Servicer on behalf of the Lower-Tier REMIC has applied for and
received an extension of such period pursuant to Code Sections 856(e)(3) and
860G(a)(8)(A), in which case the Special Servicer shall sell such REO
Property within the applicable extension period or (ii) the Special Servicer
seeks and subsequently receives within such period permitted by the Code, at
the expense of the Trust Fund, an Opinion of Counsel, addressed to the
Trustee and the Special Servicer, to the effect that the holding by the Trust
Fund of such REO Property subsequent to two years after its acquisition or
other period permitted by the Code will not result in the imposition of taxes
on "prohibited transactions" of the Upper-Tier REMIC or Lower-Tier REMIC as
defined in Section 860F of the Code or cause the Upper-Tier REMIC or
Lower-Tier REMIC to fail to qualify as a REMIC at any time that any
Certificates or uncertificated Lower-Tier Interests are outstanding. The
Special Servicer shall manage, conserve, protect and operate each REO
Property for the Certificateholders solely for the purpose of its prompt
disposition and sale in a manner which does not cause such REO Property to
fail to qualify as "foreclosure property" within the meaning of Section
860G(a)(8) of the Code (determined without regard to the exception applicable
for purposes of Section 860D(a) of the Code) or result in the receipt by the
REMIC of any "income from nonpermitted assets" within the meaning of Section
860F(a)(2)(B) of the Code or any "net income from foreclosure property" under
Section 860G(c) of the Code, which is subject to taxation under the REMIC
Provisions (other than income from the operation and management of an REO
Property in a trade or business conducted by the Trust Fund through an
Independent Contractor).
(b) The Special Servicer shall segregate and hold all funds
collected and received in connection with the operation of any REO Account
Property (including among other things, rent, insurance proceeds and
liquidation proceeds) separate and apart from its own funds and general
assets and shall establish and maintain with respect to any REO Account
Properties an account held in trust for the Trust Fund for the benefit of the
Certificateholders (the "REO Account"), which shall be an Eligible Account,
and will account separately for funds received or expended with respect to
each REO Account Property. The Special Servicer shall notify the Trustee and
the Master Servicer in writing of the
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location and account number of the REO Account and shall notify the Trustee
and Master Servicer prior to any subsequent change thereof. Amounts on
deposit in the REO Account shall be invested in Permitted Investments in
accordance with the provisions of Section 3.7.
(c) The Special Servicer shall have full power and authority,
subject only to the servicing standard set forth in Section 3.1(a) and any
other specific requirements and prohibitions of this Agreement, to do any and
all things in connection with any REO Account Property as are consistent with
the manner in which the Special Servicer manages and operates similar
property owned or managed by the Special Servicer or any of its Affiliates,
all on such terms and for such period as the Special Servicer deems to be in
the best interests of Certificateholders. In connection therewith, the
Special Servicer shall deposit or cause to be deposited on a daily basis in
the REO Account all revenues received by it with respect to any REO Account
Property and any related REO Account Mortgage Loan, and shall withdraw
therefrom funds necessary for the proper operation, management and
maintenance of any REO Account Property and for other Property Protection
Expenses, including:
(i) all insurance premiums due and payable in respect of
any REO Account Property;
(ii) all real estate taxes and assessments in respect of
any REO Account Property that may result in the
imposition of a lien thereon; and
(iii) all costs and expenses necessary to maintain, manage
or operate any REO Account Property.
To the extent that amounts on deposit in the REO Account are insufficient for
the purposes set forth in clauses (i) through (iii) above, the Master Servicer
shall advance such insufficiency unless the Master Servicer makes a
determination, in its reasonable business judgment, that such advance is not
reasonably recoverable from future payments and collections on the related
Mortgage Loan (or the related Mortgaged Property) out of Insurance Proceeds,
Liquidation Proceeds or otherwise. The Master Servicer shall be entitled to
reimbursement of advances made pursuant to the preceding sentence, together with
interest thereon at the Advance Rate, until paid, from (i) future payments and
collections on the related REO Account Property and (ii) upon a determination
that any such advance is a Nonrecoverable Advance, from amounts on deposit in
the Collection Account.
Notwithstanding the foregoing, the Special Servicer shall not:
(i) permit the Trust Fund to enter into, renew or extend
any New Lease, if the New Lease by its terms will give
rise to any income that does not constitute Rents from
Real Property;
(ii) permit any amount to be received or accrued under any
New Lease, other than amounts that will constitute
Rents from Real Property;
(iii) authorize or permit any construction on any REO Account
Property, other than the repair or maintenance thereof
or the completion of a building or other improvement
thereon, and then only if more than ten percent of the
construction of such building or other improvement was
completed before default on the related Mortgage Loan
became imminent, all within the meaning of Section
856(e)(4)(B) of the Code; or
(iv) to the extent possible, allow any Person to Directly
Operate any REO Property on any date more than 90 days
after its date of acquisition by the Trust Fund, unless
such Person is an Independent Contractor;
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unless, in any such case, the Special Servicer has requested and received an
Opinion of Counsel at the expense of the Trust Fund to the effect that such
action will not cause such REO Account Property to fail to qualify as
"foreclosure property" within the meaning of Section 860G(a)(8) of the Code
(determined without regard to the exception applicable for purposes of Section
860D(a) of the Code) at any time that it is held by the Lower-Tier REMIC, in
which case the Special Servicer may take such actions as are specified in such
Opinion of Counsel.
The Special Servicer shall use its best efforts to (and to the
extent required by the REMIC Provisions shall) contract with any Independent
Contractor for the operation and management of any REO Account Property,
provided that:
(i) the terms and conditions of any such contract shall not
be inconsistent herewith;
(ii) any such contract shall require that the Independent
Contractor pay all costs and expenses incurred in
connection with the operation and management of such
REO Account Property, including those listed above,
and return all related revenues (net of such costs and
expenses);
(iii) none of the provisions of this Section 3.17(c) relating
to any such contract or to actions taken through any
such Independent Contractor shall be deemed to relieve
the Special Servicer of any of its duties and
obligations to the Trust Fund, the Master Servicer or
the Trustee on behalf of the Certificateholders with
respect to the operation and management of any such REO
Account Property; and
(iv) the Special Servicer shall be obligated with respect
thereto to the same extent as if it alone were
performing all duties and obligations in connection
with the operation and management of such REO Account
Property.
The Special Servicer shall be entitled to enter into any agreement with any
Independent Contractor performing services for it related to its duties and
obligations hereunder for indemnification of the Special Servicer by such
Independent Contractor, and nothing in this Agreement shall be deemed to
limit or modify such indemnification. Fees owed by the Special Servicer to
any Independent Contractor other than the Special Servicer or an Affiliate of
the Special Servicer shall be payable from amounts on deposit in the REO
Account or, if the amount on deposit therein is insufficient therefor,
provided in each case that the Special Servicer determines that such fees are
reasonable and customary in the area where such REO Account Property is
located for independent contractors providing services similar to those being
provided by such Independent Contractor, the Master Servicer shall advance
such any fees unless such advance is a Nonrecoverable Advance. The Master
Servicer shall be entitled to reimbursement of such advances plus interest
thereon at the Advance Rate until paid from (i) future proceeds from the
operation or sale of the related REO Account Property and (ii) upon a
determination that any such advance is a Nonrecoverable Advance, from amounts
on deposit in the Collection Account.
(d) At least two Business Days before each Master Servicer
Remittance Date, the Special Servicer shall withdraw from the REO Account and
deposit into the Collection Account the proceeds and collections received or
collected during the related Prepayment Period and reinvestment income
thereon, net of expenses; PROVIDED, HOWEVER, the Special Servicer may retain
in the REO Account such portion of such proceeds and collections as may be
necessary to maintain in the REO Account sufficient funds for the proper
operation, management and maintenance of the REO Account Properties,
including without limitation the creation of reasonable reserves for repairs,
replacements and necessary capital improvements and other related expenses.
On the first Business Day prior to each Determination Date, the Special
Servicer shall notify the Master Servicer of the amount of all such deposits
(and the REO Account Mortgage Loans to which the deposits relate) to be made
into the Collection Account prior to the related Master Servicer Remittance
Date.
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(e) Promptly following any acquisition by the Trust Fund of an REO
Property, the Special Servicer shall determine the fair market value of such REO
Property based on an appraisal, conducted within sixty days of such acquisition
by an MAI appraiser; PROVIDED, HOWEVER that if an appraisal with respect to
such REO Property as been conducted within six months of such acquisition by the
Trust Fund, then no appraisal shall be required. The cost of such appraisal
shall be an expense of the Trust Fund. The appraisal shall be conducted by an
Independent appraiser familiar with the area in which such REO Property is
located, and shall notify the other parties hereto of such fair market value.
SECTION 3.18 SALE OF DEFAULTED MORTGAGE LOANS AND REO PROPERTIES.
(a) The Special Servicer may offer to sell to any Person
(including the Special Servicer) any Defaulted Mortgage Loan or any REO
Property, if and when the Special Servicer determines, consistent with the
servicing standard set forth in Section 3.1(a), that such a sale would be in
the best economic interests of the Trust Fund, but shall, in any event, so
offer to sell any REO Property no later than the time determined by the
Special Servicer to be sufficient to result in the sale of such REO Property
on or prior to the date specified in Section 3.17(a). The Special Servicer
shall give the Trustee and the Master Servicer not less than five days' prior
written notice of its intention to (i) purchase any Defaulted Mortgage Loan
or REO Property at the Repurchase Price therefor or (ii) sell any Defaulted
Mortgage Loan or REO Property, in which case the Special Servicer shall
accept the highest bid received from any Person for any Defaulted Mortgage
Loan or any REO Property in an amount at least equal to the Repurchase Price
therefor.
In the absence of any such bid, the Special Servicer shall accept
the highest bid received from any Person that is determined by the Special
Servicer to be a fair price for such Defaulted Mortgage Loan or REO Property,
if the highest bidder is a Person other than an Interested Person, or is
determined to be such a price by the Trustee, if the highest bidder is an
Interested Person. Notwithstanding anything to the contrary herein, neither
the Trustee, in its individual capacity, nor any of its Affiliates may bid
for or purchase any Defaulted Mortgage Loan or any REO Property pursuant
hereto.
The Special Servicer shall not be obligated by either of the
foregoing paragraphs or otherwise to accept the highest bid if the Special
Servicer determines, in accordance with the servicing standard stated in
Section 3.1(a), that rejection of such bid would be in the best interests of
the Certificateholders. In addition, the Special Servicer may accept a lower
bid if it determines, in accordance with the servicing standard stated in
Section 3.1(a), that acceptance of such bid would be in the best interests of
the Certificateholders (for example, if the prospective buyer making the
lower bid is more likely to perform its obligations, or the terms offered by
the prospective buyer making the lower bid are more favorable). In the event
that the Special Servicer determines with respect to any REO Property that
the bids being made with respect thereto are not in the best interests of the
Certificateholders and that the end of the two-year period or such other
period permitted by the Code referred to in Section 3.17(a) with respect to
such REO Property is approaching, the Special Servicer shall seek an
extension of such period in the manner described in Section 3.17(a).
(b) In determining whether any bid received from an Interested
Person represents a fair price for any Defaulted Mortgage Loan or any REO
Property, the Trustee may conclusively rely on the opinion of an Independent
appraiser or other expert in real estate matters retained by the Trustee at
the expense of the Trust Fund. In determining whether any bid constitutes a
fair price for any Defaulted Mortgage Loan or any REO Property, the Special
Servicer or the Trustee (or, if applicable, such appraiser) shall take into
account, and any appraiser or other expert in real estate matters shall be
instructed to take into account, as applicable, among other factors, the
period and amount of any delinquency on the affected Defaulted Mortgage Loan,
the physical condition of the related Mortgaged Property or such REO
Property, the state of the local economy and the Trust Fund's obligation to
dispose of any REO Property within the time period specified in Section
3.17(a).
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(c) Subject to the provisions of Section 3.17, the Special
Servicer and the Trustee shall act on behalf of the Trust Fund in negotiating
and taking any other action necessary or appropriate in connection with the sale
of any Defaulted Mortgage Loan or REO Property, including the collection of all
amounts payable in connection therewith. Any sale of a Defaulted Mortgage Loan
or any REO Property shall be without recourse to, or representation or warranty
by, the Trustee, the Depositor, the Master Servicer, the Special Servicer, the
Originator or the Trust Fund (except that any contract of sale and assignment
and conveyance documents may contain customary warranties of title, so long as
the only recourse for breach thereof is to the Trust Fund), and, if consummated
in accordance with the terms of this Agreement, none of the Master Servicer, the
Special Servicer, the Depositor or the Trustee shall have any liability to the
Trust Fund or any Certificateholder with respect to the purchase price therefor
accepted by the Special Servicer or the Trustee.
(d) The proceeds of any sale after deduction of the expenses of
such sale incurred in connection therewith shall be promptly deposited in the
Collection Account in accordance with Section 3.5(a)(iii).
SECTION 3.19 INSPECTIONS.
The Master Servicer shall, at its own expense, inspect or cause to be
inspected each Mortgaged Property other than those related to Specially Serviced
Mortgage Loans, and the Special Servicer shall, at its own expense, inspect or
cause to be inspected each Mortgaged Property related to a Specially Serviced
Mortgage Loan, at such times and in such manner as are consistent with the
servicing standard set forth in Section 3.1(a), provided that (i) in each case,
at least one half of the Mortgaged Properties securing Mortgage Loans having
outstanding principal balances of $1,000,000 or higher shall be inspected
beginning twelve months after the Closing Date (ii) in each case all Mortgage
Loans not inspected pursuant to clause (i) above shall be inspected in the
succeeding twelve months and at least once every two years thereafter and (iii)
if any Monthly Payment or Balloon Payment becomes more than 60 days delinquent
or the Debt Service Coverage Ratio falls below 1.0 times, the related Mortgaged
Property shall be inspected by the Special Servicer as soon as practicable
thereafter.
SECTION 3.20 MODIFICATIONS, WAIVERS, AMENDMENTS AND CONSENTS.
(a) The Special Servicer shall have no right to agree to any
modification, waiver or amendment of any term of any Mortgage Loan, or to any
substitution of collateral, except as provided in this Section 3.20. The
Special Servicer may agree to any modification, waiver or amendment of any term
of any Defaulted Mortgage Loan, or to any substitution of collateral securing a
Defaulted Mortgage Loan, without the consent of the Trustee, Master Servicer or
any Certificateholder, to the extent permitted by paragraphs (b) through (j) of
this Section 3.20, and in each case, subject to subparagraph (g) of this Section
3.20. All modifications, waivers or amendments of any such Mortgage Loan shall
(i) be in writing and shall be consistent with the servicing standard set forth
in Section 3.1 and (ii) the Special Servicer shall have received the written
confirmation by the Rating Agency that such substitution will not result in the
qualification, downgrade or withdrawal of the then current ratings assigned to
the Certificates.
(b) The Special Servicer shall not agree to any modification,
waiver (other than a waiver referred to in Section 3.3 or Section 3.9, which
waiver, if any, shall be governed by Section 3.3 or Section 3.9, as applicable)
or amendment of any term of any Mortgage Loan if such modification, waiver or
amendment would:
(i) affect the amount or timing of any related payment of
principal, interest or other amount payable thereunder;
or
(ii) 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 Special
Servicer) of the property to be released, or would in
the Special Servicer's
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judgment, otherwise materially impair the security for
such Mortgage Loan or reduce the likelihood of timely
payment of amounts due thereon,
unless, in any such case, and subject to paragraphs (c) and (d) of this
Section 3.20, in the Special Servicer's judgment, as evidenced by an
Officer's Certificate , a material default on such Mortgage Loan has occurred
or a default in respect of payment on such Mortgage Loan is imminent, and in
either case, such modification, waiver or amendment will, in the Special
Servicer's judgment, be in the best interests of the Certificateholders and
has determined it would maximize the net present value of recoveries on the
related Mortgage Loan; provided, however, that the Special Servicer shall not
grant any modification or waiver, or permit any amendment of any Mortgage
Loan.
(c) Subject to subsection (b) above, the Special Servicer may
extend the date on which any Balloon Payment is scheduled to be due, without
the consent of the Trustee, the Master Servicer, or any Certificateholder if,
but only if:
(i) any such extension shall be for a period not later
than the Optimal Wind-Down Date and each Modified
Monthly Payment shall be in an amount at least
sufficient to pay interest accrued and principal
payments sufficient to meet the amortization schedule
on the related Mortgage Loan since the immediately
preceding Due Date;
(ii) not more than two delinquencies of 30 days or more
(without regard to any grace period provided for in
the related Note) in respect of any Monthly Payment on
such Mortgage Loan (other than the Balloon Payment)
shall have occurred within the preceding 12 months,
and any such delinquency shall have been cured; and
(iii) the Special Servicer has previously determined in its
reasonable business judgment (and shall furnish an
Officer's Certificate to the Rating Agency certifying
that it has so determined) that (A) such extension is
reasonably likely to produce a greater recovery than
liquidation of the related Mortgage Loan, (B) no
material damage or deferred maintenance exists at the
related Mortgaged Property, (C) the pro forma Debt
Service Coverage Ratio for such Mortgage Loan for the
twelve-month period following such extension is not
less than 1.15, net of the 5% management fee, and (D)
the Borrower is in material compliance with all
applicable federal and state regulations governing the
operation of the related Mortgaged Property.
(d) The Special Servicer must provide that any interest deferred
shall be added to the principal balance of the related Mortgage Loan (and shall
be due on the Maturity Date of such Mortgage Loan, or such earlier date as the
Special Servicer may deem appropriate), and such deferred interest shall accrue
interest at the related Mortgage Interest Rate.
(e) The Special Servicer 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 Special Servicer, 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 Special Servicer, and shall require
that the Borrower reimburse, with Advance Interest, any Servicing Advances made
in connection with such Mortgage Loan. The Special Servicer may collect any
such fee from the Borrower only to the extent the collection of such fee shall
not cause the related consent, modification, waiver or indulgence to be treated
as a "significant modification" of the related Mortgage Note that would be
treated as an exchange under Treas. Reg sec. 1.860g-2(b).
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(f) The Special Servicer shall notify the Trustee, the Rating
Agency 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.
(g) Notwithstanding anything to the contrary contained in this
Agreement, the Special Servicer shall not agree to any modification, waiver
or amendment of any term of any Mortgage Loan or any substitution of
collateral unless (x) it has first obtained and delivered to the Trustee and
the Master Servicer an Opinion of Counsel, which shall be obtained at the
expense of the Borrower requesting the modification, and which may be
applicable to more than one transaction or generally to a class or classes of
transactions described therein, to the effect that the proposed modification,
waiver, amendment or substitution will not cause (i) a loss of REMIC status
with respect to either the Upper-Tier REMIC or Lower-Tier REMIC, or (ii) 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 equivalent provision of federal, state or local law or ordinance) or
(iii) the Upper-Tier REMIC or Lower-Tier REMIC to be subject to any tax under
the REMIC Provisions or equivalent provisions of federal, state or local law
or ordinance or (y) the Trustee and Special Servicer have received a
Nondisqualification Opinion or ruling from the Internal Revenue Service (at
the expense of the party making the request that the Special Servicer modify
the Mortgage Loan or a Specially Serviced Mortgage Loan) to the effect that
such modification would not be treated as an exchange pursuant to Section
1001 of the Code (or, if it would be so treated, would not be treated as a
"significant modification" for purposes of Treas. Reg. Sec. 1.860G-2(b) of
the Code); PROVIDED HOWEVER, that no such Opinion of Counsel shall be
required for a modification, waiver, amendment or substitution made pursuant
to Section 3.20(c).
(h) The Special Servicer 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, HOWEVER, that the Special Servicer shall have
requested and received an Opinion of Counsel addressed to the Trustee
(obtained at the expense of the Borrower requesting the modification) to the
effect that any such substitution, additional pledge or release of collateral
is permitted hereby and will not cause the related Mortgage Loan to cease to
be a Qualified Mortgage, will not result in the loss of REMIC status with
respect to, or the imposition of any tax upon either the Upper-Tier or the
Lower-Tier REMIC and will not cause the Trust Fund to be required to be
registered under the Investment Company Act of 1940, as amended; and PROVIDED
FURTHER, that (i) such substitution, additional pledge or release is
consistent with the related Mortgage Loan, (ii) the Special Servicer shall
have obtained the prior written confirmation from the Rating Agency that such
substitution, additional pledge or release shall not result in the downgrade,
qualification or withdrawal of the then current ratings assigned to the
outstanding Classes of the Certificates, and (iii) the Special Servicer shall
not permit the Borrower to substitute any collateral pursuant to this Section
3.20 unless the Special Servicer shall have first determined in accordance
with the servicing standard set forth in Section 3.1(a), based upon an
Environmental Assessment prepared by an Independent Person satisfying the
requirements set forth in the first sentence of Section 3.10(d), at the
expense of the Borrower, that such substitute collateral is in compliance
with applicable environmental laws and that there are no circumstances
present at such substitute collateral relating to the use, management or
disposal of any Hazardous Materials for which investigation, testing,
monitoring, containment, clean-up or remediation would be required under any
then effective federal, state or local law or regulation, or, if any such
containment, clean-up or remediation is required, that adequate funds
therefor have been placed in escrow with the Special Servicer by or on behalf
of the Borrower. In the event the Special Servicer intends to permit a
Borrower to substitute collateral for all or any portion of a Mortgaged
Property or pledge additional collateral for the related Mortgage Loan as
permitted hereunder, if the security interest of the Trust Fund in such
collateral would be perfected by possession, or if such collateral requires
special care or protection, then prior to agreeing to such substitution or
addition of collateral, the Special Servicer shall make arrangements for such
possession, care or protection, and prior to agreeing to such substitution or
addition of collateral (or such arrangement for possession, care or
protection) shall obtain the prior written consent of the Trustee, the Master
Servicer (which consent shall not be unreasonably withheld, delayed or
conditioned) and the written confirmation by the Rating Agency with respect
thereto such written confirmation shall
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state that such substitution or addition of collateral shall not result in
the downgrade, qualification or withdrawal of the ratings then assigned to
the Certificates.
(i) The Special Servicer shall have no liability to the Trust
Fund, the Certificateholders or any other Person if its analysis and
determination that the modification, waiver or amendment is reasonably likely
to produce a greater recovery on a present-value basis than liquidation
proves to be wrong or incorrect, so long as the analysis and determination
was made in the good faith reasonable business judgment of the Special
Servicer.
(j) Notwithstanding any other provision of this Agreement (other
than Section 3.20(f) and the last paragraph of Section 10.7), if either the
Special Servicer, the Master Servicer or Certificateholders representing at
least 25% of the Voting Rights submit to the Trustee a proposed amendment of
the provisions of Section 3.20(c) (subject to the written confirmation by the
Rating Agency that such modification, waiver or amendment will not result in
the qualification, downgrade or withdrawal of the rating then assigned to any
Class of Certificates), the Trustee shall submit such proposal to a vote of
the Certificateholders. If submitted to a vote of the Certificateholders,
such proposal shall be deemed to be adopted, and the provisions of Sections
3.20(c) and 3.20(d) shall be amended accordingly, if such proposal receives
the affirmative vote of Certificateholders representing 100% of the Voting
Rights and the Person submitting such proposal shall have obtained at its own
expense and delivered to the Trustee an Opinion of Counsel that neither the
proposed amendments nor the operation of the Trust Fund in accordance
therewith could cause a loss of REMIC status with respect to the Upper-Tier
or Lower-Tier REMIC or any imposition of tax on the Upper-Tier REMIC or
Lower-Tier REMIC under the REMIC Provisions or equivalent provisions of
federal, state or local law or ordinance.
SECTION 3.21 TRANSFER OF SERVICING BETWEEN MASTER SERVICER AND
SPECIAL SERVICER; RECORD KEEPING.
(a) Upon determining that a Servicing Transfer Event has
occurred with respect to any Mortgage Loan, and, to the extent practicable
prior to acceleration of any related Note or commencement of any foreclosure
or similar proceedings, the Master Servicer shall use its best efforts to
provide the Special Servicer with all information, documents (but excluding
the original documents constituting the related Mortgage File) and records
(including records stored electronically on computer tapes, magnetic discs
and the like) in its possession relating to such Mortgage Loan and reasonably
requested by the Special Servicer to enable it to assume its duties hereunder
with respect thereto. The Master Servicer shall use its best efforts to
comply with the preceding sentence within five Business Days of the
occurrence of each related Servicing Transfer Event and in any event shall
continue to act as Master Servicer and administrator of such Mortgage Loan
until the Special Servicer has commenced the servicing of such Mortgage Loan,
which shall occur upon the receipt by the Special Servicer of the
information, documents and records referred to in the preceding sentence.
Notwithstanding anything herein to the contrary, the Special Servicer shall
accept for servicing any Mortgage Loan transferred to it by the Master
Servicer pursuant to this Section 3.21. With respect to each Mortgage Loan
that becomes a Specially Serviced Mortgage Loan, the Master Servicer shall
also instruct the related Borrower to remit all payments in respect of such
Mortgage Loan to the Special Servicer, provided that the payee in respect of
such payments shall remain the Master Servicer.
Upon determining that the Servicing Transfer Event that caused a
Mortgage Loan to become a Specially Serviced Mortgage Loan (other than an REO
Mortgage Loan) has been remedied and has remained remedied for three
consecutive months and no other Servicing Transfer Event has occurred and is
continuing with respect thereto, the Special Servicer shall immediately give
notice thereof to the Master Servicer and upon giving such notice, such
Mortgage Loan shall cease to be a Specially Serviced Mortgage Loan, the
Special Servicer's obligation to service such Mortgage Loan, and its right to
receive the Workout Fee shall terminate and the obligations of the Master
Servicer to service and administer such Mortgage Loan shall resume. In
addition, upon such determination, the Special Servicer shall instruct the
related Borrower to remit all payments in respect of such Specially Serviced
Mortgage Loan directly to the Master Servicer.
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(b) In servicing any Specially Serviced Mortgage Loan, the
Special Servicer shall provide to the Custodian originals, and to the Master
Servicer copies, of documents included within the definition of "Mortgage
File" for inclusion in the related Mortgage File (with a copy of each such
original to the Master Servicer), and copies of any additional related
Mortgage Loan information, including correspondence with the related Borrower.
(c) On or before each Determination Date, the Special Servicer
shall deliver to the Master Servicer a written statement describing, on a
Mortgage Loan by Mortgage Loan basis, (l) the information described in
clauses (v) (c), (vi), (vii), (xi), (xiv), (xv) and (xviii) of Section 4.3 as
to each Specially Serviced Mortgage Loan, (2) the amount of all payments on
account of interest received on each Specially Serviced Mortgage Loan, the
amount of all payments on account of principal, including Principal
Prepayments, received on each Specially Serviced Mortgage Loan, and the
amount of Insurance Proceeds and Liquidation Proceeds received with respect
to each Specially Serviced Mortgage Loan, (3) the amount of net income or net
loss, as determined for federal income tax purposes, resulting from the
operation or management of a trade or business on, or the furnishing or
rendering of a non-customary service to the tenants of, the REO Property
relating to each applicable Specially Serviced Mortgage Loan, in each case in
accordance with Section 3.17(a); and (4) such additional information relating
to the Specially Serviced Mortgage Loans as the Master Servicer reasonably
requests to enable it to perform its duties under this Agreement.
(d) Notwithstanding the provisions of the preceding subsection
(c), the Master Servicer shall maintain ongoing payment records with respect
to each of the Specially Serviced Mortgage Loans and shall provide the
Special Servicer with any information in its possession reasonably required
by the Special Servicer to perform its duties under this Agreement.
SECTION 3.22 P&I ADVANCES.
(a) With respect to any Mortgage Loan (other than a Mortgage
Loan which only has an overdue Balloon Payment), if on any Determination Date
the Special Servicer or the Master Servicer, as applicable, shall not have
received all or any part of the Monthly Payment, unless funded by the
Subservicer, (or Modified Monthly Payment, in the case of a Modified Mortgage
Loan) for the related Due Period with respect to such Mortgage Loan (after
application of all payments and collections on such Mortgage Loan pursuant to
Section 1.2), then, on the Master Servicer Remittance Date, the Master
Servicer shall advance, subject to subsection (c) of this Section 3.22, the
amount of such shortfall with respect to each such Mortgage Loan, unless the
Master Servicer makes a determination, in its reasonable business judgment,
that such P&I Advance (plus interest accrued thereon at the Advance Rate) if
made, would be a Nonrecoverable Advance PROVIDED, HOWEVER, that the Master
Servicer shall reduce any advance of interest with respect to any such
Mortgage Loan as to which an Appraisal Reduction exists by an amount equal to
the amount which would otherwise have been advanced under this sentence but
for the application of this Section 3.22 times a fraction the numerator of
which is the related Appraisal Reduction and the denominator of which is the
Scheduled Principal Balance of such Mortgage Loan (or, if applicable, a
comparable fraction based upon the Appraisal Reduction Estimate).
(b) With respect to any Mortgage Loan (including a Modified
Mortgage Loan which pursuant to its modified terms provides for a Balloon
Payment) which has an overdue Balloon Payment, if on any Determination Date
the Special Servicer or the Master Servicer, as applicable, shall not have
received all or any part of the Assumed Scheduled Payment for the related Due
Period with respect to such Mortgage Loan (after application of all payments
and collections on such Mortgage Loan pursuant to Section 1.2), then, on the
Master Servicer Remittance Date, the Master Servicer shall, subject to
subsection (c) of this Section, advance the amount of such shortfall with
respect to each such Mortgage Loan, unless the Master Servicer makes a
determination, in its reasonable business judgment, that such P&I Advance
(plus interest accrued thereon at the Advance Rate) if made, would be a
Nonrecoverable Advance PROVIDED, HOWEVER, that the Master Servicer shall
reduce any advance payments of interest with respect to any such Mortgage
Loan as to which an Appraisal Reduction exists, an amount equal to the amount
which would otherwise have been advanced under this sentence but for the
application of this clause times a fraction the numerator of which is the
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related Appraisal Reduction and the denominator of which is the Scheduled
Principal Balance of such Mortgage Loan (or, if applicable, a comparable
fraction based upon the Appraisal Reduction Estimate).
(c) [Reserved]
(d) P&I Advances shall be deposited in the Distribution Account
by the Master Servicer not later than the Master Servicer Remittance Date.
(e) The Master Servicer shall be entitled to reimbursement for
any P&I Advances made pursuant to this Section 3.22, plus interest thereon at
the Advance Rate from the date the P&I Advance is made to the date the P&I
Advance is reimbursed.
(f) With respect to any Distribution Date and each Mortgage
Loan, the "Available Advance Reimbursement Amount" shall equal the amount
collected and applied as recoveries of principal and interest (or treated as
recovery of a cost that is or otherwise is an amount that is available to
fund the payment of Advance Interest) due in a Due Period prior to the Due
Period relating to such Distribution Date with respect to such Mortgage Loan,
whether paid by the Mortgagor or otherwise recovered from Late Collections,
Net Liquidation Proceeds, Insurance Proceeds, Condemnation Proceeds, or Net
Income from the related REO Property, or otherwise collected with respect to
the Mortgage Loan or REO Property and applied as a recovery of overdue
principal or interest or reimbursement of the costs of the lender on the
Mortgage Loan or REO Property or, upon a Final Recovery Determination, from
amounts on deposit in the Collection Account.
On each Determination Date, the Master Servicer shall calculate the
outstanding unreimbursed P&I Advance Amount and the Available Advance
Reimbursement Amount for such Determination Date and the related Distribution
Date. On each Distribution Date, the Master Servicer shall be reimbursed in
an amount up to aggregate outstanding unreimbursed P&I Advances and Advance
Interest to the extent of the sum of the Available Advance Reimbursement
Amount for all Mortgage Loans.
(g) Subject to determining that an Advance is a Nonrecoverable
Advance, the Master Servicer or the Trustee shall make P&I Advances or
Servicing Advances required by this Agreement irrespective of any bankruptcy,
insolvency or similar proceedings affecting the Borrower under the related
Mortgage Loan and irrespective of whether such Mortgage Loan has been
foreclosed upon and has become REO Property. Any determination made by the
Master Servicer pursuant to this Section 3.22 that an advance is a
Nonrecoverable Advance shall be evidenced by an Officer's Certificate
delivered to the Trustee two Business Days prior to the related Distribution
Date setting forth the determination of nonrecoverability and the procedure
and considerations of the Master Servicer forming the basis of such
determination.
SECTION 3.23 ACCESS TO CERTAIN DOCUMENTATION.
The Master Servicer shall provide to any Certificateholders that
are federally insured financial institutions, the Federal Reserve Board, the
FDIC and the OTS and the supervisory agents and examiners of such boards and
such corporations, and any other governmental or regulatory body to the
jurisdiction of which any Certificateholder is subject, access to the
documentation regarding the Mortgage Loans required by applicable regulations
of the Federal Reserve Board, FDIC, OTS or any such governmental or
regulatory body and all information forwarded to the Master Servicer
regarding the Mortgage Certificates, such access being afforded without
charge but only upon reasonable request and during normal business hours at
the offices of the Master Servicer. Nothing in this Section 3.23 shall
detract from the obligation of the Master Servicer to observe any applicable
law prohibiting disclosure of information with respect to the Borrowers, and
the failure of the Master Servicer to provide access as provided in this
Section 3.23 as a result of such obligation shall not constitute a breach of
this Section 3.23.
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SECTION 3.24 AUTHENTICATING AGENT.
The Trustee shall appoint an authenticating agent to execute and to
authenticate Certificates, which authenticating agent must be an entity that
is acceptable to the Depositor and the Master Servicer and, further, must
(i) be organized and doing business under the laws of the United States of
America or any state, (ii) have a principal office and place of business in a
state and city acceptable to the Depositor and the Master Servicer, (iii)
have a combined capital and surplus of at least $15,000,000, (iv) be
authorized under the laws of the United States or any state to do a trust
business, and (v) be subject to supervision or examination by federal or
state authorities (such entity, an "Authenticating Agent"). The Trustee
hereby appoints itself as the initial Authenticating Agent.
Any corporation into which the Authenticating Agent may be merged
or converted or with which it may be consolidated, or any corporation
resulting from any merger, conversion or consolidation to which the
Authenticating Agent shall be party, or any corporation succeeding to the
corporate agency business of the Authenticating Agent, shall be the
Authenticating Agent without the execution or filing of any paper or any
further act on the part of the Trustee or the Authenticating Agent.
The Authenticating Agent may at any time resign by giving at least
30 days' advance written notice of resignation to the Trustee, the Depositor
and the Master Servicer. The Trustee may at any time terminate the agency of
the Authenticating Agent by giving written notice of termination to the
Authenticating Agent, the Depositor and the Master Servicer. Upon receiving
a notice of resignation or upon such a termination, or in case at any time
the Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section 3.24, the Trustee promptly shall appoint a
successor Authenticating Agent, which shall be acceptable to the Master
Servicer and the Depositor, and shall mail notice of such appointment to all
Certificateholders. Any successor Authenticating Agent upon acceptance of its
appointment hereunder shall become vested with all the rights, powers, duties
and responsibilities of its predecessor hereunder, with like effect as if
originally named as Authenticating Agent herein. No successor Authenticating
Agent shall be appointed unless eligible under the provisions of this Section
3.24.
The Authenticating Agent shall have no responsibility or liability
for any action taken by it as such at the direction of the Trustee. Any
reasonable compensation paid to the Authenticating Agent shall be an
unreimbursable expense of the Trustee and shall not be payable out of the
Trust Fund.
SECTION 3.25 APPOINTMENT OF CUSTODIANS.
The Trustee may appoint one or more Custodians to hold all or a
portion of the Mortgage Files and Mortgage Certificates as agent for the
Trustee. LaSalle National Bank shall serve in the capacity of Custodian
hereunder upon the terms set forth hereby or in a Custodial Agreement and is
hereby appointed as the initial Custodian. The Custodian shall segregate and
maintain continuous custody of all documents constituting the Custodian's
Mortgage File and Mortgage Certificates received in secure and fire resistant
facilities located in the State of Illinois in accordance with customary
standards for such custody. The Trustee agrees to comply with the terms of
this Agreement and any Custodial Agreement and to enforce the terms and
provisions thereof against the Custodian for the benefit of the
Certificateholders. Each Custodian shall be a depository institution subject
to supervision by federal or state authority and shall be qualified to do
business in the jurisdiction in which it holds any Mortgage File or Mortgage
Certificate. Each Custodial Agreement may be amended only as provided in
Section 10.7. Any reasonable compensation paid to the Custodian shall be an
unreimbursable expense of the Trustee and shall not be payable out of the
Trust Fund. Each Custodian shall be required to maintain a fidelity bond and
an errors and omissions insurance policy conforming, in each case, to the
requirements for such fidelity bond and such insurance policy set forth in
Section 3.8(d).
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ARTICLE IV
DISTRIBUTIONS TO CERTIFICATEHOLDERS
SECTION 4.1 DISTRIBUTIONS FROM LOWER-TIER REMIC.
(a) On each Distribution Date, the Trustee shall calculate the
Available Distribution Amount, and the Paying Agent shall distribute such
amount from the Distribution Account (after deducting and paying to the
Trustee the Trustee Fee from amounts on deposit therein) in payment of each
Class of Lower-Tier Interests, subject to Sections 4.1(b), 4.1(c), 4.1(d) and
4.1(e), in the amounts (to the extent sufficient therefor), and in the order
of priority, set forth below:
(i) to the Class AL, Class LR and Class AR-L Interests,
the Accrued Certificate Interest for each such
Class, PRO RATA, based on the respective Accrued
Certificate Interest for each such Class for such
Distribution Date;
(ii) to the Class AL, Class LR and Class AR-L Interests,
PRO RATA, based on the respective Outstanding Class
Interest Shortfall for such Distribution Date, interest
equal to the Outstanding Class Interest Shortfall for
each such Class (for the purpose of this clause, such
amounts shall not include interest at the Class A
Spread Rate on the Certificate Principal Amounts of the
Class AL Interests);
(iii) except as set forth in clause (iv) below, to the Class
AR-L and Class LR Interests, pro rata, the Class AR-L
and Class LR Principal Distribution Amount for such
Distribution Date;
(iv) to the Class AL and Class LR Interest, PRO RATA,
principal equal to the Remaining Principal Distribution
Amount for such Distribution Date, until the
Certificate Principal Amount of the Class AL and Class
LR Interest has been reduced to zero; PROVIDED,
HOWEVER, that if the Available Distribution Amount
remaining after distributions pursuant to clauses (i)
and (ii) is less than the Principal Distribution
Amount, then payments made pursuant to this clause (iv)
and clause (iii) shall be PRO RATA;
(v) until the Certificate Principal Amounts of the Class
AL, Class LR and Class AR-L Interests have been reduced
to zero, to the Class AL, Class LR and Class AR-L
Interests, PRO RATA, to reimburse the Holders of such
Lower-Tier Interests for the unreimbursed amounts of
Realized Losses of principal, if any, previously
allocated thereto, together with interest thereon at
the applicable Pass-Through Rate from the date such
Realized Loss was allocated thereto through the close
of the Interest Accrual Period related to the
Distribution Date on which such Realized Loss is
reimbursed (for the purpose of this clause, such
amounts shall not include interest at the Class A
Spread Rate on the unreimbursed amounts of such
Realized Losses previously allocated to the Class AL,
Class LR and Class AR-L Interests, respectively);
(vi) to the Class BL Interest, interest equal to the Accrued
Certificate Interest thereon;
(vii) to the Class BL Interest, interest equal to the
Outstanding Class Interest Shortfall of such Class (for
the purpose of this clause, such amount shall not
include interest
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at the Class B Spread Rate on the Certificate
Principal Amount of the Class BL Interest);
(viii) after the aggregate Certificate Principal Amount of the
Class AL Interest has been reduced to zero, to the
Class BL Interest, principal equal to the Remaining
Principal Distribution Amount for such Distribution
Date (less the portion thereof distributed on such
Distribution Date pursuant to any preceding clause)
until the Certificate Principal Amount of the Class BL
Interest has been reduced to zero;
(ix) until the Certificate Principal Amount thereof has been
reduced to zero, to the Class BL Interest, to reimburse
the Holder of the Class BL Interest for the
unreimbursed amounts of Realized Losses of principal,
if any, previously allocated thereto, together with
interest thereon at the applicable Pass-Through Rate
from the date such Realized Loss was allocated thereto
through the close of the Interest Accrual Period
related to the Distribution Date on which such Realized
Loss is reimbursed (for the purpose of this clause,
such amount shall not include interest at the Class B
Spread Rate on the unreimbursed amounts of such
Realized Losses previously allocated to the Class BL
Interest);
(x) to the Class CL Interest, interest equal to the Accrued
Certificate Interest for such Distribution Date;
(xi) to the Class CL Interest, interest equal to the
Outstanding Class Interest Shortfall of such Class (for
the purpose of this clause, such amount shall not
include interest at the Class C Spread Rate on the
Certificate Principal Amount of the Class CL Interest);
(xii) after the aggregate Certificate Principal Amount of the
Class AL and Class BL Interest have been reduced to
zero, to the Class CL Interest, principal equal to the
Remaining Principal Distribution Amount for such
Distribution Date (less the portion thereof distributed
on such Distribution Date pursuant to any preceding
clause) until the Certificate Principal Amount of the
Class CL Interest has been reduced to zero;
(xiii) until the Certificate Principal Amount thereof has been
reduced to zero, to the Class CL Interest, to reimburse
the Holder of the Class CL Interest for the
unreimbursed amounts of Realized Losses of principal,
if any, previously allocated thereto, together with
interest thereon at the applicable Pass-Through Rate
from the date such Realized Loss was allocated thereto
through the close of the Interest Accrual Period
related to the Distribution Date on which such Realized
Loss is reimbursed (for the purpose of this clause,
such amount shall not include interest at the Class C
Spread Rate on the unreimbursed amounts of such
Realized Losses previously allocated to the Class CL
Interest);
(xiv) to the Class DL Interest, interest equal to the Accrued
Certificate Interest for such Distribution Date;
(xv) to the Class DL Interest, interest equal to the
Outstanding Class Interest Shortfall of such Class (for
the purpose of this clause, such amount shall not
include interest
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at the Class D Spread Rate on the Certificate
Principal Amount of the Class DL Interest);
(xvi) after the aggregate Certificate Principal Amount of the
Class AL, Class BL and Class CL Interests have been
reduced to zero, to the Class DL Interest, principal
equal to the Remaining Principal Distribution Amount
for such Distribution Date (less the portion thereof
distributed on such Distribution Date pursuant to any
preceding clause) until the Certificate Principal
Amount of the Class DL Interest has been reduced to
zero;
(xvii) until the Certificate Principal Amount thereof has been
reduced to zero, to the Class DL Interest, to reimburse
the Holder of the Class DL Interest for the
unreimbursed amounts of Realized Losses of principal,
if any, previously allocated thereto, together with
interest thereon at the applicable Pass-Through Rate
from the date such Realized Loss was allocated thereto
through the close of the Interest Accrual Period
related to the Distribution Date on which such Realized
Loss is reimbursed (for the purpose of this clause,
such amount shall not include interest at the Class D
Spread Rate on the unreimbursed amounts of such
Realized Losses previously allocated to the Class DL
Interest);
(xviii) to the Class EL Interest, interest equal to the Accrued
Certificate Interest for such Distribution Date;
(xix) to the Class EL Interest, interest equal to the
Outstanding Class Interest Shortfall of such Class;
(xx) after the aggregate Certificate Principal Amount of the
Class AL, Class BL, Class CL and Class DL Interests
have been reduced to zero, to the Class EL Interest,
principal equal to the Remaining Principal Distribution
Amount for such Distribution Date (less the portion
thereof distributed on such Distribution Date pursuant
to any preceding clause) until the Certificate
Principal Amount of the Class EL Interest has been
reduced to zero;
(xxi) until the Certificate Principal Amount thereof has been
reduced to zero, to the Class EL Interest, to reimburse
the Holder of the Class EL Interest for the
unreimbursed amounts of Realized Losses of principal,
if any, previously allocated thereto, together with
interest thereon at the applicable Pass-Through Rate
from the date such Realized Loss was allocated thereto
through the close of the Interest Accrual Period
related to the Distribution Date on which such Realized
Loss is reimbursed;
(xxii) to the Class FL Interest, interest equal to the Accrued
Certificate Interest of such Distribution Date;
(xxiii) to the Class FL Interest, interest equal to the
Outstanding Class Interest Shortfall of such Class;
(xxiv) after the aggregate Certificate Principal Amount of the
Class AL, Class BL, Class CL, Class DL and Class EL
Interests have been reduced to zero, to the Class FL
Interest, principal equal to the Remaining Principal
Distribution Amount for such Distribution Date (less
the portion thereof distributed on such Distribution
Date
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pursuant to any preceding clause) until the Certificate
Principal Amount of the Class FL Interest has been
reduced to zero;
(xxv) until the Certificate Principal Amount thereof has been
reduced to zero, to the Class FL Interests, to
reimburse Holders of the Class FL Interests for the
unreimbursed amounts of Realized Losses of principal,
if any, previously allocated thereto, together with
interest thereon at the applicable Pass-Through Rate
from the date such Realized Loss was allocated thereto
through the close of the Interest Accrual Period
related to the Distribution Date on which such Realized
Loss is reimbursed;
(xxvi) to the Class GL and Class X-1L Interests, interest
equal to the Accrued Certificate Interest of such
Distribution Date and to the Class AL, Class BL, Class
CL and Class DL Interests an amount of accrued interest
equal to the applicable Spread Rate times the
Certificate Principal Amount of such Certificates, PRO
RATA, for such Distribution Date;
(xxvii) to the Class GL and Class X-1L Interests, interest
equal to the Outstanding Class Interest Shortfall of
such Classes and to the Class AL, Class BL, Class CL,
Class DL and Class EL Interests, interest equal to the
portion of the Outstanding Class Interest Shortfall
equal to any accrued interest distributable pursuant to
clause (xxvi) that was not distributed pursuant to such
clause or this clause on previous Distribution Dates;
(xxviii) after the aggregate Certificate Principal Amount of the
Class AL, Class BL, Class CL, Class DL, Class EL and
Class FL Interests have been reduced to zero, to the
Class GL Interest, principal equal to the Remaining
Principal Distribution Amount for such Distribution
Date (less the portion thereof distributed on such
Distribution Date pursuant to any preceding clause)
until the Certificate Principal Amount of the Class GL
Interest has been reduced to zero;
(xxix) until the Certificate Principal Amount thereof has been
reduced to zero, to the Class GL Interests, to
reimburse Holders of the Class GL Interests for the
unreimbursed amount of Realized Losses of principal, if
any, previously allocated thereto, together with
interest thereon at the applicable Pass-Through Rate
from the date such Realized Loss was allocated thereto
through the close of the Interest Accrual Period
related to the Distribution Date on which such Realized
Loss is reimbursed; and
(xxx) to the extent of any remaining funds, to the Class AL
and Class AR-L Interests and the Class LR Certificates,
PRO RATA and then to the Class BL, Class CL, Class DL,
Class EL, Class FL and Class GL Interests, in that
order of priority, in payment of any amounts remaining
due thereon.
(b) The Holders of the Class LR Certificates will be entitled to
receive distributions, pro rata, on each Distribution Date, equal to any
funds remaining in the Distribution Account after payment in full of the
other Classes of Lower-Tier Interests. Amounts payable to the Holders of the
Class LR Certificates shall rank PARI PASSU with distributions to the Holder
of the Class AL and Class AR-L Interests. Accordingly, in the case of any
shortfall in amounts available to make payments to all such classes the
Holder of the Class AL Interest will share on a pari passu basis with both
the Class LR Certificates and the Class AR-L Interest.
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(c) On each Distribution Date, the Paying Agent shall, from
funds on deposit in the Distribution Account, (i) deposit, in immediately
available funds, by wire transfer or otherwise, into the Upper-Tier
Distribution Account the Lower-Tier distribution amount (other than amounts
distributable to the Holders of the Class LR Certificates) and (ii)
distribute to the Holders of the Class LR Certificates (other than as
provided in Section 9.1 respecting the final distributions to
Certificateholders) by check mailed to such Holders at the addresses of such
Holders appearing in the Certificate Register, the amount distributable with
respect to the Class LR Certificates pursuant to Section 4.1(b). All amounts
distributable to Holders of the Class LR Certificates pursuant to clause (ii)
of the preceding sentence on each Distribution date shall be allocated PRO
RATA among the outstanding Certificates of such Class based on the Percentage
Interests of each Holder of Class LR Certificates.
(d) On any Distribution Date on which there is a Net Prepayment
Interest Shortfall, or with respect to any Certificate Mortgage Loan, the
portion of any prepayment interest shortfalls related to Certificate Mortgage
Loans which have been allocated to the Mortgage Certificates and which
occurred during the prepayment period applicable to the Mortgage
Certificates, or a Realized Loss of interest, such Net Prepayment Interest
Shortfall or Realized Loss of interest shall be allocated, in each case to
the extent of amounts otherwise distributable thereon on such Distribution
Date, first, to the Class GL and Class X-1L Interests, then to the Class FL
Interest (but only to the extent of the Spread Rate thereon), then to the
Class EL Interest (but only to the extent of the Spread Rate thereon), then
to the Class DL Interest (but only to the extent of the Spread Rate thereon),
then to the Class CL Interest (but only to the extent of the Spread Rate
thereon), then to the Class BL Interest (but only to the extent of the Spread
Rate thereon), PRO RATA, in proportion to the related Accrued Certificate
Interest otherwise payable thereon; second, to the Class FL Interest (to the
extent of the remaining related Accrued Certificate Interest); third, to the
Class EL Interest (to the extent of the remaining related Accrued Certificate
Interest); fourth, to the Class DL Interest (to the extent of the remaining
related Accrued Certificate Interest); fifth, to the Class CL Interest (to
the extent of the remaining related Accrued Certificate Interest); sixth to
the Class BL Interest (to the extent of the remaining related Accrued
Certificate Interest); and seventh, to the Class AL and Class AR-L Interests
and the Class LR Certificates, PRO RATA in proportion to the remaining
related Accrued Certificate Interest otherwise payable thereon.
(e) On each Distribution Date, Realized Losses of principal
shall be allocated in the following order of priority:
(i) to reduce the Certificate Principal Amount of the Class
GL Interest to zero;
(ii) to reduce the Certificate Principal Amount of the Class
FL Interest to zero;
(iii) to reduce the Certificate Principal Amount of the Class
EL Interest to zero;
(iv) to reduce the Certificate Principal Amount of the Class
DL Interest to zero;
(v) to reduce the Certificate Principal Amount of the Class
CL Interest to zero;
(vi) to reduce the Certificate Principal Amount of the Class
BL Interest to zero; and
(vii) to reduce the Certificate Principal Amount of the Class
AL and Class AR-L Interests and the Class LR
Certificates, PRO RATA in proportion to their original
Certificate Principal Amounts, to zero.
(f) Any Realized Losses or Net Prepayment Interest Shortfalls
allocated to a Class of Lower-Tier Interests pursuant to Section 4.1(d) or
4.1(e) shall reduce the amount payable to such Class pursuant to Section
4.1(a) or 4.1(b). As of any date, the Certificate Principal Amount of each
Lower-Tier Interest is intended to equal the
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Certificate Principal Amount of the respective Corresponding Upper-Tier
Class, and it is intended that allocations of Realized Losses of principal
shall cause such Certificate Principal Amounts to remain equal.
SECTION 4.2 DISTRIBUTIONS FROM UPPER-TIER REMIC.
(a) On each Distribution Date, the amounts distributed on the
Lower-Tier Interests (other than the Class LR Certificates) will be distributed
by the Paying Agent to the holders of the Upper-Tier Certificates, subject to
Sections 4.2(d), 4.2(e), 4.2(f) and 4.2(g), in respect of each Class of
Certificates in the amounts (to the extent sufficient therefor), and in the
order of priority, set forth below:
(i) to the Class A and Class R Certificates, the Accrued
Certificate Interest for each such Class, PRO RATA,
based on the respective Accrued Certificate Interest
for each such Class for such Distribution Date;
(ii) to the Class A and Class R Certificates, PRO RATA,
based on the respective Outstanding Class Interest
Shortfall for such Distribution Date, interest equal to
the Outstanding Class Interest Shortfall for each such
Class;
(iii) except as set forth in clause (iv) below, to the Class
R Certificates, pro rata, the Class R Principal
Distribution Amount for such Distribution Date;
(iv) to the Class A Certificates, principal equal to the
Remaining Principal Distribution Amount for such
Distribution Date, until the Certificate Principal
Amount of the Class A Certificates has been reduced to
zero; PROVIDED, HOWEVER, that if the Available
Distribution Amount remaining after distributions
pursuant to clauses (i) and (ii) is less than the
Principal Distribution Amount, then payments made
pursuant to this clause (iv) and clause (iii) shall be
PRO RATA;
(v) until the Certificate Principal Amount of the Class A
and Class R Certificates have been reduced to zero, to
the Class A Certificates and Class R Certificates, PRO
RATA, to reimburse the Holders of such Certificates for
the unreimbursed amounts of Realized Losses of
principal, if any, previously allocated thereto,
together with interest thereon at the applicable Pass-
Through Rate from the date such Realized Loss was
allocated thereto through the close of the Interest
Accrual Period related to the Distribution Date on
which such Realized Loss is reimbursed;
(vi) to the Class B Certificates, interest equal to the
Accrued Certificate Interest thereon;
(vii) to the Class B Certificates, interest equal to the
Outstanding Class Interest Shortfall of such Class;
(viii) after the aggregate Certificate Principal Amount of the
Class A Certificates has been reduced to zero, to the
Class B Certificates, principal equal to the Remaining
Principal Distribution Amount for such Distribution
Date (less the portion thereof distributed on such
Distribution Date pursuant to any preceding clause)
until the Certificate Principal Amount of the Class B
Certificates has been reduced to zero;
(ix) until the Certificate Principal Amount thereof has been
reduced to zero, to the Class B Certificates, to
reimburse the Holders of the Class B Certificates for
the
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unreimbursed amounts of Realized Losses of principal,
if any, previously allocated thereto, together with
interest thereon at the applicable Pass-Through Rate
from the date such Realized Loss was allocated thereto
through the close of the Interest Accrual Period
related to the Distribution Date on which such Realized
Loss is reimbursed;
(x) to the Class C Certificates, interest equal to the
Accrued Certificate Interest for such Distribution
Date;
(xi) to the Class C Certificates, interest equal to the
Outstanding Class Interest Shortfall of such Class;
(xii) after the aggregate Certificate Principal Amount of the
Class A and Class B Certificates have been reduced to
zero, to the Class C Certificates, principal equal to
the Remaining Principal Distribution Amount for such
Distribution Date (less the portion thereof distributed
on such Distribution Date pursuant to any preceding
clause) until the Certificate Principal Amount of the
Class C Certificates has been reduced to zero;
(xiii) until the Certificate Principal Amount thereof has been
reduced to zero, to the Class C Certificates, to
reimburse Holders of the Class C Certificates for the
unreimbursed amounts of Realized Losses of principal,
if any, previously allocated thereto, together with
interest thereon at the applicable Pass-Through Rate
from the date such Realized Loss was allocated thereto
through the close of the Interest Accrual Period
related to the Distribution Date on which such Realized
Loss is reimbursed;
(xiv) to the Class D Certificates, interest equal to the
Accrued Certificate Interest for such Distribution
Date;
(xv) to the Class D Certificates, interest equal to the
Outstanding Class Interest Shortfall of such Class;
(xvi) after the aggregate Certificate Principal Amount of the
Class A, Class B and Class C Certificates have been
reduced to zero, to the Class D Certificates, principal
equal to the Remaining Principal Distribution Amount
for such Distribution Date (less the portion thereof
distributed on such Distribution Date pursuant to any
preceding clause) until the Certificate Principal
Amount of the Class D Certificates has been reduced to
zero;
(xvii) until the Certificate Principal Amount thereof has
previously been reduced to zero, to the Class D
Certificates, to reimburse Holders of the Class D
Certificates for the unreimbursed amounts of Realized
Losses of principal, if any, previously allocated
thereto, together with interest thereon at the
applicable Pass-Through Rate from the date such
Realized Loss was allocated thereto through the close
of the Interest Accrual Period related to the
Distribution Date on which such Realized Loss is
reimbursed;
(xviii) to the Class E Certificates, interest equal to the
Accrued Certificate Interest for such Distribution
Date;
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(xix) to the Class E Certificates, interest equal to the
Outstanding Class Interest Shortfall of such Class;
(xx) after the aggregate Certificate Principal Amount of the
Class A, Class B, Class C and Class D Certificates have
been reduced to zero, to the Class E Certificates,
principal equal to the Remaining Principal Distribution
Amount for such Distribution Date (less the portion
thereof distributed on such Distribution Date pursuant
to any preceding clause) until the Certificate
Principal Amount of the Class E Certificates has been
reduced to zero;
(xxi) until the Certificate Principal Amount thereof has been
reduced to zero, to the Class E Certificates, to
reimburse Holders of the Class E Certificates for the
unreimbursed amounts of Realized Losses of principal,
if any, previously allocated thereto, together with
interest thereon at the applicable Pass-Through Rate
from the date such Realized Loss was allocated thereto
through the close of the Interest Accrual Period
related to the Distribution Date on which such Realized
Loss is reimbursed;
(xxii) to the Class F Certificates, interest equal to the
Accrued Certificate Interest for such Distribution
Date;
(xxiii) to the Class F Certificates, interest equal to the
Outstanding Class Interest Shortfall of such Class;
(xxiv) after the aggregate Certificate Principal Amount of the
Class A, Class B, Class C, Class D and Class E
Certificates have been reduced to zero, to the Class F
Certificates, principal equal to the Remaining
Principal Distribution Amount for such Distribution
Date (less the portion thereof distributed on such
Distribution Date pursuant to any preceding clause)
until the Certificate Principal Amount of the Class F
Certificates has been reduced to zero;
(xxv) until the Certificate Principal Amount of the Class F
Certificates has been reduced to zero, to the Class F
Certificates, to reimburse Holders of the Class F
Certificates for the unreimbursed amounts of Realized
Losses of principal, if any, previously allocated
thereto, together with interest thereon at the
applicable Pass-Through Rate from the date such
Realized Loss was allocated thereto through the close
of the Interest Accrual Period related to the
Distribution Date on which such Realized Loss is
reimbursed;
(xxvi) to the Class G, Class X-1 and Class X-2 Certificates,
PRO RATA, interest equal to the Accrued Certificate
Interest for such Distribution Date;
(xxvii) to the Class G, Class X-1 and Class X-2 Certificates,
PRO RATA, interest equal to the Outstanding Class
Interest Shortfall of such Class;
(xxviii) after the aggregate Certificate Principal Amount of the
Class A, Class B, Class C, Class D, Class E and Class F
have been reduced to zero, to the Class G Certificates,
principal equal to the Remaining Principal Distribution
Amount of such Distribution Date (less the portion
thereof distributed on such Distribution Date
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pursuant to any preceding clause) until the Certificate
Principal Amount of the Class G Certificates has been
reduced to zero;
(xxix) until the Certificate Principal Amount of the Class G
Certificates has been reduced to zero, to the Class G,
Class X-1 and Class X-2 Certificates, PRO RATA, to
reimburse Holders of the Class G, Class X-1 and Class
X-2 Certificates for the unreimbursed amounts of
Realized Losses of principal, if any, previously
allocated thereto, together with interest thereon at
the applicable Pass-Through Rate from the date such
Realized Loss was allocated thereto through the close
of the Interest Accrual Period related to the
Distribution Date on which such Realized Loss is
reimbursed;
(xxx) to the extent of any remaining funds, to the Class A
and Class R Certificates PRO RATA, and then to the
Class B, Class C, Class D, Class E, Class F and Class G
Certificates, in that order of priority, in payment of
any amounts remaining due thereon; and
(xxxi) to the extent of any remaining funds, to the Class R
Certificates, pro rata, any funds remaining in the
Upper-Tier Distribution Account.
(b) On each Distribution Date, the Paying Agent shall, from
funds available on deposit in the Upper-Tier Distribution Account, distribute
to each Certificateholder of record (other than the Holders of Class LR
Certificates) on the preceding Record Date such Holder's PRO RATA share
(based on the aggregate of the Percentage Interests represented by
Certificates held by such Holder) of the amount distributable with respect to
such Certificates. Any amount remaining in the Upper-Tier Distribution
Account on a Distribution Date after all other distributions to the Holders
of the Upper-Tier Certificates have been made shall be distributed on a PRO
RATA basis to the Holders of the Class R Certificates.
All amounts distributable to a Class of Certificates pursuant to
this Section 4.2(b) on each Distribution Date shall be allocated PRO RATA
among the outstanding Certificates of each such Class based on their
respective Percentage Interests. Such distributions shall be made on each
Distribution Date other than the Termination Date to each Certificateholder
of record on the related Record Date by check mailed by first-class mail to
the address set forth therefor in the Certificate Register or, provided that
such Certificateholder has provided the Paying Agent with wire instructions
in writing at least five Business Days prior to the related Record Date, by
wire transfer of immediately available funds to the account of such
Certificateholder at a bank or other entity located in the United States and
having appropriate facilities therefor. The final distribution on each
Certificate shall be made in like manner, but only upon presentment and
surrender of such Certificate at the Corporate Trust Office or such other
location specified in the notice to Certificateholders of such final
distribution. The Trustee or its agent may clear and terminate the Upper-Tier
Distribution Account pursuant to Section 9.1.
(c) Notwithstanding the foregoing, in no event shall
distributions of principal be made to the Holders of Class A, Class R, Class
B, Class C, Class D, Class E, Class F and Class G Certificates after the
respective Certificate Principal Amounts thereof have been reduced to zero,
unless such reduction resulted from the allocation of Realized Losses of
principal, in which case principal distributions shall continue to be made to
the applicable Class or Classes of Certificates until such Realized Losses
have been reimbursed.
(d) Except as otherwise provided in Section 9.1(f) with respect
to an Anticipated Termination Date, the Trustee shall, no later than the
fifth Business Day following the Determination Date in the month preceding
the month in which the final distribution with respect to any Class of
Certificates is expected to be made, mail to each Holder of such Class of
Certificates and the Rating Agency on such date a notice to the effect that:
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(A) the Trustee reasonably expects, based upon information
previously provided to it, that the final distribution with respect to such
Class of Certificates will be made on such Distribution Date, but only upon
presentation and surrender of such Certificates at the office or agency of
the Trustee therein specified, and
(B) if such final distribution is made on such Distribution
Date, no interest shall accrue on such Certificates from and after the end
of the Interest Accrual Period immediately preceding such Distribution
Date.
Any funds not distributed to any Holder or Holders of Certificates of such
Class on such Distribution Date because of the failure of such Holder or
Holders to tender their Certificates shall, on such date, be set aside and
held in trust for the benefit of the appropriate nontendering Holder or
Holders. If any Certificates as to which notice has been given pursuant to
this Section 4.2(d) shall not have been surrendered for cancellation within
six months after the date specified in such notice, the Trustee shall mail a
second notice to the remaining nontendering Certificateholders to surrender
their Certificates for cancellation to receive the final distribution with
respect thereto. The costs and expenses of holding such funds in trust and
of contacting such Certificateholders shall be paid out of such funds. If
after the second notice any such Certificates shall not have been surrendered
for cancellation, the Trustee shall continue to hold such amounts for the
benefit of such Holders until the earlier of (i) its termination as Trustee
hereunder and the transfer of such amounts to a successor Trustee or (ii) the
termination of the Trust Fund, which termination shall occur six months after
the mailing of the second notice (or such later time as might be required by
applicable state law). Any funds not distributed to Certificateholders
pursuant to this Section 4.2(d) upon the termination of the Trust Fund shall
become the property of the Class R Certificateholder. No interest shall
accrue or be payable to any Certificateholder on any amount held in trust
hereunder as a result of such Certificateholder's failure to surrender its
Certificate(s) for final payment thereof in accordance with this Section
4.2(d). Any such amounts held by the Trustee shall not be invested.
(e) On any Distribution Date on which there is a Net Prepayment
Interest Shortfall or Realized Loss of interest allocated to any Class of
Lower-Tier Interests, such Net Prepayment Interest Shortfall or Realized Loss
of interest shall be allocated to the Corresponding Class or Classes of
Upper-Tier Certificates, in each case to the extent of amounts otherwise
distributable thereon on such Distribution Date. For purposes of such
calculation the Class X-2 Certificates shall be the "Corresponding Class" to
the Class AL, Class BL, Class CL and Class DL Interests to the extent of the
portion of the Accrued Certificate Interest equal to the applicable Spread
Rate times the Certificate Principal Amount of such Certificates.
(f) On any Distribution Date on which there is a Realized Loss
of principal allocated to any Class of Lower-Tier Interests, such Realized
Loss of principal shall be allocated to the Corresponding Class or Classes of
Upper-Tier Certificates to the extent of amounts otherwise distributable
thereon on such Distribution Date and to the extent of the Certificate
Principal Amount of such Class.
(g) Any Realized Losses or Net Prepayment Interest Shortfalls
allocated to a Class of Upper-Tier Certificates pursuant to Section 4.2(e) or
4.2(f) shall reduce the amount payable to such Class pursuant to Section
4.2(a). As of any date, the Certificate Principal Amount of each Upper-Tier
Certificate is intended to equal the Certificate Principal Amount of the
respective Corresponding Lower-Tier Interest, and it is intended that
allocations of Realized Losses of principal cause such Certificate Principal
Amounts to remain equal.
(h) On each Distribution Date, the Trustee (or the Paying Agent
on behalf of the Trustee) shall withdraw from the Upper-Tier Distribution
Account all amounts then on deposit therein that represent Prepayment
Premiums collected on Mortgage Loans during the Prepayment Period for such
Distribution Date, and shall distribute such Prepayment Premiums, in addition
to the Available Distribution Amount for such Distribution Date, to the
Holders of the Class X-1 Certificates.
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SECTION 4.3 STATEMENTS TO CERTIFICATEHOLDERS.
On each Distribution Date, the Trustee shall, based upon the
information set forth in the report prepared by the Master Servicer and Special
Servicer with respect to such Distribution Date, prepare and forward by mail to
each Certificateholder, with copies to the Depositor, the Special Servicer, the
Paying Agent and the Initial Purchaser, a statement as to such distribution
setting forth:
(i) the amount, if any, of such distribution to the Holders
of Class A, Class R, Class LR, Class B, Class C,
Class D, Class E, Class F and Class G Certificates
applied to reduce the respective Certificate Principal
Amounts thereof and the amount, if any, of Realized
Losses allocated to the Holders of each such Class and
applied to reduce the respective Certificate Principal
Amounts thereof;
(ii) the amount of such distribution to Holders of
Certificates of each Class, allocable to (a) Accrued
Certificate Interest and (b) any Outstanding Class
Interest Shortfall for each such Class;
(iii) the amount of Realized Losses and Net Prepayment
Interest Shortfalls, if any, allocated to each Class;
(iv) the aggregate Scheduled Principal Balance of the
Mortgage Loans and outstanding principal balance of the
Mortgage Certificates as of the Determination Date
preceding such Distribution Date;
(v) the number and aggregate Scheduled Principal Balance of
Mortgage Loans as of the Determination Date preceding
such Distribution Date (a) delinquent one month, (b)
delinquent two or more months and (c) as to which
foreclosure proceedings have been commenced;
(vi) with respect to any Mortgage Loan that became an REO
Mortgage Loan during the related Prepayment Period, the
principal balance of such Mortgage Loan as of the date
it became an REO Mortgage Loan;
(vii) as of the Determination Date preceding such
Distribution Date (a) the book value of any REO Account
Property, (b) as to any REO Property sold during the
related Prepayment Period, the date of the related
Final Recovery Determination, the amount of the
proceeds of such sale deposited into the REO Account
and the amount of Net REO Proceeds from such sale
deposited to the Collection Account, and (c) the
aggregate amount of other revenues collected by the
Special Servicer with respect to each REO Account
Property during the related Prepayment Period and
credited to the REO Account and Collection Account for
each such REO Account Property, in each case
identifying such REO Property by the Loan Number of the
related Mortgage Loan;
(viii) the aggregate Certificate Principal Amounts of the
Class A, Class R, Class LR, Class B, Class C, Class D,
Class E, Class F, Class G Certificates, before and
after giving effect to the distribution in respect of
principal and allocation of Realized Losses in
reduction of Certificate Principal Amounts on such
Distribution Date;
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(ix) the aggregate amount of Principal Prepayments received
during the related Prepayment Period;
(x) the Certificate Factor with respect to each Class of
Certificates applicable to such Distribution Date;
(xi) a description prepared by the Special Servicer and
forwarded to the Master Servicer of any modifications,
waivers, amendments or consents with respect to the
Mortgage Loans during the related Prepayment Period and
the bases therefor, including descriptions for any
Balloon Mortgage Loan whose maturity date has been
extended;
(xii) the number of outstanding Mortgage Loans as of the
related Determination Date;
(xiii) the aggregate amount of Servicing Fees retained by or
paid to the Master Servicer in respect of the related
Due Period;
(xiv) the aggregate amount of the Special Servicer Fee
retained by or paid to the Special Servicer in respect
of the related Due Period as the Basic Fee and as the
Workout Fee, as the case may be;
(xv) the amount of Realized Losses, if any, incurred during
the related Prepayment Period with respect to the
Mortgage Loans and the Mortgage Certificates;
(xvi) the aggregate Outstanding Class Interest Shortfall, if
any, for each Class of Certificates after giving effect
to the distributions made on such Distribution Date for
each Class of Certificates;
(xvii) with respect to each Mortgage Loan that is a Specially
Serviced Mortgage Loan, the Loan Number, the name of
the related Mortgaged Property;
(xviii) the amount of any Appraisal Reductions effected during
the related Due Period and the total Appraisal
Reductions as of such Distribution Date on a Mortgage
Loan-by-Mortgage Loan basis identifying each such
Mortgage Loan by Loan Number; and
(xix) any monthly report prepared with respect to the
Mortgage Certificates that the Trustee receives as the
holder of the Mortgage Certificates.
In the case of information furnished pursuant to subclauses (i),
(ii), (iii), (viii) and (xvi) above, the amounts shall be expressed as a
dollar amount in the aggregate for all Certificates of each applicable Class
and for each Class A, Class R, Class LR, Class B, Class C, Class D, Class E,
Class F or Class G Certificate with an initial Certificate Principal Amount
(or notional principal amount) of $1,000.
In addition, the Trustee shall forward to any Certificateholder
within five Business Days following a request therefor by such
Certificateholder, a copy of the most recent update of the information
contained in Exhibit B hereto with respect to the Mortgage Loan Schedule and
Exhibit K hereto with respect to the Mortgaged Property Schedule.
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The Trustee shall make available to Persons who have obtained an
account number on the Trustee's ASAP (Automatic Statements Accessed by Phone)
System (or similar system), the reports described above in this Section 4.3
and a summary report of Certificate Factors via automated facsimile. The
Trustee shall make available, upon request, to Certificateholders,
Certificate Owners identified to the reasonable satisfaction of the Trustee,
the Depositor, the Initial Purchaser, the Master Servicer, the Special
Servicer and the Rating Agency account numbers on the Trustee's ASAP System
(or a similar system). In addition, if the Depositor so directs the Trustee
and on terms acceptable to the Trustee, the Trustee will make available
through its electronic bulletin board system, on a confidential basis, such
information related to the Mortgage Loans as the Depositor may reasonably
request. A directory has been set up on the bulleting board in which an
electronic file is stored containing monthly servicer data. All files shall
be password protected. Passwords to each file will be released by the
Trustee, upon request, to Certificateholders and Certificate Owners
identified to the reasonable satisfaction of the Trustee, the Depositor, the
Initial Purchaser, the Master Servicer, the Special Servicer and the Rating
Agency. The Trustee also maintains a site on the Internet at www.lnbabs.com
at which certain of the above information will be available.
Within 90 days after the end of each calendar year, the Trustee
shall furnish to each Person who at any time during the calendar year was a
Holder of a Class A, Class R, Class LR, Class B, Class C, Class D, Class E,
Class F, Class G, Class X-1 or X-2 Certificate a statement containing the
information set forth in subclauses (i), (ii), (iii) and (xvi) above, in
addition to information contained in Exhibit B and Exhibit K updated for such
period, aggregated for such calendar year or applicable portion thereof
during which such Person was a Certificateholder. Such obligation of the
Trustee shall be deemed to have been satisfied to the extent that
substantially comparable information shall be provided by the Trustee
pursuant to any requirements of the Code as from time to time in force.
On each Distribution Date, the Trustee shall forward to each Holder
of a Class R or Class LR Certificate and to the Master Servicer and the
Special Servicer a copy of the reports forwarded to the Class A, Class B,
Class C, Class D, Class E, Class F, Class G, Class X-1 and Class X-2
Certificateholders on such Distribution Date and a statement setting forth
the amounts, if any, actually distributed with respect to the Class R or
Class LR Certificates on such Distribution Date.
Within a reasonable period of time after the end of each calendar
year, the Trustee shall furnish to each Person who at any time during the
calendar year was a Holder of a Class R or Class LR Certificate a statement
containing the information provided pursuant to the previous paragraph
aggregated for such calendar year or applicable portion thereof during which
such Person was holding such Certificate.
SECTION 4.4 COMPLIANCE WITH WITHHOLDING REQUIREMENTS.
Notwithstanding any other provision of this Agreement, the Trustee
shall comply with all federal withholding requirements with respect to
payments to Certificateholders of interest or original issue discount that
the Trustee reasonably believes are applicable under the Code. The consent
of Certificateholders shall not be required for any such withholding.
Without limiting the foregoing, the Trustee agrees that it will not withhold
with respect to payments of interest or original issue discount in the case
of a Certificateholder that has furnished or caused to be furnished an
effective Form W-8 or an acceptable substitute form or a successor form and
who is not, as evidenced by a written certification from such
Certificateholder to the Trustee, a "10-percent shareholder" within the
meaning of Code Section 871(h)(3)(B) or a "controlled foreign corporation"
described in Code Section 881(c)(3)(C) with respect to the Upper-Tier REMIC,
the Lower-Tier REMIC, the Trust Fund or the Depositor. In the event the
Paying Agent withholds any amount from interest or original issue discount
payments or advances thereof to any Certificateholder pursuant to federal
withholding requirements, the Paying Agent shall indicate the amount withheld
to such Certificateholder.
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SECTION 4.5 REMIC COMPLIANCE.
(a) The parties intend that each of the Upper-Tier REMIC and
Lower-Tier REMIC shall constitute, and that the affairs of each of the
Upper-Tier REMIC and Lower-Tier REMIC shall be conducted so as to qualify it
as, a "real estate mortgage investment conduit" as defined in, and in
accordance with, the REMIC Provisions, and the provisions hereof shall be
interpreted consistently with this intention. In furtherance of such
intention, the Trustee shall, to the extent permitted by applicable law, act
as agent, and is hereby appointed to act as agent, of each of the Upper-Tier
REMIC and the Lower-Tier REMIC and shall on behalf of each of the Upper-Tier
REMIC and Lower Tier REMIC: (i) prepare or cause to be prepared and file all
required federal and state tax and information returns for each of the
Upper-Tier REMIC and Lower-Tier REMIC, including, but not limited to, Form
1066, using a calendar year as the taxable year for each of the Upper-Tier
REMIC and Lower-Tier REMIC when and as required by the REMIC Provisions and
other applicable federal income tax laws; (ii) make an election, on behalf of
each of the Upper-Tier REMIC and the Lower-Tier REMIC, to be treated as a
REMIC on Form 1066 for its first taxable year, in accordance with the REMIC
Provisions and any similar state or local laws or ordinances; (iii) prepare
and forward, or cause to be prepared and forwarded, to the Certificateholders
and the Internal Revenue Service (and other governmental agencies) all
information reports as and when required to be provided to them in accordance
with the REMIC Provisions and any similar state or local laws or ordinances;
(iv) if the filing or distribution of any documents of an administrative
nature not addressed in clauses (i) through (iii) of this Section 4.5(a) is
then required by (or is considered helpful to satisfying) the REMIC
Provisions in order to maintain the status of each of the Upper-Tier REMIC
and Lower-Tier REMIC as a REMIC or is otherwise required, prepare, file and
sign or distribute, or cause to be prepared and filed and signed or
distributed, such documents with or to such Persons when and as required by
(or is considered helpful to satisfying) the REMIC Provisions; (v) within
thirty days of the Closing Date, furnish or cause to be furnished to the
Internal Revenue Service, on Form 8811 or as otherwise may be required by the
Code, the name, title, address, and telephone number of the Person that the
Holders of the Certificates may contact for tax information relating thereto
(and the Trustee shall act as the representative of the Upper-Tier REMIC and
Lower-Tier REMIC for this purpose), together with such additional information
as may be required by such Form, and shall update such information at the
time or times and in the manner required by the Code; and (vi) maintain such
records relating to each of the Upper-Tier REMIC and Lower-Tier REMIC as may
be necessary to prepare the foregoing returns, schedules, statements or
information. The "tax matters person" for the Upper-Tier REMIC, pursuant to
Treasury Regulation Section 1.860F-4(d), shall be the Holder of the largest
Percentage Interest of the Class R Certificates or, if two or more Holders
have the same largest Percentage Interest, the first of such Holders to have
acquired such Class R Certificates. The tax matters person for the Lower-Tier
REMIC, pursuant to Treasury Regulation Section 1.860F-4(d) shall be the
Holder of the largest Percentage Interest of Class LR Certificates or, if two
or more Holders have the same largest Percentage Interest, the first of such
Holders to have acquired such Class LR Certificates. The Trustee shall serve
as attorney-in-fact and agent for any Person that is the tax matters person
of the Upper-Tier REMIC or Lower-Tier REMIC. The Holder of any Certificate,
by purchasing such Certificate, (A) shall be deemed to consent to the
appointment of the Trustee as attorney-in-fact and agent for any Person that
is the tax matters person of the Upper-Tier REMIC or Lower-Tier REMIC, and
(B) agrees to execute any documents required to give effect to (A) above.
Notwithstanding any other provision of this Agreement, none of the Master
Servicer or the Trustee shall intentionally take any action or intentionally
omit to take any action in connection with its obligations under this
Agreement if, in taking or omitting to take such action, such Person knows
that such action or omission (as the case may be) would cause the termination
of the REMIC status of the Upper-Tier REMIC or Lower-Tier REMIC or subject
the Upper-Tier REMIC or Lower-Tier REMIC to tax; PROVIDED, HOWEVER, that such
Person shall not be required to take any action in this regard that such
Person in good faith believes to be inconsistent with any other provision of
this Agreement. The Depositor, the Master Servicer and the Special Servicer
shall cooperate in a timely manner with the Trustee in supplying any
information within the Depositor's, the Master Servicer's or the Special
Servicer's control that is reasonably necessary to enable the Trustee to
perform its duties under this Section 4.5.
(b) Anything herein to the contrary notwithstanding, if at any
time the Master Servicer, the Special Servicer or a Responsible Officer of the
Trustee has actual knowledge that any Mortgage Loan is not a Qualified Mortgage
within the meaning of the REMIC Provisions, the party making such discovery
shall promptly so notify the
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Originator and the Depositor and furnish the Originator and the Depositor
with an Opinion of Counsel (at the expense of the Depositor) to such effect,
and pursuant to the Transfer Agreement, the Originator shall not later than
90 days after such discovery, (i) repurchase such Mortgage Loan at a price
equal to the Repurchase Price or (ii) if within two years of the Start-up
Day, at the Originator's option, substitute such Mortgage Loan with a new
Mortgage Loan, in each case, in the manner described in, and subject to the
conditions set forth in Section 2.2(b). Notwithstanding anything herein to
the contrary, the Master Servicer, Special Servicer and Trustee have no
obligation to determine whether or not a Mortgage Loan is a Qualified
Mortgage.
(c) Except as otherwise provided herein, the Trustee shall not
sell or modify (if such modification would constitute a deemed disposition of
the modified loan for federal income tax purposes) any Mortgage Loan
(including REO Property) or any other asset of either the Upper-Tier REMIC or
Lower-Tier REMIC unless it has received an Opinion of Counsel, at the expense
of the Trust Fund, to the effect that such sale will not result in the
imposition of taxes on prohibited transactions on the Upper-Tier REMIC or
Lower-Tier REMIC and will not cause a loss of REMIC status with respect to
the Upper-Tier REMIC or Lower-Tier REMIC.
(d) In order to enable the Trustee to perform its duties as set
forth herein, the Depositor shall provide, or cause to be provided to the
Trustee, within ten (10) days after the Closing Date, all information or data
that the Trustee determines to be relevant for tax purposes to the valuations
and offering prices of the Certificates, including, without limitation, the
price, yield, prepayment assumption and projected cash flows of the
Certificates, the Mortgage Loans and the Mortgage Certificates.
(e) In the event that the Trust Fund fails to qualify as a REMIC
or loses its status as a REMIC as a result of the negligent performance by
the Trustee of its duties herein the Trustee shall be liable to the Trust
Fund for any damages, including any tax related liabilities, resulting
therefrom; PROVIDED, HOWEVER, that the Trustee shall not be liable for such
liabilities attributable to the action or inaction of the Depositor, the
Master Servicer, the Special Servicer, any subservicer, the Holders of the
Class R and Class LR Certificates or for any liability resulting from
misinformation provided by the Master Servicer, the Special Servicer, any
subservicer, the Holders of the Class R or the Class LR Certificates on which
the Trustee has relied.
SECTION 4.6 IMPOSITION OF TAX ON THE UPPER-TIER REMIC OR
LOWER-TIER REMIC.
Except as provided in Section 1.2(iii)(B), in the event that any
tax, including interest, penalties or assessments, additional amounts or
additions to tax, is imposed on the Upper-Tier REMIC or Lower-Tier REMIC,
such tax shall be charged against amounts otherwise distributable to the
Holders of the Class R Certificates (in the case of any tax imposed on the
Upper-Tier REMIC) or the Class LR Certificates (in the case of any tax
imposed on the Lower-Tier REMIC) on a PRO RATA basis; provided that any taxes
imposed on any "net income from foreclosure property" received in accordance
with the exception in the last sentence of Section 3.17(a) shall instead be
charged against the related revenues with respect to each REO Property and
shall be paid therefrom (until such taxes are paid, the Trustee being
permitted to withdraw amounts in respect of such taxes from the Collection
Account from time to time and segregated by the Trustee in a separate
non-interest bearing account, to the extent necessary to pay such taxes, and
to remit to the Collection Account the excess from time to time of the amount
in such separate account over the amount necessary to pay such taxes). The
Paying Agent is hereby authorized to and shall retain from amounts otherwise
distributable to the Holders of the Class R or Class LR Certificates, as the
case may be, sufficient funds to pay or provide for the payment of, and to
actually pay, such tax as is legally owed by the Upper-Tier REMIC or
Lower-Tier REMIC (but such authorization shall not prevent the Trustee from
contesting any such tax in appropriate proceedings and withholding payment of
such tax, if permitted by law, pending the outcome of such proceedings). To
the extent that sufficient amounts cannot be so retained to pay or provide
for the payment of such tax, the Trustee is hereby authorized to and shall
segregate, into a separate non-interest bearing account, the net income from
any "prohibited transaction" and use such income, to the extent necessary, to
pay such tax, provided that, to the extent that any such income is paid to
the Internal Revenue Service, the Trustee shall retain an equal amount from
future amounts otherwise distributable
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to the Holders of Class R or Class LR Certificates and shall distribute such
retained amounts to the Holders of Class A, Class B, Class C, Class D, Class
E, Class F, Class G, Class X-1 and Class X-2 Certificates, as applicable, to
the extent they are fully reimbursed and then to the Holders of Class R or
Class LR Certificates, as the case may be. The Master Servicer or the
Special Servicer shall not be responsible for any taxes imposed on the
Upper-Tier REMIC or Lower-Tier REMIC provided that it acts in accordance with
the servicing standards and requirements of this Agreement; provided, that
the Master Servicer or the Special Servicer, as the case may be, shall
reimburse to the Holder of the Class R or Class LR Certificates the amount of
any such taxes retained from such Holders, or shall deposit to the Collection
Account any such amount not so retained, imposed on the Upper-Tier REMIC or
Lower-Tier REMIC as a result of its acting other than in accordance with the
servicing standards and requirements of this Agreement.
SECTION 4.7 APPRAISAL REDUCTIONS.
On the earliest of (i) the effective date of any modification of
the stated maturity (excluding an extension of the stated maturity on any
Mortgage Loan that has not been more than 90 days delinquent more than once
during the preceding 12 months), Payment Rate, Mortgage Interest Rate,
principal balance or amortization terms (each, a "Payment Term" of any
Mortgage Loan), (ii) 90 days after the occurrence of any delinquency in any
payment with respect to a Mortgage Loan if such delinquency continues uncured
for such 90 day period or remained uncured immediately prior to modification
of a Payment Term of such Mortgage Loan, (iii) the date 90 days after a
receiver is appointed in respect of such Mortgaged Property, (iv) the date a
Mortgaged Property becomes an REO Account Property, (v) the date 60 days
after the entry against the related Borrower under a Mortgaged Property in
an involuntary case, of a decree or order of a court, agency or supervisory
authority (1) for the appointment of a conservator, receiver or liquidator in
any insolvency, readjustment of debt, marshalling of assets and liabilities
or similar proceedings or (2) for the winding-up or liquidation of its
affairs, and (vi) upon the filing of a voluntary petition for bankruptcy or
the consent by the related Borrower under a Mortgaged Property to the
appointment of a conservator, receiver or liquidator in any insolvency,
readjustment of debt, marshalling of assets and liabilities or similar
proceedings of or relating to such Borrower, or of or relating to all or
substantially all of its property, the Special Servicer (in the case of a
Mortgage Property relating to a Specially Serviced Mortgage Loan, except with
respect to Mortgage Loans #152, #153, #214, #215, and #216, for which the
Master Servicer will act as Special Servicer) or the Master Servicer (in the
case of any other Mortgaged Property) will, within 45 days after an event
described in clause (i), (ii), (iii), (iv), (v) and (vi) above has occurred,
obtain an appraisal of the related Mortgage Property or REO Account Property
from an Independent appraiser who is a member of the American Institute of
Real Estate Appraisers except with respect to Mortgage Loans with a principal
balance of less than $1,000,000. Such appraisal shall be on an "as is" basis
and shall be prepared in accordance with the Code of Ethics and Standards of
Professional Practice of the Appraisal Institute and the Uniform Standards of
Professional Appraisal Practice. Such appraisal shall be updated annually by
the Independent Appraiser for so long as the Mortgage Loan or REO Mortgage
Loan is outstanding; provided, that, such update may be in the form of a
letter from an Independent appraiser. The cost of any such appraisal or
update thereof shall be an expense of the Trust Fund. If no such appraisal
has been obtained prior to the later of (x) the first Distribution Date on or
after the date on which an event described in clause (i), (ii), (iii) or (iv)
above has occurred and (y) 30 days after the date on which such an event has
occurred, the Master Servicer or Special Servicer, as applicable, shall be
required to estimate the value of such Mortgaged Properties or REO Account
Properties (such estimate, the "Appraisal Reduction Estimate") and such
estimate shall be used for purposes of the Appraisal Reduction. The
Appraisal Reduction Estimate shall be based on the income approach calculated
using the formula in the most recent appraisal of the related Mortgaged
Property and the most recent operating statements provided by the Borrower
discounted by a capitalization rate of 16%. On the first Distribution Date
occurring on or after the delivery of such appraisal, the Master Servicer or
Special Servicer, as applicable, shall be required to adjust the Appraisal
Reduction to take into account such appraisal (regardless of whether such
appraisal is higher or lower than the Appraisal Reduction Estimate).
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SECTION 4.8 ADJUSTMENT OF SERVICING FEES.
(a) The total Servicing Fee payable to the Master Servicer for
any Due Period shall be increased or reduced, as the case may be, by the
Servicing Fee Adjustment for such Due Period. In the event that the
Servicing Fee Adjustment for any Due Period exceeds the Servicing Fee for
such Due Period, the Master Servicer shall advance the shortfall.
(b) The total Servicing Fee payable to the Master Servicer for
any Due Period shall be reduced by the amount of the Net Prepayment Interest
Shortfall, such reduction not to exceed up to 100% of the Servicing Fee or
shall be increased by the amount of any Net Prepayment Interest Excess, as
applicable.
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ARTICLE V
THE CERTIFICATES
SECTION 5.1 THE CERTIFICATES.
The Certificates consist of the Class A Certificates, the Class B
Certificates, the Class C Certificates, the Class D Certificates, the Class E
Certificates, the Class F Certificates, the Class G Certificates, the Class
X-1 Certificates, the Class X-2 Certificates, the Class R Certificates and
the Class LR Certificates. The Class A, Class B, Class C, Class D, Class E,
Class F, Class G, Class X-1, Class X-2, Class R and Class LR Certificates
will be substantially in the forms annexed hereto as Exhibits A-1, A-2, A-3,
A-4, A-5, A-6, A-7, A-8, A-9, A-10 and A-11respectively. Except as otherwise
expressly provided herein, the Certificates of each Class will be issuable in
registered form only in dollar denominations as described in the following
three paragraphs. Each Certificate will share ratably in all rights of the
related Class.
The Class A, Class B, Class C, Class D and Class E Certificates
shall be issued as one or more certificates registered in the name of a
nominee designated by the Depository, and Beneficial Owners will hold
interests in the Class A, Class B, Class C, Class D and Class E Certificates
through the book-entry facilities of the Depository in one or more
registered, definitive physical certificates, the minimum denominations,
integral multiples in excess thereof and aggregate denominations (expressed
in each case in terms of initial Certificate Principal Amount) as set forth
in the following table.
The Class R, Class LR, Class F and Class G Certificates shall be
issued in one or more registered, definitive physical certificates in the
minimum denominations, integral multiples in excess thereof and aggregate
denominations per Class (expressed in each case in terms of initial
Certificate Principal Amount) as set forth in the following table.
<TABLE>
<CAPTION>
Minimum Integral Multiples Aggregate Denominations
Class Denomination* in Excess of Minimum of all Certificates of Class
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
A $100,000 $1,000 $ 82,491,000
-----------------------------
B $100,000 $1,000 $ 6,226,000
-----------------------------
C $100,000 $1,000 $ 10,896,000
-----------------------------
D $100,000 $1,000 $ 9,338,000
-----------------------------
E $100,000 $1,000 $ 12,452,000
-----------------------------
F $100,000 $1,000 $ 7,783,000
-----------------------------
G $100,000 $1,000 $ 26,460,541
-----------------------------
R $ 1,000 $1,000 $ 1,000
LR $ 1,000 $1,000 $ 1,000
</TABLE>
* Except that one Certificate for each Class may be issued in a different
denomination to accommodate the remainder of the initial Certificate
Principal Amount.
The Class X Certificates shall each be issuable in one or more
registered, definitive physical certificates in minimum Percentage Interests
of 1% and integral multiples thereof, aggregating the entire 100% Percentage
Interest in each such Class.
The rights of Beneficial Owners with respect to Class A
Certificates shall be limited to those established by law and agreements
between such Beneficial Owners and the Depository and Depository
Participants. Except under the circumstances set forth below, Beneficial
Owners of Class A Certificates shall not be entitled to
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physical certificates for such Certificates as to which they are the
Beneficial Owners. Requests and directions from, and votes of, the
Depository as the authorized representative of the Beneficial Owners with
respect to the Class A Certificates shall not be deemed inconsistent if they
are made with respect to different Beneficial Owners. The Certificate
Registrar may establish a reasonable record date in connection with
solicitations of consents from or voting by Certificateholders and give
notice to the Depository of such record date. Without the written consent of
the Depositor and the Certificate Registrar, no Class A Certificates may be
transferred by the Depository except to a successor Depository that agrees to
hold such Certificate for the account of the Beneficial Owners.
In the event The Depository Trust Company resigns or is removed as
Depository, the Trustee, with the approval of the Depositor, may appoint a
successor Depository. If no successor Depository has been appointed within
30 days of the effective date of the Depository's resignation or removal,
each Beneficial Owner shall be entitled to definitive physical certificates
representing the Class A Certificates it beneficially owns.
No owner of a beneficial interest in a Class A Certificate will be
entitled to receive a certificate representing such owner's interest in such
Certificate except in the event that definitive certificates are issued for
the Class A Certificates only as provided herein. Class A Certificates
initially issued in book-entry form will be issued in fully registered,
certificated form to Certificateholders or their nominees ("definitive
certificates") (subject to the minimum denominations set forth in the table
in this Section 5.1 and the wire transfer restrictions set forth in Section
4.2(b)) rather than to the Depository or its nominee, if (i) the Depositor
advises the Certificate Registrar in writing that the Depository is no longer
willing or able to properly discharge its responsibilities as depository with
respect to the Certificates and the Depositor is unable to locate a qualified
successor or (ii) the Depositor, at its option, elects to terminate the
book-entry system through the Depository.
Upon the occurrence of either of the events described in clause (i)
or (ii) of the immediately preceding paragraph, the Depository pursuant to
its rules is required to notify all participants of the availability through
the Depository of definitive certificates for the Certificateholders. Upon
surrender by the Depository of the certificate or certificates representing
the Class A Certificates, together with instructions for re-registration, the
Trustee will issue (or cause to be issued) to the Certificateholders
identified in such instructions the definitive certificates to which they are
entitled, and thereafter the Trustee, the Paying Agent and the Certificate
Registrar will recognize the Holders of such definitive certificates as
Certificateholders under this Agreement.
Each Certificate may be printed or in typewritten or similar form,
and each Certificate shall, upon original issue, be executed and
authenticated by the Trustee or the Authenticating Agent and delivered to or
upon the order of the Depositor. All Certificates shall be executed by
manual or facsimile signature on behalf of the Trustee or the Authenticating
Agent by an authorized officer or signatory. Certificates bearing the
signatures of individuals who were at any time the proper officers or
signatories of the Trustee or the Authenticating Agent shall bind the Trustee
or the Authenticating Agent notwithstanding that such individuals or any of
them have ceased to hold such offices or positions prior to the delivery of
such Certificates or did not hold such offices or positions at the date of
such Certificates. No Certificate shall be entitled to any benefit under
this Agreement, or be valid for any purpose, unless there appears on such
Certificate a certificate of authentication in the form set forth in Exhibits
A-1, A-2, A-3, A-4, A-5, A-6, A-7, A-8, A-9, A-10 and A-11 executed by the
Trustee or the Authenticating Agent by manual signature, and such certificate
of authentication upon any Certificate shall be conclusive evidence, and the
only evidence, that such Certificate has been duly authenticated and
delivered hereunder. All Certificates shall be dated the date of their
authentication.
SECTION 5.2 CERTIFICATE REGISTRAR.
The Trustee shall be the Certificate Registrar.
SECTION 5.3 REGISTRATION OF TRANSFER AND EXCHANGE OF CERTIFICATES.
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(a) The Certificate Registrar shall keep a Certificate Register
in which, subject to such reasonable regulations as it may prescribe, it
shall provide for the registration of transfers and exchanges of Certificates
as herein provided.
(b) As a condition to the registration of any transfer, sale,
pledge or other disposition of a Certificate, the prospective transferee of
such a Certificate shall be required to certify in the Investment Letter
which such transferee is required to deliver pursuant to Section 5.3(c)
below, that it is not (A) an employee benefit plan or other plan subject to
the fiduciary responsibility provisions of ERISA or Section 4975 of the Code,
(B) an entity whose underlying assets include plan assets by reason of a
plan's investment in such entity (within the meaning of The Department of
Labor Regulations, Section 2510.3-101), or (C) an entity acting on behalf of
such plan to acquire such Certificate (any entity described in (A), (B) or
(C), an "ERISA Plan") . No transfer, sale, pledge or other disposition of
such a Certificate shall be made to any ERISA Plan, and the Certificate
Registrar shall not register any such transfer, sale, pledge or other
disposition to an ERISA Plan.
(c) By acceptance of any Certificate, the Holder thereof
specifically agrees with the Depositor, the Certificate Registrar and the
Trustee that no transfer of such Certificate shall be made unless the
registration requirements of the Act and any applicable state securities laws
are complied with, or such transfer is exempt from the registration
requirements under the Act because the transfer satisfies one of the
following: (A) such transfer is in compliance with Rule 144A under the Act,
and has been made to a person whom the transferor reasonably believes to be a
Qualified Institutional Buyer that is purchasing for its own account or for
the account of a Qualified Institutional Buyer and to whom notice is given
that such transfer is being made in reliance upon Rule 144A under the Act,
(B) after the appropriate holding period, such transfer is pursuant to an
exemption from registration under the Act provided by Rule 144 under the Act
(if available), and (C) such transfer has been made to an institutional
accredited investor as defined in Rule 501(a)(1), (2), (3) or (7) of
Regulation D promulgated under the Act in a transaction exempt from the
registration requirements of the Act and such transfer is in accordance with
any applicable securities laws of any state of the United States or any other
jurisdiction. The Certificate Registrar and Trustee shall require each
transferee referred to in the preceding clause (A), (B) or (C) to execute
and deliver to the Certificate Registrar, the Trustee, the Depositor and the
Paying Agent an Investment Letter substantially in the form attached as
Exhibit L hereto.
The Trustee shall make available to the prospective transferor and
transferee information requested to satisfy the requirements of paragraph
(d)(4) of Rule 144A (the "Rule 144A Information") to the extent such
information is in the Trustee's possession. The Rule 144A Information shall
include any or all of the following items requested by the prospective
transferee:
(i) this Agreement and any amendments hereto;
(ii) with respect to the transfer of the Class A, Class B,
Class C, Class D and Class E Certificates, the Offering
Circular relating to such Certificates dated May 11,
1998 and any amendments or supplements thereto;
(iii) all prior Distribution Date statements prepared
pursuant to Section 4.3 hereof;
(iv) the Pooling and Servicing Agreement, dated as of July
20, 1993 among LTC REMIC Corporation, Bankers Trust
Company, LTC, and Union Bank, pursuant to which the
Mortgage Certificates and other classes of the Series
1993-1 certificates were issued, the Offering Circular,
dated as of July 28, 1993 pursuant to which certain
senior classes of the Series 1993-1 certificates were
offered, and any trustee and servicer reports prepared
with respect to the Mortgage Certificates and other
classes of the Series 1993-1 certificates; and
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(v) such other information as is reasonably available to
the Trustee in order to comply with requests for
information pursuant to Rule 144A under the Act.
None of the Depositor, the Master Servicer, the Special Servicer, the
Certificate Registrar or the Trustee is under an obligation to register any
Certificate under the Act or any other securities law.
(d) Each Person who has or acquires any Ownership Interest shall
be deemed by the acceptance or acquisition of such Ownership Interest to have
agreed to be bound by the following provisions:
(i) Each Person acquiring or holding any Ownership Interest
shall be a Permitted Transferee and shall not acquire
or hold such Ownership Interest as agent (including a
broker, nominee or other middleman) on behalf of any
Person that is not a Permitted Transferee. Any such
Person shall promptly notify the Certificate Registrar
of any change or impending change in its status (or the
status of the beneficial owners of such Ownership
Interest) as a Permitted Transferee. Any acquisition
described in the first sentence of this Section
5.3(d)(i) by a Person who is not a Permitted Transferee
or by a Person who is acting as an agent of a Person
who is not a Permitted Transferee shall be void and of
no effect, and the immediately preceding owner who was
a Permitted Transferee shall be restored to registered
and beneficial ownership of the Ownership Interest as
fully as possible.
(ii) No Ownership Interest may be Transferred, and no such
Transfer shall be registered by the Certificate
Registrar in the Certificate Register, without the
express written consent of the Certificate Registrar,
and the Certificate Registrar shall not recognize the
Transfer, and such proposed Transfer shall not be
effective, without such consent with respect thereto.
In connection with any proposed Transfer of any
Ownership Interest, the Certificate Registrar shall, as
a condition to such consent, require delivery to it, in
form and substance satisfactory to it, and the proposed
transferee shall deliver to the Certificate Registrar,
an affidavit in substantially the form attached as
Exhibit H-2 (a "Transfer Affidavit") of the proposed
transferee (A) that such transferee is a Permitted
Transferee, (B) setting forth the statement of the
proposed transferee that (i) the proposed transferee
has historically paid its debts as they came due and
intends to pay its debts as they come due in the
future, (ii) the proposed transferee understands that
it may incur tax liabilities in excess of cash flows
generated by the Ownership Interest, (iii) the proposed
transferee intends to pay taxes associated with holding
the Ownership Interest as they become due and (iv) the
proposed transferee will not transfer the Ownership
Interest to any Person who does not provide a similar
affidavit, and (C) containing an express agreement by
the proposed transferee to be bound by and to abide by
the provisions of this Section 5.3, accompanied, except
upon initial issuance, by a letter in substantially the
form attached as Exhibit H-3 (a "Transferor
Acknowledgement") of the proposed transferor that the
transferor has reviewed the Transfer Affidavit and has
(i) no actual knowledge that such affidavit is not true
and (ii) no reason to know that the transferee has not
paid its debts as they come due or intends not to pay
taxes associated with holding the Class R or Class LR
Certificate, as the case may be, as they come due.
(iii) Notwithstanding the delivery of a Transfer Affidavit by
a proposed transferee under clause (ii) above, if a
responsible officer of the Certificate Registrar has
actual knowledge that the proposed transferee is not a
Permitted Transferee or has
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reason to know that the statement made by the proposed
transferee pursuant to clause (ii)(B) above is in any
respect false, no Transfer to such proposed transferee
shall be effected and such proposed Transfer shall not
be registered on the Certificate Register.
(iv) Each Person holding or acquiring any Ownership Interest
shall agree (A) to require a Transfer Affidavit from
any other Person to whom such Person attempts to
Transfer any Ownership Interest and (B) not to Transfer
any Ownership Interest or to cause the Transfer of any
Ownership Interest to any other Person if it has actual
knowledge that such Person is not a Permitted
Transferee or is an agent (including a broker, nominee
or other middleman) for, or will be holding any
Ownership Interest on behalf of, a Person that is not a
Permitted Transferee.
Upon notice to the Certificate Registrar that there has occurred a
Transfer to any Person that is a Disqualified Organization or an agent
thereof (including a broker, nominee, or middleman) in contravention of the
foregoing restrictions, the Certificate Registrar and the Trustee agree to
furnish to the Internal Revenue Service, the transferor of such Ownership
Interest or such agent such information necessary to the application of
Section 860E(e) of the Code as may be required by the Code, including but not
limited to, the present value of the total anticipated excess inclusion
income with respect to a Class R or Class LR Certificate (or portion thereof)
for periods after such Transfer. At the election of the Certificate Registrar
and the Trustee, the Certificate Registrar and the Trustee may charge a
reasonable fee for computing and furnishing such information to the
transferor or to such agent referred to above; PROVIDED, HOWEVER, that such
persons shall in no event be excused from furnishing such information to the
Internal Revenue Service and to the Transferor or agent thereof.
(e) Upon surrender for registration of transfer of any
Certificate (and, with respect to any Certificate subject to restrictions on
transfer pursuant to this Section 5.3, upon compliance with any provisions of
this Agreement relating to such transfer) held in physical certificate form
at the office of the Certificate Registrar, the Trustee or the Authenticating
Agent shall execute and authenticate, and the Certificate Registrar shall
deliver, in the name of the designated transferee or transferees, one or more
new Certificates of authorized denominations of a like aggregate Percentage
Interest and dated the date of authentication by the Authenticating Agent.
(f) At the option of the Certificateholders, Certificates may be
exchanged for other Certificates of the same class of authorized
denominations of a like aggregate Percentage Interest, upon surrender of the
Certificates to be exchanged at the office of the Certificate Registrar or
the office of its agent in the City of New York. In addition, any Class R or
Class LR Certificate issued on the Closing Date may thereafter be exchanged
for a new Class R or Class LR Certificate respectively upon surrender of such
initially issued Class R or Class LR Certificate at the office of the
Certificate Registrar or the office of its agent in the City of New York.
Whenever any Certificates are so surrendered for exchange, the Trustee or the
Authenticating Agent shall execute and authenticate and the Certificate
Registrar shall deliver the Certificates which the Certificateholder making
the exchange is entitled to receive.
(g) The Certificate Registrar shall require that every
Certificate presented or surrendered for registration of transfer or exchange
be duly endorsed by, or accompanied by a written instrument of transfer in
form satisfactory to the Certificate Registrar duly executed by, the Holder
thereof or such Person's attorney duly authorized in writing.
(h) No service charge shall be made to a Certificateholder for
any registration of transfer or exchange of Certificates, but the Certificate
Registrar may require payment of a sum sufficient to cover any tax or
governmental charge that may be imposed in connection with any registration
of transfer or exchange of Certificates.
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(i) The Certificate Registrar shall cancel and retain or destroy,
in accordance with the Certificate Registrar's retention policy then in effect,
all Certificates surrendered for registration of transfer or exchange and shall
upon written request certify to the Master Servicer or the Depositor as to such
retention or destruction.
Neither the Trustee nor the Certificate Registrar shall have any
obligation or duty to monitor, determine or inquire as to compliance with any
restriction or transfer imposed under Article 5 of this Agreement or under
applicable law with respect to any transfer of any Certificate, or any
interest therein, other than to require delivery of the certification(s)
and/or opinions of counsel described in Article 5 applicable with respect to
changes in registration of record ownership of Certificates in the
Certificate Register (without modification thereof). The Trustee and the
Certificate Registrar shall have no liability for transfers, including
transfers made through the book-entry facilities of the Depository or between
or among Depository participants or Beneficial Owners made in violation of
applicable restrictions.
SECTION 5.4 MUTILATED, DESTROYED, LOST OR STOLEN CERTIFICATES.
If (i) any mutilated Certificate is surrendered to the Certificate
Registrar, or the Certificate Registrar receives evidence to its satisfaction
of the destruction, loss or theft of any Certificate, and (ii) there is
delivered to the Trustee and the Certificate Registrar such security or
indemnity as may be required by them to save each of them and the Depositor,
the Master Servicer, the Special Servicer and the Originator harmless, then,
in the absence of actual knowledge by a Responsible Officer of the Trustee or
the Certificate Registrar that such Certificate has been acquired by a bona
fide purchaser, the Trustee or the Authenticating Agent shall execute and
authenticate and the Certificate Registrar shall deliver, in exchange for or
in lieu of any such mutilated, destroyed, lost or stolen Certificate, a new
Certificate of the same Class and of like tenor and Percentage Interest.
Upon the issuance of any new Certificate under this Section, the Certificate
Registrar may require the payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in relation thereto and any
other expenses (including the fees and expenses of the Certificate Registrar)
connected therewith. Any replacement Certificate issued pursuant to this
Section shall constitute complete and indefeasible evidence of ownership of
the corresponding interest in the Trust Fund, as if originally issued,
whether or not the lost, stolen or destroyed Certificate shall be found at
any time.
SECTION 5.5 PERSONS DEEMED OWNERS.
Prior to due presentation of a Certificate for registration of
transfer, the Master Servicer, the Trustee, the Certificate Registrar, the
Paying Agent, the Depositor, the Special Servicer and any agent of any of
them may treat the Person in whose name any Certificate is registered as the
owner of such Certificate for the purpose of receiving distributions pursuant
to Sections 4.2 and for all other purposes whatsoever, and neither the Master
Servicer, the Trustee, the Certificate Registrar, any Paying Agent, the
Depositor, the Special Servicer nor any agent of any of them shall be
affected by notice to the contrary.
SECTION 5.6 APPOINTMENT OF PAYING AGENT.
The Trustee shall initially be the Paying Agent for the purpose of
making distributions to Certificateholders pursuant to Section 4.1. The
Trustee shall cause such Paying Agent, if other than the Trustee, to execute
and deliver to the Trustee an instrument in which such Paying Agent shall
agree with the Trustee that such Paying Agent will hold all sums held by it
for the payment to Certificateholders in trust for the benefit of the
Certificateholders entitled thereto until such sums have been paid to the
Certificateholders or disposed of as otherwise provided herein. The Trustee
hereby accepts its appointment as Paying Agent and agrees to perform its
duties in accordance with the terms of this Agreement.
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SECTION 5.7 ACCESS TO CERTIFICATEHOLDERS' NAMES AND ADDRESSES.
(a) If any Certificateholder (for purposes of this Section 5.7,
an "Applicant") applies in writing to the Certificate Registrar, and such
application states that the Applicant desires to communicate with other
Certificateholders with respect to their rights under this Agreement or under
the Certificates and is accompanied by a copy of the communication which such
Applicant proposes to transmit, then the Certificate Registrar shall, at the
expense of such Applicant, within ten (10) Business Days after the receipt of
such application, furnish or cause to be furnished to such Applicant a list
of the names and addresses of the Certificateholders as of the most recent
Distribution Date.
(b) Every Certificateholder, by receiving and holding such list,
agrees with the Trustee that the Trustee and the Certificate Registrar shall
not be held accountable in any way by reason of the disclosure of any
information as to the names and addresses of the Certificateholders
hereunder, regardless of the source from which such information was derived.
SECTION 5.8 ACTIONS OF CERTIFICATEHOLDERS.
(a) Any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Agreement to be given or
taken by Certificateholders may be embodied in and evidenced by one or more
instruments of substantially similar tenor signed by such Certificateholders
in person or by agent duly appointed in writing; and except as herein
otherwise expressly provided, such action shall become effective when such
instrument or instruments are delivered to the Trustee and, when required, to
the Depositor, the Master Servicer or the Special Servicer. Proof of
execution of any such instrument or of a writing appointing any such agent
shall be sufficient for any purpose of this Agreement and conclusive in favor
of the Trustee, the Depositor, the Master Servicer and the Special Servicer,
if made in the manner provided in this Section.
(b) The fact and date of the execution by any Certificateholder
of any such instrument or writing may be proved in any reasonable manner
which the Trustee deems sufficient.
(c) Any request, demand, authorization, direction, notice,
consent, waiver or other act by a Certificateholder shall bind every Holder
of every Certificate issued upon the registration of transfer thereof or in
exchange therefor or in lieu thereof, in respect of anything done, or omitted
to be done, by the Trustee, the Depositor or the Master Servicer in reliance
thereon, whether or not notation of such action is made upon such Certificate.
(d) The Trustee may require such additional proof of any matter
referred to in this Section 5.8 as it shall deem necessary.
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ARTICLE VI
THE DEPOSITOR, THE MASTER SERVICER AND
THE SPECIAL SERVICER
SECTION 6.1 LIABILITY OF THE DEPOSITOR, THE MASTER SERVICER AND THE
SPECIAL SERVICER.
The Depositor, the Master Servicer and the Special Servicer each shall
be liable in accordance herewith only to the extent of the obligations
specifically imposed by this Agreement.
SECTION 6.2 MERGER OR CONSOLIDATION OF THE SPECIAL SERVICER OR THE
MASTER SERVICER.
Subject to the following paragraph, each of the Special Servicer and
the Master Servicer will keep in full effect its existence, rights and good
standing as a corporation under the laws of the jurisdiction of its
incorporation and will be in compliance with the laws of each state in which any
Mortgaged Property is located to the extent such compliance is necessary to
perform its obligations in accordance with the terms of this Agreement. Any
successor Special Servicer or Master Servicer will keep in full effect its
existence, rights and good standing under the laws of its jurisdiction or
organization and will not jeopardize its ability to do business in each
jurisdiction in which the Mortgaged Properties are located to the extent such
compliance is necessary to perform its respective duties under this Agreement.
The Special Servicer or the Master Servicer, as the case may be, may,
upon notice to the Rating Agency and written confirmation as provided below, be
merged into or consolidated with any Person, or transfer all or substantially
all of its assets to any Person; PROVIDED, HOWEVER, that the Rating Agency's
rating or ratings of any outstanding rated Class of Certificates in effect
immediately prior to such merger or consolidation or transfer of assets will not
be qualified, downgraded or withdrawn as a result thereof (as evidenced by a
letter to such effect from the Rating Agency delivered to the Trustee). The
Master Servicer or the Special Servicer, as applicable, shall promptly inform
each other and the Trustee in writing of any such merger, consolidation or
transfer.
SECTION 6.3 Limitation on Liability of the Depositor, the Master
Servicer, THE SPECIAL SERVICER AND OTHERS.
Neither the Depositor, the Master Servicer, the Special Servicer nor
any of the directors, officers, employees or agents of them shall be under any
liability to the Trust Fund or the Certificateholders for any action taken, or
for refraining from the taking of any action, in good faith pursuant to this
Agreement, or for errors in judgment, or for any action taken or for refraining
from the taking of any action or for errors of judgment of the master servicer,
the special servicer or the trustee for the Mortgage Certificates; PROVIDED,
HOWEVER, that this provision shall not protect the Depositor, the Master
Servicer or the Special Servicer or any such Person against any breach of
warranties, representations or covenants made herein, or against any specific
liability imposed on the Depositor, the Master Servicer or the Special Servicer
pursuant to Section 3.1 or any other Section hereof, or against any liability
which would otherwise be imposed by reason of bad faith, willful misfeasance or
gross negligence in the performance of duties or by reason of reckless disregard
of obligations or duties hereunder. The Depositor, the Master Servicer, the
Special Servicer and any director, officer, employee or agent of the Depositor,
the Master Servicer or the Special Servicer may rely in good faith on any
document of any kind which, PRIMA FACIE, is properly executed and submitted by
any appropriate Person respecting any matters arising hereunder. The Trust
shall indemnify the Master Servicer and the Special Servicer and any director,
officer, employee or agent of the Master Servicer and the Special Servicer and
hold them harmless against any and all claims, losses, penalties, fines,
forfeitures, legal fees and related costs, judgments and any other costs,
liabilities, fees and expenses incurred in connection with any pending or
threatened legal action relating to (i) this Agreement, the Mortgage Loans or
REO Property, if such legal action is incidental to, or arises from, the Master
Servicer or Special Servicer, as the case may be, serving in such capacity under
this Agreement, (ii) any defect in any Mortgage Loan or Mortgage Certificate or
related documents as of the Cut-Off Date, (iii) in the case of the Master
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Servicer, any action taken based on information provided by the Special
Servicer, and (iv) any action taken by the Master Servicer or the Special
Servicer, as the case may be, in accordance with instructions delivered in
writing to the Master Servicer or the Special Servicer, as the case may be, by
the Trustee or, in the case of the Special Servicer or by the Master Servicer,
pursuant to any provision of this Agreement, in each case other than any loss,
liability or expense incurred by reason of the Master Servicer's or the Special
Servicer's, as the case may be, breach of any representation, warranty or
covenant in this Agreement, by reason of the Master Servicer's or the Special
Servicer's, as the case may be, willful misfeasance, bad faith or negligence in
the performance of its obligations and duties under this Agreement or by reason
of the Master Servicer's or the Special Servicer's, as the case may be, reckless
disregard of its obligations and duties under this Agreement. Neither the
Depositor, the Master Servicer nor the Special Servicer shall be under any
obligation to appear in, prosecute or defend any legal action which is not
incidental to its respective duties under this Agreement and in its opinion does
not expose it to any material expense or liability for which it is not entitled
to reimbursement hereunder; PROVIDED, HOWEVER, that the Depositor, the Master
Servicer or the Special Servicer, as applicable, may in its sole discretion
undertake any such action which it may reasonably deem necessary or desirable in
order to protect the interests of the Certificateholders hereunder. In such
event, any reasonable legal expenses and costs of such action shall be expenses,
costs and liabilities of the Trust Fund, and the Depositor, the Master Servicer
and the Special Servicer shall be entitled to be reimbursed therefor from the
Collection Account as provided in Section 3.6 of this Agreement; PROVIDED,
HOWEVER, that the Master Servicer shall be under no duty to recalculate or
otherwise verify the amount of such reimbursement.
The right of each of the Master Servicer and the Special Servicer to
indemnification and reimbursement pursuant to this Section 6.3 shall survive any
resignation or termination of the Master Servicer or the Special Servicer,
respectively, pursuant to this Agreement.
SECTION 6.4 LIMITATION ON RESIGNATION OF THE MASTER SERVICER AND
THE SPECIAL SERVICER.
Each of the Master Servicer and the Special Servicer may assign its
respective rights and delegate its respective duties and obligations under this
Agreement provided that: (i) the purchaser or transferee accepting such
assignment and delegation (A) shall be reasonably satisfactory to the Trustee,
the Master Servicer (in the case of the Special Servicer) and the Depositor, (B)
shall be an established housing and home finance institution, bank, real estate
investment trust or mortgage servicing institution having a net worth of not
less than $20,000,000 organized and doing business under the laws of any state
of the United States or the District of Columbia, authorized under such laws to
perform the duties of a servicer of mortgage loans, and (C) shall execute and
deliver to the Trustee an agreement, in form and substance reasonably
satisfactory to the Trustee, which contains an assumption by such Person of the
due and punctual performance and observance of each covenant and condition to be
performed or observed by the Master Servicer or the Special Servicer, as the
case may be, under this Agreement from and after the date of such agreement;
(ii) the Master Servicer or the Special Servicer, as the case may be, shall not
be released from its obligations under this Agreement that arose prior to (or
out of acts or omissions prior to) the effective date of such assignment and
delegation under this Section 6.4; (iii) the rate at which the Servicing Fee and
the Special Servicer Fee, (or any component thereof) is calculated shall not
exceed the rate then in effect; and (iv) the Rating Agency shall have confirmed
in writing that such sale or transfer to the proposed purchaser or transferee
will not result in a qualification, downgrade or withdrawal of the then current
ratings assigned by the Rating Agency to the outstanding Classes of the
Certificates. Upon acceptance of such assignment and delegation, the purchaser
or transferee shall be the successor Master Servicer or Special Servicer
hereunder.
Except as provided in this Section 6.4, neither the Master Servicer
nor the Special Servicer shall resign from its respective obligations and duties
hereby imposed on it except (i) in the case of the Special Servicer, upon
appointment of a successor Special Servicer and receipt by the Trustee and the
Master Servicer of a letter from the Rating Agency that such resignation and
appointment will not, in and of itself, result in a qualification, downgrade or
withdrawal of the ratings of any outstanding rated Class of Certificates or (ii)
in the case of the Master Servicer or Special Servicer, upon determination that
its duties hereunder are no longer permissible under applicable law and in such
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case the Trustee, in the case of the Master Servicer, and the Master Servicer,
in the case of the Special Servicer, will use its best efforts to appoint a
successor that will not in and of itself, result in a qualification, downgrading
or withdrawal of the then current ratings of any outstanding rated class of
Certificates as evidenced in writing. Any such determination permitting the
resignation of the Master Servicer or the Special Servicer shall be evidenced by
an Opinion of Counsel (obtained at the resigning party's expense) to such effect
delivered to the Trustee. No such resignation shall become effective until the
Trustee or a successor Master Servicer shall have assumed the Master Servicer's
or the Special Servicer's, as applicable, responsibilities, duties, liabilities
and obligations hereunder.
SECTION 6.5 RIGHTS OF THE DEPOSITOR AND THE TRUSTEE IN RESPECT OF
THE MASTER SERVICER AND THE SPECIAL SERVICER.
Each of the Master Servicer and the Special Servicer shall afford the
Depositor, the Rating Agency and the Trustee, upon reasonable notice and during
normal business hours, access to all records maintained by it in respect of its
rights and obligations hereunder and access to its officers responsible for such
obligations. Upon request, each shall furnish to the Depositor and the Trustee
its most recent financial statements and such other information in its
possession regarding its business, affairs, property and condition, financial or
otherwise as the party requesting such information, in its reasonable judgment,
determines to be relevant to the performance of the obligations hereunder of the
Master Servicer or the Special Servicer, as the case may be. The Depositor may,
but is not obligated to, enforce the obligations of each of the Master Servicer
and the Special Servicer hereunder and may, but is not obligated to, perform, or
cause a designee to perform, any defaulted obligation of such Person hereunder
or exercise its rights hereunder, provided that the Master Servicer or the
Special Servicer, as the case may be, shall not be relieved of any of its
obligations hereunder by virtue of such performance by the Depositor or its
designee. The Depositor shall not have any responsibility or liability for any
action or failure to act by the Master Servicer or the Special Servicer and is
not obligated to supervise the performance of the Master Servicer or the Special
Servicer under this Agreement or otherwise.
SECTION 6.6 CERTAIN RIGHTS OF THE MASTER SERVICER AND SPECIAL
SERVICER.
Except as otherwise provided herein:
(a) the Master Servicer and the Special Servicer, and any
director, officer, employee or agent of the Master Servicer or the Special
Servicer, may rely and shall be protected in, and shall not be liable for,
acting or refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order, bond,
note or other paper or document believed by it to be genuine and to have been
signed or presented by the proper party or parties;
(b) any request or direction of the Originator, the Depositor, the
Master Servicer, the Special Servicer or the Trustee mentioned herein shall be
sufficiently evidenced in writing;
(c) the Master Servicer and the Special Servicer, and any
director, officer, employee or agent of the Master Servicer or the Special
Servicer, may at its own expense consult with counsel, and the advice of such
counsel shall be full and complete authorization and protection in respect of
any action taken, suffered or omitted by it hereunder in good faith and in
reasonable reliance thereon; and
(d) neither the Master Servicer nor the Special Servicer, nor any
of their respective directors, officers, employees or agents, shall be bound to
make any investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, note or other paper or document delivered to it by the
Originator, the Depositor, the Trustee, or the Master Servicer or the Special
Servicer, as applicable, but in its discretion may make such further inquiry or
investigation into such fact or matters as they may see fit.
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SECTION 6.7 NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF
CERTIFICATES.
The recitals contained herein and in the Certificates, except any such
recitals relating to the Master Servicer, shall not be taken as statements of
the Master Servicer, and the Master Servicer assumes no responsibility for their
correctness. The Master Servicer makes no representation as to the validity
(other than as against it) or sufficiency of this Agreement or of the
Certificates.
SECTION 6.8 DEPOSITOR, SPECIAL SERVICER, MASTER SERVICER, AND
TRUSTEE TO COOPERATE.
Each of the Depositor, the Master Servicer, the Special Servicer and
the Trustee shall furnish such reports, certifications and information in its
possession to any other party hereto as such party reasonably requests to enable
it to perform its duties hereunder. Any party (other than the Rating Agency)
requesting information shall reimburse the party providing such information for
reasonable out-of-pocket costs incurred in providing such information, if such
information is not normally prepared as part of such party's duties under this
Agreement.
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ARTICLE VII
DEFAULT
SECTION 7.1 EVENTS OF DEFAULT.
"Event of Default", wherever used herein, means any one of the
following events:
(i) (a) with respect to the Master Servicer, any failure
by the Master Servicer to deposit in the Collection
Account or the Distribution Account for distribution to
Certificateholders any amount required to be remitted
by the Master Servicer no later than 10:00 am Central
Standard Time on the Distribution Date or, in the case
of a failure to make a required Servicing Advance or
P&I Advance (other than Nonrecoverable Advances), at
least one Business Day prior to the related
Distribution Date, which failure is not caused by a
failure of the Special Servicer, including a failure
specified in clause (b) of this Section 7.1(i), and (b)
with respect to the Special Servicer, any failure by
the Special Servicer to remit to the Master Servicer
for deposit in the Collection Account any remittance
required to be made by the Special Servicer on the day
such remittance is required to be made pursuant to this
Agreement, and which failure is not caused by a failure
of the Master Servicer, including a failure specified
in clause (a) of this Section 7.1(i); or
(ii) any failure on the part of the Master Servicer or the
Special Servicer, as applicable, duly to observe or
perform in any material respect any other of the
covenants or agreements on the part of the Master
Servicer or the Special Servicer, as applicable,
contained in this Agreement which failure continues
unremedied for a period of 30 days after the date which
written notice of such failure, requiring the same to
be remedied, shall have been given to the Master
Servicer or the Special Servicer, as applicable, by the
Depositor or the Trustee, and in each case, to the
Depositor and the Trustee, by the Holders of
Certificates entitled to at least 25% of the Voting
Rights of any Class affected thereby; PROVIDED,
HOWEVER, that if the Master Servicer or the Special
Servicer, as applicable, can demonstrate to the
reasonable satisfaction of the Trustee that the Master
Servicer or the Special Servicer, as applicable, is
diligently attempting to cure such breach, the cure
period may be extended by the Trustee for a reasonable
amount of time, which time period shall not exceed 30
days; or
(iii) a decree or order 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 for the
appointment of a conservator or receiver or liquidator
in any insolvency, readjustment of debt, marshalling of
assets and liabilities or similar proceedings, or for
the winding-up or liquidation of its affairs, shall
have been entered against the Master Servicer or the
Special Servicer, as applicable, and such decree or
order shall have remained in force undischarged or
unstayed for a period of 60 days; or
(iv) the Master Servicer or the Special Servicer, as
applicable, 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
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or relating to the Master Servicer or the Special
Servicer, as applicable, or of or relating to all or
substantially all of its property; or
(v) the Master Servicer or the Special Servicer, as
applicable, shall admit in writing its inability to pay
its debts generally as they become due, file a petition
to take advantage of any applicable insolvency or
reorganization statute, make an assignment for the
benefit of its creditors, or voluntarily suspend
payment of its obligations; or
(vi) any Event of Default as defined in the last sentence of
Section 2.5(c) or of Section 2.6(c), respectively,
shall have occurred and be continuing; or
(vii) the Trustee shall have received written notice from the
Rating Agency that the continuation of the Master
Servicer or the Special Servicer, as applicable, in
such capacity would result in the qualification,
downgrade or withdrawal of any rating then assigned by
the Rating Agency to any Class of Certificates,
then, so long as such Event of Default shall not have been remedied (such cure
period not to extend, with respect to clause (i) above only, beyond 10:00 a.m.
Central time on the Distribution Date), the Trustee, in the case of an Event of
Default by the Master Servicer or the Special Servicer, may, and at the written
direction of the Holders of Certificates entitled to at least 51% of the
aggregate Voting Rights of all Certificates the Trustee shall, by notice in
writing to the Master Servicer (if it is the defaulting party) or to the Special
Servicer (if it is the defaulting party), terminate all of the rights and
obligations of the Master Servicer or the Special Servicer, as applicable, under
this Agreement and in and to the Mortgage Loans and Mortgage Certificates and
the proceeds thereof, other than any rights it may have hereunder as a
Certificateholder and any rights or obligations that accrued prior to (or arose
out of an action or omission prior to) the date of such termination (including
the right to receive all amounts accrued or owing to it under this Agreement on
or prior to the date of such termination and the right to the benefits of
Section 6.3 notwithstanding any such termination). On or after the receipt by
the Master Servicer or the Special Servicer, as the case may be, of such written
notice, all of its authority and power under this Agreement, whether with
respect to the Certificates, the Mortgage Certificates or the Mortgage Loans or
otherwise, shall pass to and be vested in the Trustee in the case of the Master
Servicer and the Trustee or the Master Servicer in the case of the Special
Servicer pursuant to and under this Section, and, without limitation, the
Trustee in the case of the Master Servicer and the Trustee or the Master
Servicer in the case of the Special Servicer is hereby authorized and empowered
to execute and deliver, on behalf of and at the expense of the defaulting Master
Servicer or Special Servicer, as applicable, as attorney-in-fact or otherwise,
any and all documents and other instruments, and to do or accomplish all other
acts or things necessary or appropriate to effect the purposes of such notice of
termination, whether to complete the transfer and endorsement or assignment of
the Mortgage Loans and related documents, or otherwise. Each of the Master
Servicer and the Special Servicer agrees in the event it is terminated pursuant
to this Section 7.1 to promptly (and in any event no later than ten Business
Days subsequent to such notice) provide, at its own expense, the Trustee, in the
case of the Master Servicer, and the Master Servicer, in the case of the Special
Servicer, with all documents and records requested by the Trustee, in the case
of the Master Servicer, and the Trustee or the Master Servicer, in the case of
the Special Servicer, then in its possession to enable the Trustee in the case
of the Master Servicer and the Trustee or the Master Servicer in the case of the
Special Servicer to assume its functions hereunder, and to cooperate with the
Trustee and Master Servicer, as the case may be, and the successor in effecting
the termination of its responsibilities and rights hereunder, including, without
limitation, the transfer to the Master Servicer or the Trustee, as applicable,
for administration by it of all cash amounts which shall at the time be or
should have been credited by the Master Servicer to the Collection Account (if
it is then the defaulting party) and by the Special Servicer to any REO Account
(if it is then the defaulting party) or thereafter be received with respect to
the Mortgage Loans or any REO Account Property. All reasonable costs and
expenses of the successor Master Servicer or Special Servicer incurred in
connection with transferring the Mortgage Files and the Mortgage Certificates to
the successor Master Servicer or Special Servicer, as the case may be, and
amending this Agreement to reflect such
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succession as Master Servicer or Special Servicer, as the case may be, pursuant
to this Section 7.1 shall be paid by the predecessor Master Servicer or Special
Servicer, other than the Trustee as the case may be, upon presentation of
reasonable documentation of such costs and expenses.
SECTION 7.2 TRUSTEE AND MASTER SERVICER TO ACT; APPOINTMENT OF
SUCCESSOR.
On and after the time the Master Servicer or the Special Servicer, as
the case may be, receives a notice of termination pursuant to Section 7.1, the
Trustee or the Master Servicer, as applicable, shall be its successor in all
respects in its capacity as Master Servicer or Special Servicer, as applicable,
under this Agreement and the transactions set forth or provided for herein and
shall be subject to all the responsibilities, duties, limitations on liability
and liabilities relating thereto and arising thereafter placed on the Master
Servicer or Special Servicer by the terms and provisions hereof; provided,
however, that any failure to perform such duties or responsibilities caused by
the terminated party's failure to provide information or monies required by
Section 7.1 shall not be considered a default by such successor hereunder.
Without in any way limiting its other obligations as a successor Master
Servicer, the Trustee hereby acknowledges that, as successor to the Master
Servicer it shall make P&I Advances pursuant to Section 3.22 irrespective of any
bankruptcy, insolvency or similar proceedings affecting the predecessor Master
Servicer or the Borrower under the related Mortgage Loan subject to its
determination that such Advance is not a Nonrecoverable Advance. The appointment
of a successor Master Servicer or Special Servicer shall not affect any
liability of the predecessor Master Servicer or Special Servicer, as applicable,
which may have arisen (or which may relate to an act or omission which occurred)
prior to its termination as Master Servicer or Special Servicer, as applicable.
The Trustee or the Master Servicer, as applicable, shall not be liable for any
of the representations and warranties of the Master Servicer or the Special
Servicer, as applicable, herein or in any related document or agreement or for
any acts or omissions of the predecessor Master Servicer or Special Servicer nor
shall the Trustee or the Master Servicer, as applicable, be required to purchase
any Mortgage Loan or Mortgage Certificate hereunder. As compensation therefor,
the Trustee as successor Master Servicer pursuant to this Section 7.2 shall be
entitled to the Servicing Fees and all funds relating to the Mortgage Loans and
Mortgage Certificates which the Master Servicer would have been entitled to
charge to the Collection Account if the Master Servicer had continued to act
hereunder, and the Trustee or the Master Servicer, as applicable, as successor
to the Special Servicer shall be entitled to the Special Servicer Fees to which
the Special Servicer would have been entitled if the Special Servicer had
continued to act hereunder. Notwithstanding the above, the Trustee or the
Master Servicer, as applicable, if it shall be unwilling or unable to so act, or
if it is not approved by the Rating Agency as a Master Servicer or Special
Servicer, as applicable, may, if the Holders of the Certificates entitled to at
least 66 2/3% of the Voting Rights so request in writing to the Trustee,
promptly appoint, or petition a court of competent jurisdiction to appoint, any
established mortgage loan servicing institution which is not a Disqualified
Organization acceptable to the Rating Agency (such acceptance indicated by the
written confirmation from the Rating Agency that such appointment will not
result in a qualification, downgrade or withdrawal of the rating then assigned
to any Class of Certificates), and, in the case of an appointment of a Special
Servicer, the Trustee or the Master Servicer as the successor to the Master
Servicer or the Special Servicer, as applicable, hereunder in the assumption of
all or any part of the responsibilities, duties or liabilities of the Master
Servicer or the Special Servicer hereunder. No appointment of a successor to
the Master Servicer or the Special Servicer hereunder shall be effective until
the assumption by the successor to the Master Servicer or the Special Servicer
of all its responsibilities, duties and liabilities hereunder. Pending
appointment of a successor to the Master Servicer or the Special Servicer
hereunder, unless the Trustee or the Master Servicer, as applicable, shall be
prohibited by law from so acting (in which event the outgoing Master Servicer or
Special Servicer shall continue to act as such until a successor is appointed),
the Trustee or the Master Servicer, as applicable, shall act in such capacity as
herein provided above. In connection with such appointment and assumption
described herein, the Trustee or the Master Servicer, as applicable, may make
such arrangements for the compensation of such successor out of payments on
Mortgage Loans and distributions on Mortgage Certificates as it and such
successor shall agree; PROVIDED, HOWEVER, that no such compensation shall be in
excess of that permitted the terminated party hereunder. The Depositor, the
Trustee, the Custodian, if any, the Master Servicer or the Special Servicer
(whichever is not the terminated party) and such successor shall take such
action, consistent with this Agreement, as shall be necessary to effectuate any
such succession.
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SECTION 7.3 NOTIFICATION TO CERTIFICATEHOLDERS.
(a) Upon any termination pursuant to Section 7.1 above or
appointment of a successor to the Master Servicer or the Special Servicer, the
Trustee shall give prompt written notice thereof to Certificateholders at their
respective addresses appearing in the Certificate Register.
(b) Within 60 days after the occurrence of any Event of Default
known to a Responsible Officer of the Trustee (five days in the case of an Event
of Default under Section 7.1(i)), the Trustee shall transmit by mail to all
Holders of Certificates notice of such Event of Default, unless such Event of
Default shall have been cured or waived.
SECTION 7.4 OTHER REMEDIES OF TRUSTEE.
During the continuance of any Event of Default, so long as such Event
of Default shall not have been remedied, the Trustee, in addition to the rights
specified in Section 7.1, shall have the right, in its own name as trustee of an
express trust, to take all actions now or hereafter existing at law, in equity
or by statute to enforce its rights and remedies and protect the interests of,
and enforce the rights and remedies of, the Certificateholders (including the
institution and prosecution of all judicial, administrative and other
proceedings and the filing of proofs of claim and debt in connection therewith).
Except as otherwise expressly provided in this Agreement, no remedy provided for
by this Agreement shall be exclusive of any other remedy and each and every
remedy shall be cumulative and in addition to any other remedy and no delay or
omission or failure to exercise any right or remedy shall impair any such right
or remedy or shall be deemed to be a waiver of any Event of Default.
SECTION 7.5 WAIVER OF PAST EVENTS OF DEFAULT.
The Holders of Certificates evidencing not less than 66 2/3% of the
aggregate Voting Rights of the Certificates may, on behalf of all Holders of
Certificates, waive any default by the Master Servicer or the Special Servicer
in the performance of its obligations hereunder and its consequences, except a
default in making any required deposits to or payments from the Collection
Account in the case of the Master Servicer or the REO Account in the case of
Special Servicer, or in remitting payments as received to the Master Servicer by
the Special Servicer, in each case in accordance with this Agreement. Upon any
such waiver of a past default, such default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been remedied for every
purpose of this Agreement. No such waiver shall extend to any subsequent or
other default or impair any right consequent thereon.
SECTION 7.6 EFFECTS OF TRANSFER.
After the transfer of the duties of the Master Servicer or the Special
Servicer, pursuant to Section 6.2, 6.4, 7.1 or 7.2 of this Agreement, the
replaced Master Servicer or Special Servicer, as the case may be, shall have no
further obligations with respect to the management, administration or collection
of the Mortgage Loans or Mortgage Certificates, but shall remain entitled to
compensation or other amounts due under this Agreement to it that had already
accrued prior to such transfer.
SECTION 7.7 TRUSTEE AS MAKER OF ADVANCES.
(a) In the event that the Master Servicer or the Special Servicer,
as the case may be, fails to fulfill its obligations hereunder to make any P&I
Advances or Servicer Advances, the Trustee, or successor Master Servicer or
Special Servicer, as the case may be, shall, subject to a determination of
recoverability as described below, in the case of P&I Advances, perform such
obligations within one Business Day of such failure by the Master Servicer or
the Special Servicer, as the case may be, but in no event later than 12:00 noon
(Eastern Standard Time) on the related Distribution Date, and, in the case of
Servicer Advances, perform such obligations within five Business Days of (i)
receipt of notice of such failure by the Master Servicer or the Special
Servicer, as the case may be or (ii) the date on
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which a Responsible Officer has actual knowledge of such an advance not being
made and, with respect to any such P&I Advance or Servicer Advance made by the
Trustee, the Trustee shall succeed to all of the Master Servicer's or the
Special Servicer's rights with respect to P&I Advances and Servicer Advances
and the accrued and unpaid interest thereon at the Advance Rate hereunder,
including, without limitation, the Master Servicer's or the Special Servicer's,
as the case may be, rights of reimbursement (without regard to any impairment
of any such rights of reimbursement caused by such Master Servicer's or Special
Servicer's default in its obligations hereunder); PROVIDED, HOWEVER, that if P&I
Advances or Servicer Advances made by the Trustee, the Master Servicer and
Special Servicer, as the case may be, shall at any time be outstanding, or any
amounts of interest thereon at the Advance Rate shall be accrued and unpaid,
all amounts available to repay such P&I Advances or Servicer Advances and
interest thereon shall be applied entirely to the such P&I Advances or Servicer
Advances outstanding to the Trustee, until such P&I Advances or Servicer
Advances shall have been repaid in full, together with all amounts of interest
accrued thereon at the Advance Rate. In connection with making any P&I Advances
or Servicer Advances hereunder, the Trustee shall be entitled to conclusively
rely on any Officer's Certificate evidencing a determination by the Master
Servicer or the Special Servicer, as the case may be, that such P&I Advance or
Servicer Advance is a Nonrecoverable Advance or the Trustee may make its own
determination that such P&I Advance or Servicer Advance is a Nonrecoverable
Advance; provided, however, that such determination shall be evidenced by an
Officer's Certificate delivered to the Depositor.
(b) [Reserved]
(c) In the event the Trustee, as acting Master Servicer or Special
Servicer, as the case may be, makes any P&I Advance or Servicer Advance, the
successor Master Servicer or Special Servicer, as the case may be, shall upon
the effectiveness of its appointment reimburse the Trustee for any and all
outstanding P&I Advances and Servicer Advances made thereby, together with any
and all accrued and unpaid interest at the Advance Rate thereon, and the
successor Master Servicer or Special Servicer, as the case may be, shall succeed
to all of the rights of reimbursement of the Trustee with respect thereto.
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ARTICLE VIII
CONCERNING THE TRUSTEE
SECTION 8.1 DUTIES OF TRUSTEE.
The Trustee, prior to the occurrence of an Event of Default of which a
Responsible Officer of the Trustee has actual knowledge and after the curing or
waiver of all Events of Default which may have occurred or been waived,
undertakes to perform such duties and only such duties as are specifically set
forth in this Agreement. In case of an Event of Default of which a Responsible
Officer of the Trustee has actual knowledge shall have occurred (which has not
been cured or waived), the Trustee, subject to the provisions of Section 7.1,
7.2, 7.4 and 7.5, shall exercise such of the rights and powers vested in it by
this Agreement, and use the same degree of care and skill in their exercise, as
a prudent person would exercise or use under the circumstances in the conduct of
such person's own affairs.
The Trustee, upon receipt of any resolutions, certificates,
statements, opinions, reports, documents, orders or other instruments furnished
to the Trustee which are specifically required to be furnished pursuant to any
provision of this Agreement, shall examine them to determine whether they
conform on their face to the requirements of this Agreement; PROVIDED, HOWEVER,
that prior to the occurrence of any Event of Default, the Trustee shall be under
no obligation to recalculate, verify or recompute any information provided to it
hereunder by the Depositor, the Master Servicer, the Special Servicer or others.
If any such instrument is found not to conform to the requirements of this
Agreement in a material manner, the Trustee shall take action as it deems
appropriate to have the instrument corrected and if the instrument is not
corrected to the Trustee's reasonable satisfaction, the Trustee shall provide
notice thereof to the Certificateholders.
Subject to Section 8.2, no provision of this Agreement shall be
construed to relieve the Trustee from liability for its own negligent action,
its own negligent failure to act or its own misconduct; PROVIDED, HOWEVER, that:
(i) prior to the occurrence of an Event of Default, and
after the curing or waiver of all such Events of
Default which may have occurred, the duties and
obligations of the Trustee shall be determined solely
by the express provisions of this Agreement, the
Trustee shall not be liable except for the performance
of such duties and obligations as are specifically set
forth in this Agreement, no implied covenants or
obligations shall be read into this Agreement against
the Trustee and, in the absence of bad faith on part of
the Trustee, the Trustee may conclusively rely as to
the truth of the statements and the correctness of the
opinions expressed therein, upon any certificates,
reports or opinions furnished to the Trustee that
conform to the requirements of this Agreement;
(ii) the Trustee shall not be personally liable for an error
of judgment made in good faith by a Responsible Officer
or Responsible Officers, unless it shall be proved that
the Trustee was negligent in ascertaining the pertinent
facts;
(iii) the Trustee shall not be personally liable with respect
to any action taken, suffered or omitted to be taken by
it in good faith in accordance with the direction of
Holders of Certificates entitled to at least 25% of the
Voting Rights (or such other percentage as is specified
herein) of each affected Class, or of the aggregate
Voting Rights of the Certificates, relating to the
time, method and place of conducting any proceeding for
any remedy available to the Trustee, or exercising any
trust or power conferred upon the Trustee, under this
Agreement; and
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(iv) the Trustee shall not be charged with knowledge of any
failure by the Master Servicer or the Special Servicer
to comply with the obligations of the Master Servicer
or the Special Servicer referred to in clause (i) or
clause (ii) of Section 7.1, or of any breach referred
to in clause (vi) of Section 7.1, unless a Responsible
Officer of the Trustee obtains actual knowledge of such
failure or breach.
SECTION 8.2 CERTAIN MATTERS AFFECTING THE TRUSTEE.
(a) Except as otherwise provided in Section 8.1:
(i) the Trustee may request and/or conclusively rely upon
and shall be protected in acting or refraining from
acting upon any resolution, Officer's Certificate,
certificate of auditors or any other certificate,
statement, instrument, opinion, report, notice,
request, consent, order, appraisal, bond or other paper
or document reasonably believed by it to be genuine and
to have been signed or presented by the proper party or
parties;
(ii) the Trustee may consult with counsel and any written
advice or opinion of counsel shall be full and complete
authorization and protection in respect of any action
taken or suffered or omitted by it hereunder in good
faith and in accordance with such advice or opinion of
counsel;
(iii) the Trustee shall be under no obligation to exercise
any of the trusts or powers vested in it by this
Agreement or to institute, conduct or defend any
litigation hereunder or in relation hereto at the
request, order or direction of any of the
Certificateholders pursuant to the provisions of this
Agreement, unless such Certificateholders shall have
offered to the Trustee reasonable security or indemnity
against the costs, expenses and liabilities which may
be incurred therein or thereby; the right of the
Trustee to perform any discretionary act enumerated in
this Agreement shall not be construed as a duty, and
the Trustee shall not be answerable for other than its
negligence or willful misconduct in the performance of
any such act; nothing contained herein shall, however,
relieve the Trustee of the obligations, upon the
occurrence of an Event of Default of which a
Responsible Officer of the Trustee has actual knowledge
(which has not been cured or waived), to exercise such
of the rights and powers vested in it by this
Agreement, and to use the same degree of care and skill
in their exercise, as a prudent person would exercise
or use under the circumstances in the conduct of such
person's own affairs;
(iv) neither the Trustee nor any of its directors, officers,
employees, Affiliates or agents shall be personally
liable for any action taken, suffered or omitted by the
Trustee in good faith and reasonably determined by the
Trustee to be authorized or within the discretion or
rights or powers conferred upon the Trustee by this
Agreement;
(v) prior to the occurrence of an Event of Default
hereunder and after the curing or waiver of all Events
of Default which may have occurred, the Trustee shall
not be bound to make any investigation into the facts
or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice,
request, consent, order, approval, bond or other paper
or document, unless requested in writing to do so by
Holders of Certificates entitled to at least 51% (or
such other percentage as is specified herein) of the
Voting Rights of any affected Class; PROVIDED, HOWEVER,
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that if the payment within a reasonable time to the
Trustee of the costs, expenses or liabilities likely to
be incurred by it in the making of such investigation
is, in the opinion of the Trustee, not reasonably
assured to the Trustee by the security afforded to it
by the terms of this Agreement, the Trustee may require
reasonable indemnity against such expense or liability
as a condition to taking any such action. The
reasonable expense of every such examination shall be
paid by the Master Servicer if an Event of Default
shall have occurred and be continuing relating to the
Master Servicer, and by the Special Servicer, if an
Event of Default shall have occurred and be continuing
relating to the Special Servicer, and otherwise by the
Certificateholders requesting the investigation; and
(vi) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either
directly or by or through agents or attorneys or a
custodian other than the Originator or the Depositor.
The Trustee shall not be liable or responsible for the
misconduct or negligence of any of the Trustee's agents
or attorneys or a custodian appointed with due care by
the Trustee hereunder consistent with the preceding
sentence or the actions of the Master Servicer, the
Special Servicer, any Subservicer or the Depositor.
(b) Following the Startup Day, the Trustee shall not, except as
expressly required by any provision of this Agreement, accept any contribution
of assets to the Trust Fund, the Upper-Tier REMIC or the Lower-Tier REMIC unless
the Trustee shall have received an Opinion of Counsel, at the expense of the
contributor of such assets to the Trust Fund, to the effect that the inclusion
of such assets in the Upper-Tier REMIC or Lower-Tier REMIC will not cause the
Upper-Tier REMIC or Lower-Tier REMIC to fail to qualify as a REMIC at any time
that any Certificates or Uncertificated Lower-Tier Interests are outstanding or
subject the Upper-Tier REMIC or Lower-Tier REMIC to any tax under the REMIC
Provisions or other applicable provisions of federal, state and local law or
ordinances.
(c) All rights of action under this Agreement or under any of the
Certificates enforceable by the Trustee, may be enforced by it without the
possession of any of the Certificates or the production thereof at the trial or
other proceeding relating thereto, and any such suit, action or proceeding
instituted by the Trustee shall be brought in its name for the benefit of all
the Holders of such Certificates, subject to the provisions of this Agreement.
The Trustee shall not be required to expend or risk its own funds or
otherwise incur financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers, if in the
Trustee's opinion repayment of such funds or adequate indemnity against such
risk or liability is not reasonably assured to it, and none of the provisions
contained in this Agreement shall in any event require the Trustee to perform or
be responsible for the manner of performance of, any of the obligations of the
Master Servicer or the Special Servicer under this Agreement, except during such
time, if any, as the Trustee shall be the successor to, and be vested with the
rights, duties, powers and privileges of, the Master Servicer or the Special
Servicer in accordance with the terms of this Agreement. Notwithstanding
anything contained herein, the Trustee shall not be responsible and shall have
no liability in connection with duties assumed by the Paying Agent, the
Custodian, the Authenticating Agent and the Certificate Registrar hereunder,
unless the Trustee is acting in any such capacity hereunder.
The Trustee shall have no duty to conduct any affirmative
investigation as to the occurrence of any condition requiring the repurchase or
substitution of any Mortgage Loan or Mortgage Certificate, as applicable, by the
Originator pursuant to this Agreement or the Transfer Agreement or the
eligibility of any Mortgage Loan or Mortgage Certificate for purposes of this
Agreement.
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(d) Monthly, the Trustee shall be entitled to receive the Trustee
Fee (which shall not be limited by any provision of law with respect to the
compensation of the trustee of an express trust), for all services rendered by
it in the execution of the trusts hereby created and in the exercise and
performance of any of the powers and duties hereunder of the Trustee. On or
before the Master Servicer Remittance Date in each month (commencing in May
1998), the Master Servicer shall, pursuant to Section 3.6, withdraw from the
Collection Account and pay to the Trustee that portion of funds then on deposit
in the Collection Account that are allocable to the Trustee Fee. The Master
Servicer shall also withdraw from the Collection Account the amount necessary to
reimburse the Trustee for all Advances, together with Advance Interest thereon,
and (at the direction of the Trustee) all expenses of the Trust Fund paid by the
Trustee and reimbursable under this Agreement. The provisions of this Section
8.2(d) shall survive any termination of this Agreement and the resignation or
removal of the Trustee.
SECTION 8.3 TRUSTEE NOT LIABLE FOR CERTIFICATES,
MORTGAGE LOANS OR MORTGAGE CERTIFICATES.
The recitals contained herein and in the Certificates (other than the
signature, if any, of the Trustee on the Certificates) and information contained
in any offering document for the Certificates, except to the extent provided by
the Trustee, shall not be taken as the statements of the Trustee and the Trustee
assumes no responsibility for their correctness. The Trustee makes no
representations or warranties as to the validity or sufficiency of this
Agreement or of the Certificates (other than the signature, if any, of the
Trustee on the Certificates) or of any Mortgage Loan or Mortgage Certificate or
related document. The Trustee shall not at any time have any responsibility or
liability for or with respect to the legality, validity and enforceability of
any Mortgage or any Mortgage Loan or the Mortgage Certificate, or the perfection
and priority of any Mortgage or the maintenance of any such perfection and
priority, or for or with respect to the sufficiency of the Trust Fund or its
ability to generate the payments to be distributed to Certificateholders, under
this Agreement, including, without limitation: the existence, condition and
ownership of any Mortgaged Property; the existence and enforceability of any
hazard or other insurance thereon (other than if the Trustee shall assume the
duties of the Master Servicer or the Special Servicer pursuant to Section 7.2);
the existence of any Mortgage Loan or the Mortgage Certificate or the contents
of the related Mortgage File on any computer or other record thereof (other than
if the Trustee shall assume the duties of the Master Servicer pursuant to
Section 7.2); the validity of the assignment of any Mortgage Loan or the
Mortgage Certificate to the Trust Fund or of any intervening assignment; the
completeness of any Mortgage File; the performance or enforcement of any
Mortgage Loan or Mortgage Certificate (other than if the Trustee shall assume
the duties of the Master Servicer or the Special Servicer pursuant to Section
7.2); the compliance by the Depositor, the Master Servicer or the Special
Servicer with any warranty or representation made under this Agreement or in any
related document or the accuracy of any such warranty or representation prior to
the Trustee's receipt of notice or other discovery of any non-compliance
therewith or any breach thereof; any investment of monies by or at the direction
of the Master Servicer or any loss resulting therefrom, it being understood that
the Trustee shall remain responsible for any Trust Fund property that it may
hold in its individual capacity; the acts or omissions of any of the Depositor,
the Master Servicer (other than if the Trustee shall assume the duties of the
Master Servicer pursuant to Section 7.2), the Special Servicer (other than if
the Trustee shall assume the duties of the Special Servicer pursuant to Section
7.2), any subservicer or any Borrower; any action of the Master Servicer (other
than if the Trustee shall assume the duties of the Master Servicer pursuant to
Section 7.2), or any other action taken by the Master Servicer in the name of
the Trustee, except to the extent such action is taken at the express written
direction of the Trustee; the failure of the Master Servicer, the Special
Servicer or any subservicer to act or perform any duties required of it as agent
of the Trustee hereunder; or any action by the Trustee taken at the instruction
of the Master Servicer (other than if the Trustee shall assume the duties of the
Master Servicer pursuant to Section 7.2) or the Special Servicer (other than if
the Trustee shall assume the duties of the Special Servicer pursuant to Section
7.2) unless the taking of such action is not permitted by the express terms of
this Agreement; PROVIDED, HOWEVER, that the foregoing shall not relieve the
Trustee of its obligation to perform its duties under this Agreement. The
Trustee shall not be accountable for the use or application by the Depositor or
the Master Servicer of any of the Certificates or of the proceeds of such
Certificates, or for the use or application of any funds paid to the Depositor,
the Master Servicer or the Special Servicer in respect of the Mortgage Loans or
Mortgage Certificates or deposited in or withdrawn from the Collection Account
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by the Depositor, the Master Servicer or the Special Servicer, other than any
funds held by the Trustee in accordance with Section 3.5(b). The Trustee shall
not have any responsibility for filing any financing or continuation statement
in any public office at any time or to otherwise perfect or maintain the
perfection of any security interest or lien granted to it hereunder (unless the
Trustee shall have become the successor Master Servicer) or to record this
Agreement. In making any calculation hereunder which includes as a component
thereof the payment or distribution of interest for a stated period at a stated
rate, to the extent permitted by applicable law, the Trustee shall assume that
such payment is so permitted unless a Responsible Officer of the Trustee has
actual knowledge, or receives an Opinion of Counsel to the effect, that such
payment is not permitted by applicable law.
The Trustee may request, and conclusively rely upon, an Officer's
Certificate of the Master Servicer or the Special Servicer, as to whether any
breach of a representation and warranty of the Master Servicer or the Special
Servicer in Section 2.5 or 2.6, as the case may be, is susceptible to cure in
all material respects.
SECTION 8.4 TRUSTEE MAY OWN CERTIFICATES.
The Trustee, in its individual capacity or any other capacity, may
become the owner or pledgee of Certificates, and may deal with the Depositor,
the Master Servicer and the Special Servicer in banking transactions, with the
same rights it would have if it were not Trustee.
SECTION 8.5 LIMITATION ON LIABILITY OF TRUSTEE.
(a) The Trustee, its affiliates and each of their respective
directors, officers, employees and agents in their corporate capacity, shall be
indemnified by amounts on deposit in the Collection Account and Distribution
Account and held harmless against any and all losses, liabilities, damages,
claims, penalties, fines, forfeitures or expenses (including reasonable
attorneys' fees) arising in respect of this Agreement (including, with respect
to the Trustee, performance under Section 8.1 hereof) or the Certificates other
than those resulting from bad faith or intentional misconduct, or negligence in
the performance of its duties.
(b) The Master Servicer agrees to indemnify each of the Trustee,
its affiliates, and each of their respective directors, officers, employees and
agents (each an "Indemnified Party") in its corporate capacity from, and hold it
harmless against, any and all losses, liabilities, damages, claims, penalties,
fines, forfeitures or expenses (including reasonable attorneys' fees) resulting
from the Master Servicer's negligence, bad faith or intentional misconduct in
the performance of its duties under this Agreement except to the extent the
Indemnified Party's own bad faith, willful misconduct or negligence is the cause
of the loss, liability, damage, claim or expense.
(c) The Special Servicer agrees to indemnify each of the Trustee,
its affiliates, and each of their respective directors, officers, employees and
agents in its corporate capacity from, and hold it harmless against, any and all
losses, liabilities, damages, claims, penalties, fines, forfeitures or expenses
(including reasonable attorneys' fees) arising in respect of the Special
Servicer's acts or omissions in connection with this Agreement or the
Certificates except to the extent the Trustee's own bad faith, willful
misconduct or negligence is the cause of the loss, liability, damage, claim or
expense.
(d) This Section 8.5 shall survive the termination or maturity of
this Agreement or the resignation or removal of the Trustee as regards rights
accrued prior to such resignation or removal.
SECTION 8.6 ELIGIBILITY REQUIREMENTS FOR TRUSTEE.
The Trustee hereunder shall at all times (i) be a corporation or
association organized and doing business under the laws of any state of the
United States of America or a nationally chartered bank, (ii) be authorized
under such laws to exercise corporate trust powers and to accept the trust
conferred under this Agreement, (iii) have a
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combined capital and surplus of at least $50,000,000 and be subject to
supervision or examination by federal or state authority, (iv) not be an
Affiliate of the Originator, the Depositor, the Master Servicer or the Special
Servicer (except during any period when the Trustee has assumed the duties of
the Master Servicer or the Special Servicer pursuant to Section 7.2) and
(v) have a long-term unsecured senior debt rating of at least "AA" from the
Rating Agency or written confirmation shall have been received from the Rating
Agency that the performance of such entity in the capacity of the Trustee shall
not result in the qualification, downgrade or withdrawal of the then current
ratings assigned by the Rating Agencies to the outstanding Classes of
Certificates (other than the initial Trustee, LaSalle National Bank, who is
hereby deemed to be acceptable to the Rating Agency); PROVIDED HOWEVER, that if
the Trustee does not have such long-term unsecured debt rating, either party
shall be eligible pursuant to this Section if the Master Servicer has a
long-term unsecured senior debt rating of at least "AA" from the Rating Agency.
Any successor Trustee shall at the time of its appointment have long-term
unsecured senior debt ratings of at least "AA" from the Rating Agency. If such
corporation publishes reports of condition at least annually, pursuant to law
or to the requirements of the aforesaid supervising or examining authority,
then for the purposes of this Section the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as set forth
in its most recent report of condition so published. In case at any time the
Trustee shall cease to be eligible in accordance with the provisions of this
Section, the Trustee shall resign immediately in the manner and with the effect
specified in Section 8.7.
SECTION 8.7 RESIGNATION AND REMOVAL OF THE TRUSTEE.
The Trustee may not resign until either (A) the Trust Fund has been
completely liquidated and the proceeds of the liquidation have been distributed
to the security holders of the trust, or (B) a successor trustee or custodian,
having the qualifications prescribed in Section 8.6, has been designated and has
accepted such trusteeship or custodianship. Subject to the preceding sentence,
the Trustee may resign and be discharged from the trusts hereby created by
giving written notice thereof to the Depositor, the Master Servicer and the
Special Servicer. Upon receiving such notice of resignation, the Depositor
shall, at the expense of the Trust Fund, promptly remove the Trustee and
promptly appoint a successor trustee by written instrument, which instrument
shall be delivered in original form to the resigning Trustee, the Master
Servicer, the Special Servicer and the successor trustee. If no successor
trustee shall have been so appointed and have accepted appointment within 90
days after the giving of such notice of resignation, the resigning Trustee may
petition any court of competent jurisdiction for the appointment of a successor
trustee.
If at any time the Trustee shall cease to be eligible in accordance
with the provisions of Section 8.6 and shall fail to resign after written
request therefor by the Depositor, or if at any time the Trustee shall become
incapable of acting, or shall be adjudged bankrupt or insolvent, or a receiver
of the Trustee or of its property shall be appointed, or any public officer
shall take charge or control of the Trustee or of its property or affairs for
the purpose of rehabilitation, conservation or liquidation, then the Depositor
may remove the Trustee. If it removes the Trustee under the authority of the
immediately preceding sentence, the Depositor shall promptly remove the appoint
a successor trustee by written instrument, which instrument shall be delivered
in original form to the Trustee so removed, to the Master Servicer, to the
Special Servicer and to such successor trustee.
The Holders of Certificates entitled to at least 66-2/3% of the Voting
Rights may at any time remove the Trustee and, in such event, shall promptly
appoint a successor trustee by written instrument or instruments, in five
originals, signed by such Holders or their attorneys-in-fact duly authorized,
one complete set of which instruments shall be delivered to the Depositor, one
complete set to the Master Servicer one complete set to the Special Servicer,
one complete set to the Trustee so removed and one complete set to the successor
so appointed.
Any resignation or removal of the Trustee and the appointment of a
successor trustee pursuant to any of the provisions of this Section shall not
become effective until acceptance of appointment by the successor Trustee as
provided in Section 8.9.
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SECTION 8.8 REPRESENTATIONS AND WARRANTIES OF THE TRUSTEE.
(a) The Trustee, in its capacity as the Trustee, hereby represents
and warrants as of the Closing Date that:
(i) The Trustee is a banking corporation, duly organized,
validly existing and in good standing under the laws
governing its creation and existence and has full
corporate power and authority, to own its property, to
carry on its business as presently conducted, and to
enter into and perform its obligations under this
Agreement;
(ii) The execution and delivery by the Trustee of this
Agreement have been duly authorized by all necessary
corporate action on the part of the Trustee; neither
the execution and delivery of this Agreement, nor the
consummation of the transactions contemplated in this
Agreement, nor compliance with the provisions of this
Agreement, will conflict with or result in a breach of,
or constitute a default under, (i) any of the
provisions of any law, governmental rule, regulation,
judgment, decrees or order binding on the Trustee or
its properties that would materially and adversely
affect the Trustee's ability to perform its obligations
under this Agreement, (ii) the organizational documents
of the Trustee, or (iii) the terms of any material
agreement or instrument to which the Trustee is a party
or by which it is bound; the Trustee is not in default
with respect to any order or decree of any court or any
order, regulation or demand of any federal, state,
municipal or other governmental agency, which default
would materially and adversely affect its performance
under this Agreement;
(iii) The execution, delivery and performance by the Trustee
of this Agreement and the consummation of the
transactions contemplated by this Agreement do not
require the consent, approval, authorization or order
of, the giving of notice to or the registration with
any state, federal or other governmental authority or
agency, except such as has been or will be obtained,
given, effected or taken in order for the Trustee to
perform its obligations under this Agreement; provided,
however, that to the extent it may become necessary,
the Trustee may act pursuant to Section 8.11 hereof.
(iv) This Agreement has been duly executed and delivered by
the Trustee and, assuming due authorization, execution
and delivery by the other parties hereto, constitutes a
legal, valid and binding obligation of the Trustee,
enforceable against the Trustee in accordance with its
terms, subject, as to enforcement of remedies, to
applicable bankruptcy, reorganization, insolvency,
moratorium and other similar laws affecting creditors'
rights generally as from time to time in effect, and to
general principles of equity (regardless of whether
such enforceability is considered in a proceeding in
equity or at law); and
(v) There are no actions, suits or proceedings pending or,
to the best of the Trustee's knowledge, threatened,
against the Trustee that, either in any one instance or
in the aggregate, would draw into question the validity
of this Agreement, or which would be likely to impair
materially the ability of the Trustee to perform under
the terms of this Agreement.
(b) [Reserved]
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SECTION 8.9 SUCCESSOR TRUSTEE.
Any successor trustee appointed as provided in Section 8.7 shall
execute, acknowledge and deliver to the Depositor and to its predecessor trustee
an instrument accepting such appointment hereunder, and thereupon the
resignation or removal of the predecessor trustee shall become effective and
such successor trustee, without any further act, deed or conveyance, shall
become fully vested with all the rights, powers, duties and obligations of its
predecessor hereunder, with the like effect as if originally named as trustee
herein. The predecessor trustee shall deliver to the successor trustee all
Mortgage Files and Mortgage Certificates and related documents and statements
held by it hereunder (other than any Mortgage Files and Mortgage Certificates at
the time held by a Custodian, which shall become the agent of any successor
trustee hereunder), and the Depositor and the predecessor trustee shall execute
and deliver such instruments and do such other things as may reasonably be
required for more fully and certainly vesting and confirming in the successor
trustee all such rights, powers, duties and obligations. No successor trustee
shall accept appointment as provided in this Section unless at the time of such
acceptance such successor trustee shall be eligible under the provisions of
Section 8.6.
Upon acceptance of appointment by a successor trustee as provided in
this Section, the Depositor shall mail notice of the succession of such trustee
hereunder to all Holders of Certificates at their addresses as shown in the
Certificate Register. If the Depositor fails to mail such notice within 10 days
after acceptance of appointment by the successor trustee, the successor trustee
shall cause such notice to be mailed at the expense of the Depositor.
SECTION 8.10 MERGER OR CONSOLIDATION OF TRUSTEE.
Any Person into which the Trustee may be merged or converted or with
which it may be consolidated or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Trustee shall be the successor of the Trustee hereunder,
provided that such corporation shall be eligible under the provisions of Section
8.6, 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 8.11 APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE.
Notwithstanding any other provisions hereof, at any time, for the
purpose of meeting any legal requirements of any jurisdiction in which any part
of the Trust Fund or property securing the same may at the time be located, the
Depositor and the Trustee acting jointly shall have the power and shall execute
and deliver all instruments to appoint one or more Persons approved by the
Trustee to act as co-trustee or co-trustees, jointly with the Trustee, or
separate trustee or separate trustees, of all or any part of the Trust Fund, and
to vest in such Person or Persons, in such capacity, such title to the Trust
Fund, or any part thereof, and, subject to the other provisions of this Section
8.11, such powers, duties, obligations, rights and trusts as the Depositor and
the Trustee may consider necessary or desirable. If the Depositor shall no
longer be in existence or shall not have joined in such appointment within 15
days after the receipt by it of a request so to do, or in case an Event of
Default shall have occurred and be continuing, the Trustee alone shall have the
power to make such appointment. No co-trustee or separate trustee hereunder
shall be required to meet the terms of eligibility as a successor trustee under
Section 8.6 hereunder and no notice to Holders of Certificates of the
appointment of co-trustee(s) or separate trustee(s) shall be required under
Section 8.9 hereof. No appointment of a co-trustee shall relieve the Trustee of
its obligations hereunder; provided that the Trustee shall have no liability for
the actions of a co-trustee or separate trustee which exceed the express
authority of such co-trustee or separate trustee.
In the case of any appointment of a co-trustee or separate trustee
pursuant to this Section 8.11, all rights, powers, duties and obligations
conferred or imposed upon the Trustee shall be conferred or imposed upon and
exercised or performed by the Trustee and such separate trustee or co-trustee
jointly (it being understood that such separate trustee or co-trustee is not
authorized to act separately without the Trustee joining in such act), except to
the
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extent that under any law of any jurisdiction in which any particular act or
acts are to be performed (whether as Trustee hereunder or as successor to the
Master Servicer or the Special Servicer hereunder), the Trustee shall be
incompetent or unqualified to perform such act or acts, in which event such
rights, powers, duties and obligations (including the holding of title to the
Trust Fund or any portion thereof in any such jurisdiction) shall be exercised
and performed by such separate trustee or co-trustee solely at the direction of
the Trustee.
No trustee under this Agreement shall be personally liable by reason
of any act or omission of any other trustee under this Agreement. The Depositor
and the Trustee acting jointly may at any time accept the resignation of or
remove any separate trustee or co-trustee.
Any notice, request or other writing given to the Trustee shall be
deemed to have been given to each of the then separate trustees and co-trustees,
as effectively as if given to each of them. Every instrument appointing any
separate trustee or co-trustee shall refer to this Agreement and the conditions
of this Article VIII. Every such instrument shall be filed with the Trustee.
Each separate trustee and co-trustee, upon its acceptance of the trusts
conferred, shall be vested with the estates or property specified in its
instrument of appointment, either jointly with the Trustee or separately, as may
be provided therein, subject to all the provisions of this Agreement,
specifically including every provision of this Agreement relating to the conduct
of, affecting the liability of, or affording protection to, the Trustee.
Any separate trustee or co-trustee may, at any time, constitute the
Trustee, its agent or attorney-in-fact, with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of this
Agreement on its behalf and in its name. If any separate trustee or co-trustee
shall die, become incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the
Trustee, to the extent permitted by law, without the appointment of a new or
successor trustee. The fees and expenses of any co-trustee or separate trustee
shall be paid by the Trustee (other than expenses, disbursements and advances
made by such co-trustees or separate trustees, which shall be paid out of the
Trust Fund to the extent, and in accordance with the procedures, specified in
this Agreement), unless the appointment of such co-trustee or separate trustee
is required due to changes in federal or state law occurring after the Closing
Date, in which case the reasonable compensation of, and expenses, disbursements
and expenses made by, such co-trustee or separate trustee shall be paid out of
the Trust Fund to the extent and in accordance with the standards specified in
this Agreement.
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ARTICLE IX
TERMINATION
SECTION 9.1 TERMINATION.
(a) The respective obligations and responsibilities of the Master
Servicer, the Depositor, the Special Servicer and the Trustee created hereby
with respect to the Certificates (other than the obligation to make certain
payments, to send certain notices to Certificateholders as hereinafter set forth
and to prepare and file certain tax reports) shall terminate immediately
following the occurrence of the last action required to be taken by the Trustee
pursuant to this Article IX on the Termination Date; PROVIDED, HOWEVER, that in
no event shall the Trust Fund created hereby continue beyond the expiration of
twenty-one years from the death of the last survivor of the descendants of
Joseph P. Kennedy, the late ambassador of the United States to the Court of
Saint James, living on the date hereof.
(b) The Trust Fund shall be terminated and the assets of the Trust
Fund shall be sold or otherwise disposed of in connection with Section 9.1(c) or
9.1(d), only pursuant to a "plan of complete liquidation" within the meaning of
Section 860F(a)(4) of the Code adopted on behalf of each of the Upper-Tier REMIC
and Lower-Tier REMIC. The plan of complete liquidation shall be adopted by
designating on each REMIC's final federal income tax return a day no more than
90 days prior to the Anticipated Termination Date specified in the Notice of
Termination (such date being deemed the date of adoption of the plan of complete
liquidation).
(c) 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 Notice Date, specifying the Anticipated Termination Date, purchase
on the Early Termination Determination Date all, but not less than all, of the
Mortgage Loans and Mortgage Certificates then included in the Trust Fund, all
property acquired in respect of any Mortgage Loan or Mortgage Certificate and
any assets conveyed to the Trust Fund, at a purchase price (the "Termination
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 and Mortgage Certificate included in
the Trust Fund as of such Early Termination
Determination Date; and
(B) all unpaid interest accrued on such principal
balance of each such Mortgage Loan and Mortgage
Certificate 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 9.1(d)(ii)(B)) of the Mortgage
Loans and Mortgage Certificate, and all other
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property acquired in respect of any Mortgage Loan
in the Trust Fund, as of the date of purchase.
All costs and expenses incurred by any party to this Agreement or by the Trust
Fund in connection with the purchase of the Mortgage Loans and Mortgage
Certificates and other assets of the Trust Fund pursuant to this Section 9.1(c)
shall be borne by the party exercising its purchase rights hereunder. Such
party shall deposit the Termination Price into the Collection Account on or
prior to the Early Termination Determination Date.
(d) If the Trust Fund has not been previously terminated pursuant
to subsection (b) of this Section 9.1:
(i) the Trustee shall determine as soon as practicable the
Distribution Date on which the Trustee reasonably
anticipates based on information with respect to the
Mortgage Loans and Mortgage Certificates previously
provided to it that the amount of cash on deposit in
the Distribution Account will be sufficient (without
giving effect to the sales referred to in clause (ii)
below) to distribute in full the Certificate Principal
Amounts of all the Certificates as of such Distribution
Date, together with all amounts required to be
distributed on such Distribution Date pursuant to
Section 4.1; and
(ii) the Master Servicer shall, at the expense of the Trust
Fund, on the Early Termination Determination Date sell
for cash all, but not less than all, the Mortgage Loans
and Mortgage Certificates and other property included
in the Trust Fund on such date and deposit such cash
into the Collection Account:
(A) on the terms and to the Persons specified in a
notice given to the Master Servicer by the Holders
of 100% of the Percentage Interests of the Class
LR Certificates; or
(B) if no such notice is timely received, to any
Person at a purchase price equal to the aggregate
fair market value of all the Mortgage Loans and
Mortgage Certificates and other property included
in the Trust Fund on such date, as determined by
an Independent appraiser acceptable to the Master
Servicer as of a day not more than 30 days prior
to such date.
The costs and expenses of the Master Servicer incurred in connection with
subsection (c) of this Section 9.1 shall be reimbursed by the Trust Fund.
(e) If the Trust Fund has not been previously terminated pursuant
to subsection (c) or (d) of this Section 9.1, the Trustee shall determine as
soon as practicable the Distribution Date on which the Trustee reasonably
anticipates based on information with respect to the Mortgage Loans and Mortgage
Certificates previously provided to it, that the final distribution will be made
(i) to the Holders of outstanding Class R, Class B, Class C, Class D, Class E,
Class F, Class G, Class X-1 and Class X-2 Certificates, notwithstanding that
such distribution may be insufficient to distribute in full the Certificate
Principal Amount, if any, of each such Certificate, together with amounts
required to be distributed on such Distribution Date pursuant to Section 4.1, or
(ii) if no Class R, Class B, Class C, Class D, Class E, Class F, Class G, Class
X-1 and Class X-2 Certificates are then outstanding, to the Holders of the Class
LR Certificates, in each case, following the later to occur of (A) the receipt
or collection of the last payment due on any Mortgage Loan or Mortgage
Certificate included in the Trust Fund or (B) the liquidation or disposition
pursuant to Section 3.18 of the last asset held by the Trust Fund.
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(f) Notice of any termination of the Trust Fund pursuant to this
Section 9.1 shall be mailed by the Trustee to affected Certificateholders at
their addresses shown in the Certificate Register as soon as practicable after
the Trustee shall have received a Notice of Termination but in any event not
more than thirty days, and not less than five days, prior to the Anticipated
Termination Date. The notice mailed by the Trustee to affected
Certificateholders shall:
(i) specify the Anticipated Termination Date on which the
final distribution is anticipated to be made to Holders
of Certificates of the Classes specified therein;
(ii) specify the amount of any such final distribution, if
known;
(iii) state that the final distribution to Certificateholders
will be made only upon presentation and surrender of
Certificates at the office of the Trustee or Paying
Agent therein specified; and
(iv) if such termination is to be made pursuant to Section
9.1(c), set forth the right of the Holders of the Class
LR Certificates to purchase all, but not less than all,
the Mortgage Loans and Mortgage Certificates and the
other property included in the Trust Fund on the Early
Termination Determination Date specified therein.
If the Trust Fund is not terminated on any Anticipated Termination Date for any
reason, the Trustee shall promptly mail notice thereof to each affected
Certificateholder.
(g) Any funds not distributed on the Termination Date because of
the failure of any Certificateholders to tender their Certificates shall be set
aside and held uninvested in trust for the account of the appropriate non-
tendering Certificateholders, whereupon the Trust Fund shall terminate. If any
Certificates as to which notice of the Termination Date has been given pursuant
to this Section 9.1 shall not have been surrendered for cancellation within six
months after the time specified in such notice, the Trustee shall mail a second
notice to the remaining Certificateholders, at their last addresses shown in the
Certificate Register, to surrender their Certificates for cancellation in order
to receive, from such funds held, the final distribution with respect thereto.
The costs and expenses of maintaining such funds and of contacting
Certificateholders shall be paid out of the assets which remain held. If after
the second notice any Certificates shall not have been surrendered for
cancellation, the Class R Certificates shall be entitled to all unclaimed funds
and other assets which remain subject hereto. No interest shall accrue or be
payable to any Certificateholder on any amount held as a result of such
Certificateholder's failure to surrender its Certificate(s) for final payment
thereof in accordance with this Section 9.1. Any such amounts held by the
Trustee shall not be invested.
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ARTICLE X
MISCELLANEOUS PROVISIONS
SECTION 10.1 COUNTERPARTS.
This 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 but one and the same instrument.
SECTION 10.2 LIMITATION ON RIGHTS OF CERTIFICATEHOLDERS.
The death or incapacity of any Certificateholder shall not operate to
terminate this Agreement, the Trust Fund or the Upper-Tier REMIC or Lower-Tier
REMIC, nor entitle such Certificateholder's legal representatives or heirs to
claim an accounting or to take any action or proceeding in any court for a
partition or winding up of the Trust Fund, nor otherwise affect the rights,
obligations and liabilities of the parties hereto or any of them.
No Certificateholder shall have any right to vote (except as expressly
provided for herein) or in any manner otherwise control the operation and
management of the Trust Fund, or the obligations of the parties hereto, nor
shall anything herein set forth, or contained in the terms of the Certificates,
be construed so as to constitute the Certificateholders from time to time as
partners or members of an association; nor shall any Certificateholder be under
any liability to any third person by reason of any action taken by the parties
to this Agreement pursuant to any provision hereof.
No Certificateholder shall have any right by virtue of any provision
of this Agreement to institute any suit, action or proceeding in equity or at
law upon or under or with respect to this Agreement, unless such Holder
previously shall have given to the Trustee a written notice of default and of
the continuance thereof, as hereinbefore provided, and unless also the Holders
of Certificates representing over 50% of the Voting Rights allocated to each
affected Class of Certificates shall have made written request upon the Trustee
to institute such action, suit or proceeding in its own name as Trustee
hereunder and shall have offered to the Trustee such reasonable indemnity as it
may require against the costs, expenses and liabilities to be incurred therein
or thereby, and the Trustee, for 15 days after its receipt of such notice,
request and offer of indemnity, shall have neglected or refused to institute any
such action, suit or proceeding. It is understood and intended, and expressly
covenanted by each Certificateholder with every other Certificateholder and the
Trustee, that no one or more Holders of Certificates of any Class shall have any
right in any manner whatever by virtue of any provision of this Agreement to
affect, disturb or prejudice the rights of the Holders of any other of such
Certificates, or to obtain or seek to obtain priority over or preference to any
other such Holder, or to enforce any right under this Agreement, except in the
manner herein provided and for the equal, ratable and common benefit of all
Holders of Certificates of such Class. For the protection and enforcement of
the provisions of this Section, each and every Certificateholder and the Trustee
shall be entitled to such relief as can be given either at law or in equity.
SECTION 10.3 GOVERNING LAW.
THIS 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.
SECTION 10.4 NOTICES.
All demands, notices and communications hereunder shall be in writing,
shall be deemed to have been given upon receipt (except that notices to Holders
of any Class of Certificates shall be deemed to have been given upon
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being sent by first class mail, postage prepaid, to the Holders at the addresses
of such Holders as shown in the Certificate Register) as follows:
If to the Trustee, to:
LaSalle National Bank
135 South LaSalle Street - 17th Floor
Chicago, IL 60674
Attention: Asset-Backed Securities Trust
Services - LTC Series 1998-1
With a copy to:
Kennedy, Covington, Lobdell & Hickman
100 North Tryon Street
42nd Floor
Charlotte, North Carolina 28202-4006
Attention: William R. Pleasant, Esq.
If to the Depositor, to:
LTC REMIC IV Corporation
300 Esplanade Drive
Suite 1860
Oxnard, California 93030
Attention: Darrell Struck
With a copy to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Attention: Warren T. Buhle, Esq.
If to the Master Servicer, to:
GMAC Commercial Mortgage Corporation
100 South Wacker Drive, Suite 400
Chicago, IL 60606
Attention: LTC Commercial Pass-Through
Certificates, Series 1998-1
With a copy to:
GMAC Commercial Mortgage Corporation
650 Dresher Road
P.O. Box 1015
Horsham, PA 19044-8015
Attention: General Counsel
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If to the Special Servicer, to:
LTC Properties, Inc.
300 Esplanade Drive
Suite 1860
Oxnard, California 93030
Attention: Darrell Struck
If to the Originator, to:
LTC Properties, Inc.
300 Esplanade Drive
Suite 1860
Oxnard, California 93030
Attention: Darrell Struck
If to the Initial Purchaser, to:
Goldman, Sachs & Co.
85 Broad Street, 28th Floor
New York, NY 10004
Attention: Rolf Edwards
If to any Certificateholder, to:
the address set forth in the
Certificate Register,
or, in the case of the parties to this Agreement, to such other address as such
party shall specify by written notice to the other parties hereto. All notices
required to be given from one Person to another Person shall be deemed to have
been given without actually delivering such notice, as long as both parties are
controlled by the same Person.
SECTION 10.5 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 10.6 NOTICE TO THE RATING AGENCY.
(a) The Master Servicer, the Special Servicer and, in the event
that the Trustee is the only recipient thereof or party hereto who has actual
knowledge thereof, the Trustee shall use its best efforts to promptly provide
notice to the Rating Agency with respect to each of the following of which a
Servicing Officer has actual knowledge:
(i) any material change or amendment to this Agreement;
(ii) the occurrence of any Event of Default that has not
been cured;
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(iii) the resignation or termination of the Master Servicer,
the Trustee or the Special Servicer;
(iv) the repurchase of Mortgage Loans pursuant to Section
4.5(b);
(v) the final payment to any Class of Certificateholders;
(vi) any change in the location of the Collection Account;
and
(vii) any event that would result in the voluntary or
involuntary termination of any insurance of the
accounts of the Master Servicer or the Special
Servicer.
In addition, the party providing such notice to the Rating Agency shall furnish
to the Rating Agency copies of each notice or report to Certificateholders.
(b) Each of the Master Servicer and the Special Servicer shall
promptly furnish to the Rating Agency copies of the following:
(i) each of its annual statements as to compliance
described in Section 3.14; and
(ii) each of its annual independent public accountants'
servicing reports described in Section 3.15.
(c) The Depositor hereby requests that the Master Servicer or the
Special Servicer, as the case may be, shall furnish the Rating Agency with such
information with respect to a non-performing or Defaulted Mortgage Loan as the
Rating Agency shall reasonably request and which the Master Servicer or the
Special Servicer, as the case may be, can reasonably obtain.
(d) Notices to the Rating Agency shall be addressed as follows:
Standard & Poor's Ratings Services
26 Broadway
New York, New York 10004-1010
Attention: Structured Finance -- Commercial Real Estate
Surveillance Group
or, in each case, to such other address as the Rating Agency shall specify by
written notice to the parties hereto.
SECTION 10.7 AMENDMENT.
This Agreement or any Custodial Agreement may be amended from time to
time by the Depositor, the Master Servicer, the Special Servicer and the
Trustee, without the consent of any of the Certificateholders, to cure any
ambiguity, to correct or supplement any provisions herein or therein that may be
inconsistent with any other provisions herein or therein, to maintain the rating
or ratings assigned to the Class A, Class R, Class LR, Class B, Class C,
Class D, Class E, Class F and Class G Certificates by the Rating Agency, or to
make any other provisions with respect to matters or questions arising under
this Agreement or such Custodial Agreement which shall not be inconsistent with
the provisions of this Agreement or such Custodial Agreement; PROVIDED, HOWEVER,
that such action shall not, as evidenced by an Officer's Certificate of the
Depositor, which shall be at the expense of the party requesting such amendment
(or, if such amendment is required by the Rating Agency to maintain the rating
issued by it or requested by the Trustee in order to clarify any ambiguity or
resolve any inconsistency, then the related Officer's
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Certificate shall be an expense of the Trust Fund), adversely affect in any
material respect the interests of any Certificateholder.
Further, the Depositor, the Master Servicer, the Special Servicer and
the Trustee, at any time and from time to time, without the consent of the
Certificateholders, may amend this Agreement to modify, eliminate or add to any
of its provisions to such extent as shall be necessary or helpful to maintain
the qualification of each of the Upper-Tier REMIC or Lower-Tier REMIC as a
REMIC, or to prevent the imposition of any tax on either entity under the REMIC
Provisions or of any additional material federal, state or local taxes, at all
times that any Certificates or Uncertificated Lower-Tier Interests are
outstanding; PROVIDED, HOWEVER, that such action, as evidenced by an Officer's
Certificate of the Depositor (obtained at the expense of the Trust Fund), is
necessary or helpful to maintain such qualification or to prevent the imposition
of any such taxes, and would not adversely affect in any material respect the
interest of any Certificateholder.
This Agreement or any Custodial Agreement may also be amended from
time to time by the Depositor, the Master Servicer, the Special Servicer and the
Trustee with the consent of the Holders of the Class A, Class R, Class LR, Class
B, Class C, Class D, Class E, Class F, Class G, 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 Certificates affected by the amendment (except as
otherwise provided in Section 3.20(c)) for the purpose of adding any provisions
to or changing in any manner or eliminating any of the provisions of this
Agreement or of modifying in any manner the rights of the Certificateholders;
PROVIDED, HOWEVER, that no such amendment shall:
(i) reduce in any manner the amount of, or delay the timing
of, payments received on Mortgage Loans or
distributions received on Mortgage Certificates which
are required to be distributed on any Certificate
without the consent of each affected Certificateholder;
or
(ii) reduce the aforesaid percentage of Certificates the
Holders of which are required to consent to any such
amendment or any action hereunder, without the consent
of the Holders of all Certificates then outstanding; or
(iii) alter the servicing standard set forth in Section 3.1
without the consent of the Holders of all Certificates
then outstanding; or
(iv) amend the principal amount of any Certificates, the
interest rate payable on any Certificate or the latest
possible maturity date of the Certificates; or
(v) adversely affect the qualification of either the
Upper-Tier REMIC or the Lower-Tier REMIC as a REMIC.
Any such consent by a Holder shall be conclusive and binding on such
Holder and upon all future Holders whether or not notation is made upon such
Holder's Certificate.
Promptly after the execution of any amendment, the Master Servicer
shall furnish written notification of the substance of such amendment to each
Certificateholder.
It shall not be necessary for the consent of Certificateholders under
this Section 10.7 to approve the particular form of any proposed amendment, but
it shall be sufficient if such consent shall approve the substance thereof. The
manner of obtaining such consents and of evidencing the authorization of the
execution thereof by Certificateholders shall be subject to such reasonable
regulations as the Trustee may prescribe.
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Notwithstanding any contrary provision of this Agreement, no amendment
shall be made to this Agreement unless the Master Servicer and the Trustee shall
have received an Opinion of Counsel, at the expense of the party requesting such
amendment (or, if such amendment is required by the Rating Agency to maintain
the rating issued by it or requested by the Trustee in order to clarify any
ambiguity or resolve any inconsistency, then at the expenses of the Trust Fund),
to the effect that such amendment will not cause the Trust Fund to fail to
qualify as two separate REMICs at any time that any Certificates or
Uncertificated Lower-Tier interests are outstanding or cause a tax to be imposed
on the Upper-Tier REMIC or Lower-Tier REMIC under the REMIC Provisions. The
placement of an "original issue discount" legend on, or any change required to
correct any such legend previously placed on, Certificate shall not be deemed an
amendment to this Agreement.
Prior to the execution of any amendment to this Agreement, the Trustee
and the Master Servicer shall be entitled to receive and rely upon an Opinion of
Counsel, at the expense of the party requesting such amendment (or, if such
amendment is required by the Rating Agency to maintain the rating issued by it
or requested by the Trustee in order to clarify any ambiguity or resolve any
inconsistency, then at the expense of the Trust Fund) stating that the execution
of such amendment is authorized or permitted by this Agreement. The Trustee
may, but shall not be obligated to, enter into any such amendment which affects
the Trustee's own rights, duties or immunities under this Agreement.
SECTION 10.8 LIMITATION OF LIABILITY OF CERTAIN PERSONS.
No recourse under or upon any obligation or covenant contained in this
Agreement, or of any Certificate, or for any claim based thereon or otherwise in
respect thereof, shall be had against an incorporator, shareholder, officer or
director, as such, past, present or future, of the Trustee, the Originator, the
Master Servicer, the Special Servicer or the Depositor or any successor
corporation, either directly or through the Trustee, the Originator, the Master
Servicer, the Special Servicer or the Depositor, whether by virtue of any
constitution, statute or rule of law, or by the enforcement of any assessment or
penalty or otherwise; it being expressly understood that this Agreement and the
obligations issued hereunder are solely corporate obligations, and that no such
personal liability whatever shall attach to, or is or shall be incurred by the
incorporators, shareholders, officers or directors, as such, of the Trustee, the
Originator, the Master Servicer, the Special Servicer or the Depositor, or any
of them, because of the creation of the Certificates hereby authorized, or under
or by reason of the obligations or covenants contained in this Agreement or in
any of the Certificates or implied therefrom; and that any and all such personal
liability, either at common law or in equity or by constitution or statute, of,
and any and all such rights and claims against, every such incorporator,
shareholder, officer or director, as such, because of the creation of the
Certificates hereby authorized, or under or by reason of the obligations or
covenants contained in this Agreement or in any of the Certificates or implied
therefrom, are hereby expressly waived and released as a condition of, and as a
consideration for, the execution of this Agreement and the issuance of the
Certificates.
SECTION 10.9 STREIT ACT.
Any provisions required to be contained in this Agreement by Section
126 of Article 4-A of the New York Real Property Law and any provisions
permitted to be contained in this Agreement by Section 130-k of such Article 4A
that are necessary in order to permit the Trustee to act in the manner
contemplated by this Agreement are hereby incorporated herein, and such
provisions shall be in addition to those conferred or imposed by this Agreement;
PROVIDED, HOWEVER, that to the extent that such Section 126 and/or Section 130-k
shall not have any effect, and if said Section 126 and/or Section 130-k should
at any time be repealed or cease to apply to this Agreement, or be construed by
judicial decision to be inapplicable, said Section 126 and/or Section 130-k
shall cease to have any further effect upon the provisions of this Agreement.
In the case of a conflict between the provisions of this Agreement and any
mandatory provisions of Article 4-A of the New York Real Property Law, such
mandatory provisions of said Article 4-A shall prevail, provided that if said
Article 4-A shall not apply to this Agreement, should at any time be repealed,
or cease to apply to this Agreement, or be construed by judicial decision to be
inapplicable, such mandatory provisions of such Article 4-A shall cease to have
any further effect upon the provisions of this Agreement.
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IN WITNESS WHEREOF, the Depositor, the Master Servicer, the Special
Servicer and the Trustee have caused their names to be signed hereto by their
respective officers thereunto duly authorized all as of the day and year first
above written.
LTC REMIC IV CORPORATION,
as Depositor
By:___________________________
Name:____________________
Title:___________________
GMAC COMMERCIAL MORTGAGE
CORPORATION,
as Master Servicer
By:___________________________
Name:____________________
Title:___________________
LTC PROPERTIES, INC.,
as Special Servicer
By:___________________________
Name:____________________
Title:___________________
LASALLE NATIONAL BANK,
as Trustee, Custodian, Certificate
Registrar, Authenticating Agent and
Paying Agent
By:___________________________
Name:____________________
Title:___________________
<PAGE>
EXHIBIT 10.5
DISTRIBUTION AGREEMENT
BY AND BETWEEN
LTC PROPERTIES, INC.
AND
LTC HEALTHCARE, INC.
DATED AS OF
September 30, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE I. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II. TRANSFER OF ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 2.01. Transfer of Assets to Healthcare . . . . . . . . . . . . . . . . 6
Section 2.02. Consideration for Asset Transfers. . . . . . . . . . . . . . . . 7
Section 2.04. Cooperation Re: Assets. . . . . . . . . . . . . . . . . . . . . 7
Section 2.05. No Representations or Warranties; Consents . . . . . . . . . . . 8
Section 2.06. Conveyancing and Assumption Instruments. . . . . . . . . . . . . 8
ARTICLE III. ASSUMPTION AND SATISFACTION OF LIABILITIES . . . . . . . . . . . . . 9
Section 3.01. Assumption and Satisfaction of Liabilities . . . . . . . . . . . 9
ARTICLE IV. THE DISTRIBUTION. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 4.01. Cooperation Prior to the Distribution. . . . . . . . . . . . . . 10
Section 4.03. The Distribution . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 4.04. Cash in Lieu of Fractional Shares. . . . . . . . . . . . . . . . 11
ARTICLE V. INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 5.01. Indemnification by LTC . . . . . . . . . . . . . . . . . . . . . 11
Section 5.03. Insurance Proceeds . . . . . . . . . . . . . . . . . . . . . . . 12
Section 5.04. Procedure for Indemnification. . . . . . . . . . . . . . . . . . 12
Section 5.05. Remedies Cumulative. . . . . . . . . . . . . . . . . . . . . . . 15
Section 5.06. Survival of Indemnities. . . . . . . . . . . . . . . . . . . . . 15
ARTICLE VI. CERTAIN ADDITIONAL MATTERS. . . . . . . . . . . . . . . . . . . . . . 15
Section 6.01. Healthcare Board . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE VII. ACCESS TO INFORMATION AND SERVICES . . . . . . . . . . . . . . . . . 16
Section 7.01. Provision of Corporate Records . . . . . . . . . . . . . . . . . 16
Section 7.02. Access to Information. . . . . . . . . . . . . . . . . . . . . . 16
Section 7.03. Production of Witnesses. . . . . . . . . . . . . . . . . . . . . 17
Section 7.04. Reimbursement. . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 7.06. Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 7.07. Privileged Matters . . . . . . . . . . . . . . . . . . . . . . . 18
<PAGE>
ARTICLE VIII. INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 8.01. Policies and Rights Included Within the Healthcare Assets. . . . 19
Section 8.02. Post-Distribution Date Claims. . . . . . . . . . . . . . . . . . 20
Section 8.03. Administration and Reserves. . . . . . . . . . . . . . . . . . . 20
Section 8.04. Agreement for Waiver of Conflict and Shared Defense. . . . . . . 21
ARTICLE IX. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 9.01. Complete Agreement; Construction . . . . . . . . . . . . . . . . 21
Section 9.02. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 9.03. Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 9.04. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 9.06. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . 22
Section 9.07. Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 9.08. Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 9.09. No Third-Party Beneficiaries . . . . . . . . . . . . . . . . . . 23
Section 9.10. Titles and Headings. . . . . . . . . . . . . . . . . . . . . . . 23
Section 9.11. Exhibits and Schedules . . . . . . . . . . . . . . . . . . . . . 23
Section 9.12. Legal Enforceability . . . . . . . . . . . . . . . . . . . . . . 23
Section 9.13. Arbitration of Disputes. . . . . . . . . . . . . . . . . . . . . 24
Section 9.14. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 9.15. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 9.16. Relationship of Parties. . . . . . . . . . . . . . . . . . . . . 25
Section 9.17. Further Action . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 9.18. Predecessors and Successors. . . . . . . . . . . . . . . . . . . 25
</TABLE>
EXHIBITS
Exhibit A: Administrative Services Agreement
Exhibit B: Healthcare Bylaws
Exhibit C: Healthcare Articles
Exhibit D: Healthcare Employees
Exhibit E: Tax Sharing Agreement
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DISTRIBUTION AGREEMENT
This DISTRIBUTION AGREEMENT (this "Agreement") is made as of this
30th day of September, 1998 by and between LTC Properties, Inc., a Maryland
corporation ("LTC"), and LTC Healthcare, Inc., a Nevada corporation
("Healthcare").
RECITALS
WHEREAS, the Board of Directors of LTC has determined that it is in
the best interests of its stockholders to transfer to Healthcare certain
equity investments, real properties and related assets and liabilities
currently held by LTC (the "Asset Transfers"), and thereafter to distribute
all of the outstanding shares of Healthcare Common Stock that are held by LTC
(approximately 99% of all outstanding shares of Healthcare Common Stock) to
the holders of LTC common stock, the holders of LTC 8.5% Series C cumulative
convertible preferred stock, par value $.01 per share and the holders of LTC
convertible subordinated debentures (the "Distribution");
WHEREAS, in connection with the Distribution, LTC and Healthcare have
determined that it is necessary and desirable to set forth the principal
corporate transactions required to effect the Asset Transfers and the
Distribution, and to set forth the agreements that will govern certain matters
following the Distribution.
NOW, THEREFORE, in consideration of the mutual agreements, provisions
and covenants contained in this Agreement, the parties hereby agree as follows:
ARTICLE I.
DEFINITIONS
As used in this Agreement, the following terms shall have the
following meanings:
ACTION: Any action, claim, suit, arbitration, inquiry, proceeding or
investigation by or before any court, any governmental or other regulatory or
administrative agency or commission or any arbitration tribunal.
ADMINISTRATIVE SERVICES AGREEMENT: The Administrative Services
Agreement between LTC and Healthcare, which agreement shall be entered into on
or prior to the Distribution Date in substantially the form of Exhibit A
attached hereto.
AFFILIATE: With respect to any specified Person, any other Person
directly or indirectly controlling or controlled by, or under direct or indirect
common control with, such specified Person. For purposes of this definition,
"control," when used with respect to any Person, means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" shall have meanings correlative to the foregoing.
Notwithstanding the foregoing, (i) the Affiliates of LTC shall not include
Healthcare or any other Person which would be an Affiliate of LTC by reason of
LTC's ownership of the capital stock of
<PAGE>
Healthcare prior to the Distribution or the fact that any officer or director of
Healthcare shall also serve as an officer or director of LTC, and (ii) the
Affiliates of Healthcare shall not include LTC or any other Person which would
be an Affiliate of Healthcare by reason of LTC's ownership of the capital stock
of Healthcare prior to the Distribution or the fact that any officer or director
of Healthcare shall also serve as an officer or director of LTC.
AGENT: The distribution agent appointed by LTC to distribute the
Healthcare Common Stock pursuant to the Distribution.
ASSET TRANSFERS: shall have the meaning set forth in the recitals
hereof.
COMMISSION: The Securities and Exchange Commission.
CONSENTS: shall have the meaning set forth in Section 4.01(c) hereof.
CONVEYANCING AND ASSUMPTION INSTRUMENTS: Collectively, the various
agreements, instruments and other documents to be entered into to effect the
Asset Transfers and the assumption of Liabilities in the manner contemplated by
this Agreement and the Related Agreements.
DISTRIBUTION: shall have the meaning set forth in the recitals
hereof.
DISTRIBUTION DATE: The date determined by the LTC Board as the date
on which the Distribution shall be effected, which Distribution Date is
contemplated by the LTC Board to occur on or about September 30, 1998.
DISTRIBUTION RECORD DATE: The date established by the LTC Board as
the date for taking a record of the Holders of LTC Common Stock entitled to
participate in the Distribution, which Distribution Record Date has been
established as September 15, 1998, subject to the fulfillment on or before
September 30, 1998 of certain conditions to the Distribution as provided in
Section 4.02.
EXCHANGE ACT: The Securities Exchange Act of 1934, as amended.
FINANCING OBLIGATIONS: All (i) indebtedness for borrowed money,
(ii) obligations evidenced by bonds, notes, debentures or similar instruments,
(iii) obligations under capitalized leases and deferred purchase arrangements,
(iv) reimbursement or other obligations relating to letters of credit or similar
arrangements, and (v) obligations to guarantee, directly or indirectly, any of
the foregoing types of obligations on behalf of others.
HEALTHCARE: shall have the meaning set forth in the recitals hereof.
HEALTHCARE ARTICLES: The Amended and Restated Articles of
Incorporation of Healthcare, substantially in the form of Exhibit C, to be in
effect at the Distribution Date.
HEALTHCARE ASSETS: shall have the meaning set forth in Section
2.01(b) hereof.
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<PAGE>
HEALTHCARE BOARD: The Board of Directors of Healthcare.
HEALTHCARE BOOKS AND RECORDS: The books and records (including
computerized records) of Healthcare and all books and records owned by LTC which
relate to the Healthcare Business or are necessary to operate the Healthcare
Business, including, without limitation, all such books and records relating to
Healthcare Employees, all files relating to any Action being assumed by
Healthcare as part of the Healthcare Liabilities, original corporate minute
books, stock ledgers and certificates and corporate seals, and all licenses,
leases, agreements and filings, relating to Healthcare or the Healthcare
Business (but not including the LTC Books and Records, provided that Healthcare
shall have access to, and have the right to obtain duplicate copies of, the LTC
Books and Records in accordance with the provisions of Article VII).
HEALTHCARE BUSINESS: The business conducted by Healthcare pursuant to
or utilizing the Healthcare Assets, including without limitation, the
acquisition, development and operation of real estate and health care assets.
HEALTHCARE BYLAWS: The Amended and Restated Bylaws of Healthcare,
substantially in the form of Exhibit B, to be in effect at the Distribution
Date.
HEALTHCARE COMMON STOCK: The common stock, par value $.01 per share,
of Healthcare.
HEALTHCARE EMPLOYEES: All of the Healthcare employees at the time of
the Distribution, as identified on Exhibit D.
HEALTHCARE INDEMNITEES: shall have the meaning set forth in Section
5.01 hereof.
HEALTHCARE INDEMNIFIABLE LOSSES: shall have the meaning set forth in
Section 5.01 hereof.
HEALTHCARE LIABILITIES: (i) All of the Liabilities of Healthcare
under, or to be retained or assumed by Healthcare pursuant to, this Agreement or
any of the Related Agreements, including those set forth on Schedule 1.01(c),
(ii) all Liabilities for payment of outstanding drafts of LTC attributable to
the Healthcare Business existing as of the Distribution Date, and (iii) all
Liabilities arising out of or in connection with any of the Healthcare Assets or
the Healthcare Business.
HEALTHCARE POLICIES: All Policies, current or past, which are owned
or maintained by or on behalf of LTC or any of its Affiliates or predecessors,
which relate to the Healthcare Business but do not relate to the LTC Retained
Business, and which Policies are either maintained by Healthcare or assignable
to Healthcare.
HOLDERS: The holders of record of LTC Common Stock as of the
Distribution Record Date.
INDEMNIFIABLE LOSSES: shall have the meaning set forth in Section
5.02 hereof.
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INDEMNIFYING PARTY: shall have the meaning set forth in Section 5.03
hereof.
INDEMNITEE: shall have the meaning set forth in Section 5.03 hereof.
INFORMATION: shall have the meaning set forth in Section 7.02 hereof.
INSURANCE PROCEEDS: Those moneys (i) received by an insured from an
insurance carrier or (ii) paid by an insurance carrier on behalf of the insured,
in either case net of any applicable premium adjustment, retrospectively-rated
premium, deductible, retention, cost or reserve paid or held by or for the
benefit of such insured.
INSURED CLAIMS: Those Liabilities that, individually or in the
aggregate, are covered within the terms and conditions of any of the Policies,
whether or not subject to deductibles, co-insurance, uncollectability or
retrospectively-rated premium adjustments, but only to the extent that such
Liabilities are within applicable Policy limits, including aggregates.
LIABILITIES: Any and all debts, liabilities and obligations, absolute
or contingent, matured or unmatured, liquidated or unliquidated, accrued or
unaccrued, known or unknown, whenever arising, including all costs and expenses
relating thereto, and including, without limitation, those debts, liabilities
and obligations arising under any law, rule, regulation, Action, threatened
Action, order or consent decree of any governmental entity or any award of any
arbitrator of any kind, and those arising under any contract, commitment or
undertaking.
LTC: shall have the meaning set forth in the recitals hereof.
LTC BOARD: The Board of Directors of LTC.
LTC BOOKS AND RECORDS: The books and records (including computerized
records) of LTC and all books and records owned by Healthcare which relate to
the LTC Retained Business or are necessary to operate the LTC Retained Business,
or are required by law to be retained by LTC, including without limitation, all
files relating to any Action pertaining to the LTC Retained Liabilities,
original corporate minute books, stock ledgers and certificates and corporate
seals, and all licenses, leases, agreements and filings, relating to LTC or the
LTC Retained Business (but not including the Healthcare Books and Records,
provided that LTC shall have access to, and shall have the right to obtain
duplicate copies of, the Healthcare Books and Records in accordance with the
provisions of Article VII).
LTC COMMON STOCK: The common stock, par value $.01 per share, of LTC.
LTC INDEMNITEES: shall have the meaning set forth in Section 5.02
hereof.
LTC INDEMNIFIABLE LOSSES: shall have the meaning set forth in Section
5.02 hereof.
LTC REAL ESTATE ASSETS: The real estate assets listed on Schedule
1.01(b).
4
<PAGE>
LTC RETAINED ASSETS: The assets of LTC other than the Healthcare
Assets transferred to Healthcare by LTC, including without limitation (i) assets
relating to the LTC Retained Business, (iii) all of the assets expressly
allocated to LTC under this Agreement or the Related Agreements, and (iv) any
other assets of LTC and its Affiliates relating to the LTC Retained Business.
LTC RETAINED BUSINESS: The businesses conducted by LTC pursuant to or
utilizing the LTC Retained Assets, including without limitation, the investment
in long-term care and other health-care related facilities through mortgage
loans, facility lease transactions and other investments.
LTC RETAINED LIABILITIES: (i) All of the Liabilities arising out of
or in connection with the LTC Retained Assets or the LTC Retained Business,
(ii) all Liabilities arising out of or in connection with any lawsuits relating
to the Distribution (other than those Liabilities relating to employee claims
which shall be allocated pursuant to the Administrative Services Agreement),
(iii) all of the Liabilities of LTC under, or to be retained or assumed by LTC
pursuant to, this Agreement or any of the Related Agreements, (iv) any Financing
Obligations not constituting Healthcare Liabilities, (v) all Liabilities for the
payment of outstanding drafts of LTC attributable to the LTC Retained Business
existing as of the Distribution Date, (vi) all Liabilities arising out of LTC's
prior ownership of the LTC Real Estate Assets and the LTC Shares, and (vii) all
other Liabilities of LTC not constituting Healthcare Liabilities.
LTC RETAINED POLICIES: All Policies, current or past, which are owned
or maintained by or on behalf of LTC (or any of its predecessors) which relate
to the LTC Retained Business but do not relate to the Healthcare Business.
LTC SHARES: The shares of stock listed on Schedule 1.01(a).
PENDING ACTION: shall have the meaning set forth in Section 5.04(h)
hereof.
PERSON: Any individual, corporation, partnership, association, trust,
estate or other entity or organization, including any governmental entity or
authority.
POLICIES: Insurance policies and insurance contracts of any kind
relating to the Healthcare Business or the LTC Retained Business as conducted
prior to the Distribution Date, including without limitation primary and excess
policies, comprehensive general liability policies, automobile and workers'
compensation insurance policies, and self-insurance and captive insurance
company arrangements, together with the rights, benefits and privileges
thereunder.
PRIVILEGES: All privileges that may be asserted under applicable law,
including, without limitation, privileges arising under or relating to the
attorney-client relationship (including but not limited to the attorney-client
and work product privileges), the accountant-client privilege, and privileges
relating to internal evaluative processes.
5
<PAGE>
PRIVILEGED INFORMATION: All Information as to which LTC, Healthcare
or any of their Subsidiaries are entitled to assert the protection of a
Privilege.
RELATED AGREEMENTS: All of the agreements, instruments,
understandings, assignments or other arrangements which are entered into in
connection with the transactions contemplated hereby and which are set forth in
a writing, including, without limitation (i) the Conveyancing and Assumption
Instruments, (ii) the Administrative Services Agreement and (iii) the Tax
Sharing Agreement.
SHARED POLICIES: All Policies, current or past, which are owned or
maintained by or on behalf of LTC or its predecessors which relate to both the
LTC Retained Business and the Healthcare Business, and all other Policies not
constituting Healthcare Policies or LTC Retained Policies.
SUBSIDIARY: With respect to any Person, (a) any corporation of which
at least a majority in interest of the outstanding voting stock (having by the
terms thereof voting power under ordinary circumstances to elect a majority of
the directors of such corporation, irrespective of whether or not at the time
stock of any other class or classes of such corporation shall have or might have
voting power by reason of the happening of any contingency) is at the time,
directly or indirectly, owned or controlled by such Person, by one or more
Subsidiaries of such Person, or by such Person and one or more of its
Subsidiaries, or (b) any non-corporate entity in which such Person, one or more
Subsidiaries of such Person, or such Person and one or more Subsidiaries of such
Person, directly or indirectly, at the date of determination thereof, has at
least majority ownership interest.
TAX SHARING AGREEMENT: The Tax Sharing Agreement between Healthcare
and LTC, which agreement shall be entered into on or prior to the Distribution
Date in substantially the form of Exhibit E attached hereto.
THIRD-PARTY CLAIM: shall have the meaning set forth in Section
5.04(a) hereof.
ARTICLE II.
TRANSFER OF ASSETS
Section 2.01. TRANSFER OF ASSETS TO HEALTHCARE (a) Prior to the
Distribution Date, LTC shall take or cause to be taken all actions necessary to
cause the transfer, assignment, delivery and conveyance to Healthcare of all of
LTC's right, title and interest in the following assets:
(i) the LTC Real Estate Assets;
(ii) the LTC Shares;
(iii) the Healthcare Books and Records;
6
<PAGE>
(iii) all of the other assets to be assigned to Healthcare by
LTC under this Agreement or the Related Agreements; and
(iv) all other assets relating to the Healthcare Business held
by LTC.
(b) The "Healthcare Assets" shall consist of the assets transferred
to Healthcare by LTC pursuant to this Section 2.01.
Section 2.02. CONSIDERATION FOR ASSET TRANSFERS
As consideration for the foregoing asset transfers on or prior to the
Distribution Date, LTC shall receive from Healthcare a sufficient number of
shares of Healthcare Common Stock to effect the Distribution to the Holders of
LTC Common Stock.
Section 2.03. TRANSFERS NOT EFFECTED PRIOR TO THE DISTRIBUTION
To the extent that any transfers contemplated by this Article II shall
not have been fully effected on the Distribution Date, the parties shall
cooperate to effect such transfers as promptly as shall be practicable following
the Distribution Date. Nothing herein shall be deemed to require the transfer
of any assets or the assumption of any Liabilities which by their terms or
operation of law cannot be transferred or assumed; PROVIDED, HOWEVER, that LTC
and Healthcare and their respective Subsidiaries and Affiliates shall cooperate
in seeking to obtain any necessary consents or approvals for the transfer of all
assets and Liabilities contemplated to be transferred pursuant to this Article
II. In the event that any such transfer of assets or Liabilities has not been
consummated effective as of the Distribution Date, the party retaining such
asset or Liability shall thereafter hold such asset in trust for the use and
benefit of the party entitled thereto (at the expense of the party entitled
thereto) and retain such Liability for the account of the party by whom such
Liability is to be assumed pursuant hereto, and take such other actions as may
be reasonably required in order to place the parties, insofar as reasonably
possible, in the same position as would have existed had such asset been
transferred or such Liability been assumed as contemplated hereby. As and when
any such asset or Liability becomes transferable, such transfer and assumption
shall be effected forthwith. The parties agree that, except as set forth in
this Section 2.03, as of the Distribution Date, each party hereto shall be
deemed to have acquired complete and sole beneficial ownership over all of the
assets, together with all rights, powers and privileges incidental thereto, and
shall be deemed to have assumed in accordance with the terms of this Agreement
all of the Liabilities, and all duties, obligations and responsibilities
incidental thereto, which such party is entitled to acquire or required to
assume pursuant to the terms of this Agreement.
Section 2.04. COOPERATION RE: ASSETS
In the case that at any time after the Distribution Date, Healthcare
reasonably determines that any of the LTC Retained Assets are essential for the
conduct of the Healthcare Business, or LTC reasonably determines that any of the
Healthcare Assets are essential for the conduct of the LTC Retained Business,
and the nature of such assets makes it impracticable for Healthcare or LTC, as
the case may be, to obtain substitute assets or to make alternative
7
<PAGE>
arrangements on commercially reasonable terms to conduct their respective
businesses, and reasonable provisions for the use thereof are not already
included in the Related Agreements, then Healthcare (with respect to the
Healthcare Assets) and LTC (with respect to the LTC Retained Assets) shall
cooperate to make such assets available to the appropriate party on commercially
reasonable terms, as may be reasonably required for such party to maintain
normal business operations (provided that such assets shall be required to be
made available only until such time as the other party may reasonably obtain
substitute assets or make alternative arrangements on commercially reasonable
terms to permit it to maintain normal business operations).
Section 2.05. NO REPRESENTATIONS OR WARRANTIES; CONSENTS
Each of the parties hereto understands and agrees that no party hereto
is, in this Agreement or in any other agreement or document contemplated by this
Agreement or otherwise, representing or warranting in any way (i) as to the
value or freedom from encumbrance of, or any other matter concerning, any assets
of such party or (ii) as to the legal sufficiency to convey title to any asset
transferred pursuant to this Agreement or any Related Agreement, including,
without limitation, any Conveyancing and Assumption Instruments. It is also
agreed and understood that there are no warranties, express or implied, as to
the merchantability or fitness of any of the assets either transferred to or
retained by the parties, as the case may be, and all such assets shall be "as
is, where is" and "with all faults" (provided, however, that the absence of
warranties shall have no effect upon the allocation of liabilities under this
Agreement). Similarly, each party hereto understands and agrees that no party
hereto is, in this Agreement or in any other agreement or document contemplated
by this Agreement or otherwise, representing or warranting in any way that the
obtaining of any consents or approvals, the execution and delivery of any
amendatory agreements and the making of any filings or applications contemplated
by this Agreement will satisfy the provisions of any or all applicable laws or
judgments or other instruments or agreements relating to such assets.
Notwithstanding the foregoing, the parties shall use their good faith efforts to
obtain all consents and approvals, to enter into all reasonable amendatory
agreements and to make all filings and applications which may be reasonably
required for the consummation of the transactions contemplated by this
Agreement, and shall take all such further reasonable actions as shall be
reasonably necessary to preserve for each of LTC and Healthcare, to the greatest
extent feasible, the economic and operational benefits of the allocation of
assets and liabilities provided for in this Agreement. In case at any time
after the Distribution Date any further action is necessary or desirable to
carry out the purposes of this Agreement, the proper officers and directors of
each party to this Agreement shall take all such necessary or desirable action.
Section 2.06. CONVEYANCING AND ASSUMPTION INSTRUMENTS
In connection with the Asset Transfers and the assumptions of
Liabilities contemplated by this Agreement, the parties shall execute or cause
to be executed by the appropriate entities the Conveyancing and Assumption
Instruments in such forms as the parties shall reasonably agree, including the
transfer of real property with deeds as may be appropriate, and the assignment
of trademarks and other intellectual property rights. The transfer of capital
8
<PAGE>
stock shall be effected by means of delivery of stock certificates and executed
stock powers and notation on the stock record books of the corporation or other
legal entities involved and, to the extent required by applicable law, by
notation on public registries.
Section 2.07. CASH MANAGEMENT
(a) CASH MANAGEMENT AFTER THE DISTRIBUTION DATE. Healthcare shall
establish and maintain a separate cash management system and accounting records
with respect to the Healthcare Business effective as of 12:01 a.m. on the day
following the Distribution Date; thereafter, (i) any payments by LTC on behalf
of Healthcare in connection with the Healthcare Business (including, without
limitation, any such payments in respect of Liabilities or other obligations of
Healthcare under the Administrative Services Agreement) shall be recorded in the
accounts of Healthcare as a payable to LTC; (ii) any payments by Healthcare on
behalf of LTC in connection with the LTC Retained Business (including, without
limitation, any such payments in respect of Liabilities or other obligations of
LTC under the Administrative Services Agreement), shall be recorded in the
accounts of LTC, as a payable to Healthcare; (iii) any cash payments received by
LTC relating to the Healthcare Business or the Healthcare Assets shall be
recorded in the accounts of LTC, as a payable to Healthcare; (iv) any cash
payments received by Healthcare relating to the LTC Retained Business or the LTC
Retained Assets shall be recorded in the accounts of Healthcare as a payable to
LTC; (v) LTC and Healthcare shall make adjustments for late deposits, checks
returned for not sufficient funds and other post-Distribution Date transactions
as shall be reasonable under the circumstances consistent with the purpose and
intent of this Agreement; and (vi) the net balance due to LTC or Healthcare, as
the case may be, in respect of the aggregate amounts of clauses (i), (ii),
(iii), (iv) and (v) shall be paid by LTC or Healthcare, as appropriate, as
promptly as practicable. For purposes of this Section 2.07(a), the parties
contemplate that the LTC Retained Business and the Healthcare Business,
including but not limited to the administration of accounts payable and accounts
receivable, will be conducted in the normal course.
(b) All transactions contemplated in this Section 2.07 shall be
subject to audit by the parties, and any dispute thereunder shall be resolved by
Ernst & Young LLP (or, if Ernst & Young LLP is not available, by such other
independent firm of certified public accountants mutually acceptable to LTC and
Healthcare), whose decision shall be final and unappealable.
ARTICLE III.
ASSUMPTION AND SATISFACTION OF LIABILITIES
Section 3.01. ASSUMPTION AND SATISFACTION OF LIABILITIES
Except as set forth in the Administrative Services Agreement, the Tax
Sharing Agreement or the other Related Agreements, effective as of and after the
Distribution Date, (a) Healthcare shall assume, pay, perform and discharge in
due course all of the Healthcare Liabilities, and (b) LTC shall pay, perform and
discharge in due course all of the LTC Retained Liabilities.
9
<PAGE>
ARTICLE IV.
THE DISTRIBUTION
Section 4.01. COOPERATION PRIOR TO THE DISTRIBUTION
(a) LTC and Healthcare shall cooperate in preparing, filing with the
Commission and causing to become effective any registration statements or
amendments thereof which are appropriate to reflect the establishment of, or
amendments to, any employee benefit plans and other plans contemplated by the
Administrative Services Agreement.
(b) LTC and Healthcare shall take all such action as may be necessary
or appropriate under the securities or blue sky laws of states or other
political subdivisions of the United States in connection with the transactions
contemplated by this Agreement and the Related Agreements.
(c) LTC and Healthcare shall use all reasonable efforts to obtain any
third-party consents or approvals necessary or desirable in connection with the
transactions contemplated hereby ("Consents").
(d) LTC and Healthcare will use all reasonable efforts to take, or
cause to be taken, all actions, and to do, or cause to be done, all things
necessary or desirable under applicable law, to consummate the transactions
contemplated under this Agreement and the Related Agreements.
Section 4.02. LTC BOARD ACTION; CONDITIONS PRECEDENT TO THE
DISTRIBUTION
The LTC Board shall, in its discretion, establish any appropriate
procedures in connection with the Distribution. In no event shall the
Distribution occur unless the following conditions shall have been satisfied:
(a) the transactions contemplated by Sections 2.01 and 2.02 shall
have been consummated in all material respects;
(b) the Healthcare Board, comprised as contemplated by Section 6.01,
shall have been elected, and the Healthcare Articles and Healthcare Bylaws shall
have been adopted and shall be in effect;
(c) LTC and Healthcare shall have obtained all Consents, the failure
of which to obtain would not, in the sole judgment of the LTC Board, have a
material adverse effect on LTC or Healthcare;
(d) the Registration Statement on Form 10 under the Exchange Act
filed by Healthcare shall have been declared effective by the Commission;
(e) the Healthcare Common Stock shall have been approved for
quotation and trading on the Pacific Exchange subject to official notice of
issuance; and
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(f) LTC and Healthcare shall have entered into the Related Agreements
to which they are a party;
PROVIDED, HOWEVER, that (i) any such condition may be waived by the LTC Board in
its sole discretion, and (ii) the satisfaction of such conditions shall not
create any obligation on the part of LTC or any other party hereto to effect the
Distribution or in any way limit LTC's power of termination set forth in Section
9.07 or alter the consequences of any such termination from those specified in
such Section.
Section 4.03. THE DISTRIBUTION
On the Distribution Date, subject to the conditions and rights of
termination set forth in this Agreement, LTC shall deliver to the Agent a share
certificate representing all of the then outstanding shares of Healthcare Common
Stock owned by LTC and shall instruct the Agent to distribute, on or as soon as
practicable following the Distribution Date, such Healthcare Common Stock to the
Holders. Healthcare agrees to provide all share certificates that the Agent
shall require in order to effect the Distribution.
Section 4.04. CASH IN LIEU OF FRACTIONAL SHARES
No certificate or scrip representing fractional shares of Healthcare
Common Stock shall be issued as part of the Distribution and in lieu thereof,
each holder of LTC Common Stock who would otherwise be entitled to receive a
fractional share of Healthcare Common Stock will receive cash for such
fractional share. LTC shall instruct the Agent to determine the number of whole
shares and fractional shares of Healthcare Common Stock allocable to each holder
of record of LTC Common Stock as of the Distribution Record Date. LTC shall
instruct the Agent to aggregate all such fractional shares into whole shares and
sell the whole shares obtained thereby in the open market as soon as practicable
following the Distribution Date at then prevailing prices on behalf of Holders
who otherwise would be entitled to receive fractional share interests and to
distribute to each such Holder such Holder's ratable share of the proceeds of
such sale as soon as practicable after the Distribution Date. LTC shall bear
the costs of commissions incurred in connection with such sales.
ARTICLE V.
INDEMNIFICATION
Section 5.01. INDEMNIFICATION BY LTC
Except as otherwise expressly set forth in a Related Agreement, LTC
shall indemnify, defend and hold harmless Healthcare and its directors,
officers, employees, agents and Affiliates and each of the heirs, executors,
successors and assigns of any of the foregoing (the "Healthcare Indemnitees")
from and against the LTC Retained Liabilities and any and all losses,
Liabilities, damages, including, without limitation, the costs and expenses of
any and all Actions, threatened Actions, demands, assessments, judgments,
settlements and compromises relating to the LTC Retained Liabilities and
attorneys' fees and any and all expenses whatsoever
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reasonably incurred in investigating, preparing or defending against any such
Actions or threatened Actions (collectively, "Healthcare Indemnifiable Losses"
and, individually, a "Healthcare Indemnifiable Loss") of the Healthcare
Indemnitees arising out of or due to the failure or alleged failure of LTC or
any of its Affiliates (i) prior to or after the Distribution Date to pay,
perform or otherwise discharge in due course any of the LTC Retained
Liabilities, or (ii) comply with the provisions of Section 6.04.
Section 5.02. INDEMNIFICATION BY HEALTHCARE
Except as otherwise expressly set forth in a Related Agreement,
Healthcare shall indemnify, defend and hold harmless LTC and each of its
respective directors, officers, employees, agents and Affiliates and each of the
heirs, executors, successors and assigns of any of the foregoing (the "LTC
Indemnitees") from and against the Healthcare Liabilities and any and all
losses, Liabilities, damages, including, without limitation, the costs and
expenses of any and all Actions, threatened Actions, demands, assessments,
judgments, settlements and compromises relating to the Healthcare Liabilities
and attorneys' fees and any and all expenses whatsoever reasonably incurred in
investigating, preparing or defending against any such Actions or threatened
Actions (collectively, "LTC Indemnifiable Losses" and, individually, an "LTC
Indemnifiable Loss") of the LTC Indemnitees arising out of or due to the failure
or alleged failure of Healthcare or any of its Affiliates (i) prior to or after
the Distribution Date to pay, perform or otherwise discharge in due course any
of the Healthcare Liabilities or (ii) comply with the provisions of
Section 6.04. The "Healthcare Indemnifiable Losses," and the "LTC Indemnifiable
Losses" are collectively referred to as the "Indemnifiable Losses."
Section 5.03. INSURANCE PROCEEDS
The amount which any party (an "Indemnifying Party") is or may be
required to pay to any other Person (an "Indemnitee") pursuant to Section 5.01
or Section 5.02 shall be reduced (including, without limitation, retroactively)
by any Insurance Proceeds or other amounts actually recovered by or on behalf of
such Indemnitee in reduction of the related Indemnifiable Loss. If an
Indemnitee shall have received the payment required by this Agreement from an
Indemnifying Party in respect of an Indemnifiable Loss and shall subsequently
actually receive Insurance Proceeds, or other amounts in respect of such
Indemnifiable Loss as specified above, then such Indemnitee shall pay to such
Indemnifying Party a sum equal to the amount of such Insurance Proceeds or other
amounts actually received.
Section 5.04. PROCEDURE FOR INDEMNIFICATION
(a) Except as may be set forth in a Related Agreement, if an
Indemnitee shall receive notice or otherwise learn of the assertion by a Person
(including, without limitation, any governmental entity) who is not a party to
this Agreement or to any of the Related Agreements of any claim or of the
commencement by any such Person of any Action (a "Third-Party Claim") with
respect to which an Indemnifying Party may be obligated to provide
indemnification pursuant to this Agreement, such Indemnitee shall give such
Indemnifying Party written notice thereof promptly after becoming aware of such
Third-Party Claim; provided that the failure of any Indemnitee to give notice as
required by this Section 5.04 shall not relieve the Indemnifying
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Party of its obligations under this Article V, except to the extent that such
Indemnifying Party is prejudiced by such failure to give notice. Such notice
shall describe the Third-Party Claim in reasonable detail, and shall indicate
the amount (estimated if necessary) of the Indemnifiable Loss that has been or
may be sustained by such Indemnitee.
(b) An Indemnifying Party may elect to defend or to seek to settle or
compromise, at such Indemnifying Party's own expense and by such Indemnifying
Party's own counsel, any Third-Party Claim, provided that the Indemnifying Party
must confirm in writing that it agrees that the Indemnitee is entitled to
indemnification hereunder in respect of such Third-Party Claim. Within 30 days
of the receipt of notice from an Indemnitee in accordance with Section 5.04(a)
(or sooner, if the nature of such Third-Party Claim so requires), the
Indemnifying Party shall notify the Indemnitee of its election whether to assume
responsibility for such Third-Party Claim (provided that if the Indemnifying
Party does not so notify the Indemnitee of its election within 30 days after
receipt of such notice from the Indemnitee, the Indemnifying Party shall be
deemed to have elected not to assume responsibility for such Third-Party Claim),
and such Indemnitee shall cooperate in the defense or settlement or compromise
of such Third-Party Claim. After notice from an Indemnifying Party to an
Indemnitee of its election to assume responsibility for a Third-Party Claim,
such Indemnifying Party shall not be liable to such Indemnitee under this
Article V for any legal or other expenses (except expenses approved in advance
by the Indemnifying Party) subsequently incurred by such Indemnitee in
connection with the defense thereof; provided that if the defendants in any such
claim include both the Indemnifying Party and one or more Indemnitees and in
such Indemnitees' reasonable judgment a conflict of interest between such
Indemnitees and such Indemnifying Party exists in respect of such claim, such
Indemnitees shall have the right to employ separate counsel and in that event
the reasonable fees and expenses of such separate counsel (but not more than one
separate counsel reasonably satisfactory to the Indemnifying Party) shall be
paid by such Indemnifying Party. If an Indemnifying Party elects not to assume
responsibility for a Third-Party Claim (which election may be made only in the
event of a good faith dispute that a claim was inappropriately tendered under
Section 5.01 or 5.02, as the case may be) such Indemnitee may defend or (subject
to the following sentence) seek to compromise or settle such Third-Party Claim.
Notwithstanding the foregoing, an Indemnitee may not settle or compromise any
claim without prior written notice to the Indemnifying Party, which shall have
the option within ten days following the receipt of such notice (i) to
disapprove the settlement and assume all past and future responsibility for the
claim, including reimbursing the Indemnitee for prior expenditures in connection
with the claim, or (ii) to disapprove the settlement and continue to refrain
from participation in the defense of the claim, in which event the Indemnifying
Party shall have no further right to contest the amount or reasonableness of the
settlement if the Indemnitee elects to proceed therewith, or (iii) to approve
the amount of the settlement, reserving the Indemnifying Party's right to
contest the Indemnitee's right to indemnity, or (iv) to approve and agree to pay
the settlement. In the event the Indemnifying Party makes no response to such
written notice from the Indemnitee, the Indemnifying Party shall be deemed to
have elected option (ii).
(c) If an Indemnifying Party chooses to defend or to seek to
compromise any Third-Party Claim, the Indemnitee shall make available to such
Indemnifying Party any
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personnel and any books, records or other documents within its control or which
it otherwise has the ability to make available that are necessary or appropriate
for such defense.
(d) Notwithstanding anything else in this Section 5.04 to the
contrary, an Indemnifying Party shall not settle or compromise any Third-Party
Claim unless such settlement or compromise contemplates as an unconditional term
thereof the giving by such claimant or plaintiff to the Indemnitee of a written
release from all liability in respect of such Third-Party Claim (and provided
further that such settlement may not provide for any non-monetary relief by
Indemnitee without the written consent of Indemnitee). In the event the
Indemnitee shall notify the Indemnifying Party in writing that such Indemnitee
declines to accept any such settlement or compromise, such Indemnitee may
continue to contest such Third-Party Claim, free of any participation by such
Indemnifying Party, at such Indemnitee's sole expense. In such event, the
obligation of such Indemnifying Party to such Indemnitee with respect to such
Third-Party Claim shall be equal to (i) the costs and expenses of such
Indemnitee prior to the date such Indemnifying Party notifies such Indemnitee of
the offer to settle or compromise (to the extent such costs and expenses are
otherwise indemnifiable hereunder) plus (ii) the lesser of (A) the amount of any
offer of settlement or compromise which such Indemnitee declined to accept and
(B) the actual out-of-pocket amount such Indemnitee is obligated to pay
subsequent to such date as a result of such Indemnitee's continuing to pursue
such Third-Party Claim.
(e) Any claim on account of an Indemnifiable Loss which does not
result from a Third-Party Claim shall be asserted by written notice given by the
Indemnitee to the applicable Indemnifying Party. Such Indemnifying Party shall
have a period of 15 days after the receipt of such notice within which to
respond thereto. If such Indemnifying Party does not respond within such 15-day
period, such Indemnifying Party shall be deemed to have refused to accept
responsibility to make payment. If such Indemnifying Party does not respond
within such 15-day period or rejects such claim in whole or in part, such
Indemnitee shall be free to pursue such remedies as may be available to such
party under applicable law or under this Agreement.
(f) In addition to any adjustments required pursuant to Section 5.03,
if the amount of any Indemnifiable Loss shall, at any time subsequent to the
payment required by this Agreement, be reduced by recovery, settlement or
otherwise, the amount of such reduction, less any expenses incurred in
connection therewith, shall promptly be repaid by the Indemnitee to the
Indemnifying Party.
(g) In the event of payment by an Indemnifying Party to any
Indemnitee in connection with any Third-Party Claim, such Indemnifying Party
shall be subrogated to and shall stand in the place of such Indemnitee as to any
events or circumstances in respect of which such Indemnitee may have any right
or claim relating to such Third-Party Claim against any claimant or plaintiff
asserting such Third-Party Claim. Such Indemnitee shall cooperate with such
Indemnifying Party in a reasonable manner, and at the cost and expense of such
Indemnifying Party, in prosecuting any subrogated right or claim.
(h) Notwithstanding anything else in this Section 5.04 to the
contrary, with respect to any Action pending at the time of the Distribution (a
"Pending Action") with respect to
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which an Indemnifying Party may be obligated to provide indemnification pursuant
to this Agreement, LTC or Healthcare shall, at the request of any other party,
cause the employee(s) who were handling the defense, compromise or settlement of
such Pending Action prior to the Distribution to continue to handle such
defense, compromise or settlement following the Distribution (subject to the
last two sentences of subsection (b) above). If such employees are employed by
the Indemnitee, the Indemnitee shall keep the Indemnifying Party reasonably
informed of the progress of, and the Indemnifying Party shall cooperate in, such
defense, compromise or settlement.
Section 5.05. REMEDIES CUMULATIVE
The remedies provided in this Article V shall be cumulative and shall
not preclude assertion by any Indemnitee of any other rights or the seeking of
any and all other remedies against any Indemnifying Party.
Section 5.06. SURVIVAL OF INDEMNITIES
The obligations of each of LTC and Healthcare under this Article V
shall survive the sale or other transfer by it of any assets or businesses or
the assignment by it of any Liabilities with respect to any Indemnifiable Loss
of the others related to such assets, businesses or Liabilities.
ARTICLE VI.
CERTAIN ADDITIONAL MATTERS
Section 6.01. HEALTHCARE BOARD
LTC and Healthcare shall take all actions which may be required to
constitute, effective as of the Distribution Date, the Healthcare Board with the
persons listed on Schedule 1.01(f).
Section 6.02. ARTICLES AND BYLAWS
On or prior to the Distribution Date, Healthcare shall adopt the
Healthcare Articles and the Healthcare Bylaws, and shall file the Healthcare
Articles with the Secretary of State of the State of Nevada.
Section 6.03. CERTAIN POST-DISTRIBUTION TRANSACTIONS
(a) HEALTHCARE. Healthcare shall comply with each representation and
statement made, or to be made, to any taxing authority in connection with any
ruling obtained, or to be obtained, by LTC and Healthcare acting together, from
any such taxing authority with respect to any transaction contemplated by this
Agreement.
(b) LTC. LTC shall comply with each representation and statement
made, or to be made, to any taxing authority in connection with any ruling
obtained, or to be obtained, by
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LTC and Healthcare acting together, from any such taxing authority with respect
to any transaction contemplated by this Agreement.
Section 6.04. NOTICES BY LTC
LTC shall provide notice of the Distribution to all holders of its
securities, or options, rights or warrants convertible into its securities, as
may be required by LTC's Articles of Incorporation or Bylaws or any agreement to
which LTC is a party.
ARTICLE VII.
ACCESS TO INFORMATION AND SERVICES
Section 7.01. PROVISION OF CORPORATE RECORDS
(a) Except as may otherwise be provided in a Related Agreement, LTC
shall arrange as soon as practicable following the Distribution Date, to the
extent not previously delivered in connection with the transactions contemplated
in Article II, for the transportation (at Healthcare's cost) to Healthcare of
the Healthcare Books and Records in its possession, except to the extent such
items are already in the possession of Healthcare. The Healthcare Books and
Records shall be the property of Healthcare, but shall be available to LTC for
review and duplication until LTC shall notify Healthcare in writing that such
records are no longer of use to LTC.
(b) Except as otherwise provided in a Related Agreement, Healthcare
shall arrange as soon as practicable following the Distribution Date, to the
extent not previously delivered in connection with the transactions contemplated
in Article II, for the transportation (at LTC's cost) to LTC of the LTC Books
and Records in its possession, except to the extent such items are already in
the possession of LTC. The LTC Books and Records shall be the property of LTC,
but shall be available to Healthcare for review and duplication until Healthcare
shall notify LTC in writing that such records are no longer of use to
Healthcare.
Section 7.02. ACCESS TO INFORMATION
Except as otherwise provided in a Related Agreement, from and after
the Distribution Date, LTC shall afford to Healthcare and its authorized
accountants, counsel and other designated representatives reasonable access
(including using reasonable efforts to give access to persons or firms
possessing information) and duplicating rights during normal business hours to
all records, books, contracts, instruments, computer data and other data and
information relating to pre-Distribution operations (collectively,
"Information") within LTC's possession insofar as such access is reasonably
required by Healthcare for the conduct of its business, subject to appropriate
restrictions for classified or Privileged Information. Similarly, except as
otherwise provided in a Related Agreement, Healthcare shall afford to LTC and
their authorized accountants, counsel and other designated representatives
reasonable access (including using reasonable efforts to give access to persons
or firms possessing information) and duplicating rights during normal business
hours to Information within Healthcare's possession, insofar as
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such access is reasonably required by LTC for the conduct of its business,
subject to appropriate restrictions for classified or Privileged Information.
Information may be requested under this Article VII for the legitimate business
purposes of either party, including, without limitation, audit, accounting,
claims (including claims for indemnification hereunder), litigation and tax
purposes, as well as for purposes of fulfilling disclosure and reporting
obligations and for performing this Agreement and the transactions contemplated
hereby.
Section 7.03. PRODUCTION OF WITNESSES
At all times from and after the Distribution Date, each of LTC and
Healthcare shall use reasonable efforts to make available to the others, upon
written request, its and its Subsidiaries' officers, directors, employees and
agents as witnesses to the extent that such persons may reasonably be required
in connection with any Action.
Section 7.04. REIMBURSEMENT
Except to the extent otherwise contemplated in any Related Agreement,
a party providing Information or witness services to another party under this
Article VII shall be entitled to receive from the recipient, upon the
presentation of invoices therefor, payments of such amounts, relating to
supplies, disbursements and other out-of-pocket expenses (at cost) and direct
and indirect expenses of employees who are witnesses or otherwise furnish
assistance (at cost), as may be reasonably incurred in providing such
Information or witness services.
Section 7.05. RETENTION OF RECORDS
Except as otherwise required by law or agreed to in a Related
Agreement or otherwise in writing, each of LTC and Healthcare may destroy or
otherwise dispose of any of the Information, which is material Information and
is not contained in other Information retained by LTC or Healthcare, as the case
may be, at any time after the tenth anniversary of this Agreement, provided
that, prior to such destruction or disposal, (a) it shall provide no less than
90 or more than 120 days prior written notice to the other, specifying in
reasonable detail the Information proposed to be destroyed or disposed of and
(b) if a recipient of such notice shall request in writing prior to the
scheduled date for such destruction or disposal that any of the Information
proposed to be destroyed or disposed of be delivered to such requesting party,
the party proposing the destruction or disposal shall promptly arrange for the
delivery of such of the Information as was requested at the expense of the party
requesting such Information.
Section 7.06. CONFIDENTIALITY
Each of LTC, Healthcare and their respective Subsidiaries shall hold,
and shall cause its consultants and advisors to hold, in strict confidence, all
Information concerning the other parties hereto in its possession or furnished
by the other parties or the other parties' representatives pursuant to this
Agreement (except to the extent that such Information has been (i) in the public
domain through no fault of such party or (ii) later lawfully acquired from other
sources by such party), and subject to Section 7.07, each party shall not
release or disclose such Information to any other person, except its auditors,
attorneys, financial advisors, rating agencies,
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bankers and other consultants and advisors, unless compelled to disclose by
judicial or administrative process or, as reasonably advised by its counsel or
by other requirements of law, or unless such Information is reasonably required
to be disclosed in connection with (x) any litigation with any third-parties or
litigation between LTC and Healthcare or any of them, (y) any contractual
agreement to which LTC or Healthcare or any of them are currently parties, or
(z) in exercise of any party's rights hereunder.
Section 7.07. PRIVILEGED MATTERS
LTC and Healthcare recognize that legal and other professional
services that have been and will be provided prior to the Distribution Date have
been and will be rendered for the benefit of each of LTC and Healthcare and that
each of LTC and Healthcare should be deemed to be the client for the purposes of
asserting all Privileges. To allocate the interests of each party in the
Privileged Information, the parties agree as follows:
(a) LTC shall be entitled, in perpetuity, to control the assertion or
waiver of all Privileges in connection with Privileged Information which relates
solely to the LTC Retained Business, whether or not the Privileged Information
is in the possession of or under the control of LTC or Healthcare. LTC shall
also be entitled, in perpetuity, to control the assertion or waiver of all
Privileges in connection with Privileged Information that relates solely to the
subject matter of any claims constituting LTC Retained Liabilities, now pending
or which may be asserted in the future, in any lawsuits or other proceedings
initiated against or by LTC, whether or not the Privileged Information is in the
possession of or under the control of LTC or Healthcare.
(b) Healthcare shall be entitled, in perpetuity, to control the
assertion or waiver of all Privileges in connection with Privileged Information
which relates solely to the Healthcare Business, whether or not the Privileged
Information is in the possession of or under the control of LTC or Healthcare.
Healthcare shall also be entitled, in perpetuity, to control the assertion or
waiver of all Privileges in connection with Privileged Information which relates
solely to the subject matter of any claims constituting Healthcare Liabilities,
now pending or which may be asserted in the future, in any lawsuits or other
proceedings initiated against or by Healthcare, whether or not the Privileged
Information is in the possession of Healthcare or under the control of LTC or
Healthcare.
(c) LTC and Healthcare agree that they shall have a shared Privilege,
with equal right to assert or waive, subject to the restrictions in this Section
7.07, with respect to all Privileges not allocated pursuant to the terms of
Sections 7.07(a) and (b). All Privileges relating to any claims, proceedings,
litigation, disputes or other matters which involve each of LTC and Healthcare
in respect of which LTC and Healthcare retain any responsibility or liability
under this Agreement shall be subject to a shared Privilege.
(d) No party may waive any Privilege which could be asserted under
any applicable law, and in which any other party has a shared Privilege, without
the consent of the other party, except to the extent reasonably required in
connection with any litigation with third-parties or as provided in subsection
(e) below. Consent shall be in writing, or shall be deemed to
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be granted unless written objection is made within 20 days after notice upon the
other party requesting such consent.
(e) In the event of any litigation or dispute between LTC and
Healthcare, or any of them, any party may waive a Privilege in which any other
party has a shared Privilege, without obtaining the consent of the other party,
provided that such waiver of a shared Privilege shall be effective only as to
the use of Information with respect to the litigation or dispute between such
parties, and shall not operate as a waiver of the shared Privilege with respect
to third-parties.
(f) If a dispute arises between the parties regarding whether a
Privilege should be waived to protect or advance the interest of any party, each
party agrees that it shall negotiate in good faith, shall endeavor to minimize
any prejudice to the rights of the other parties, and shall not unreasonably
withhold consent to any request for waiver by the other parties. Each party
specifically agrees that it will not withhold consent to waiver for any purpose
except to protect its own legitimate interests.
(g) Upon receipt by any party of any subpoena, discovery or other
request which arguably calls for the production or disclosure of Information
subject to a shared Privilege or as to which any other party has the sole right
hereunder to assert a Privilege, or if any party obtains knowledge that any of
its current or former directors, officers, agents or employees have received any
subpoena, discovery or other requests which arguably calls for the production or
disclosure of such Privileged Information, such party shall promptly notify the
other party of the existence of the request and shall provide the other party a
reasonable opportunity to review the Information and to assert any rights it may
have under this Section 7.07 or otherwise to prevent the production or
disclosure of such Privileged Information.
(h) The transfer of the Healthcare Books and Records and the LTC
Books and Records and other Information between LTC, Healthcare and their
respective Subsidiaries is made in reliance on the agreement of LTC and
Healthcare, as set forth in Sections 7.06 and 7.07, to maintain the
confidentiality of Privileged Information and to assert and maintain all
applicable Privileges. The access to information being granted pursuant to
Sections 7.01 and 7.02, the agreement to provide witnesses and individuals
pursuant to Section 7.03 and the transfer of Privileged Information between LTC,
Healthcare and their respective Subsidiaries pursuant to this Agreement shall
not be deemed a waiver of any Privilege that has been or may be asserted under
this Agreement or otherwise.
ARTICLE VIII.
INSURANCE
Section 8.01. POLICIES AND RIGHTS INCLUDED WITHIN THE HEALTHCARE
ASSETS
Without limiting the generality of the definition of the Healthcare
Assets set forth in Section 2.01 or the effect of Section 2.01, the Healthcare
Assets shall include (a) any and all rights of an insured party under each of
the Shared Policies, specifically including rights of
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indemnity and the right to be defended by or at the expense of the insurer, with
respect to all injuries, losses, liabilities, damages and expenses incurred or
claimed to have been incurred on or prior to the Distribution Date by any party
in or in connection with the conduct of the Healthcare Business or, to the
extent any claim is made against Healthcare or any of its Subsidiaries, the LTC
Retained Business, and which injuries, losses, liabilities, damages and expenses
may arise out of insured or insurable occurrences or events under one or more of
the Shared Policies; PROVIDED, HOWEVER, that nothing in this Section 8.01 shall
be deemed to constitute (or to reflect) the assignment of the Shared Policies,
or any of them, to Healthcare, and (b) the Healthcare Policies.
Section 8.02. POST-DISTRIBUTION DATE CLAIMS
If, subsequent to the Distribution Date, any person, corporation, firm
or entity shall assert a claim against Healthcare with respect to any injury,
loss, liability, damage or expense incurred or claimed to have been incurred on
or prior to the Distribution Date in or in connection with the Distribution or
the conduct of the Healthcare Business or, to the extent any claim is made
against Healthcare or any of its Subsidiaries, the LTC Retained Business, and
which injury, loss, liability, damage or expense may arise out of insured or
insurable occurrences or events under one or more of the Shared Policies, LTC
shall at the time such claim is asserted be deemed to assign, without need of
further documentation, to Healthcare any and all rights of an insured party
under the applicable Shared Policy with respect to such asserted claim,
specifically including rights of indemnity and the right to be defended by or at
the expense of the insurer; provided, however, that nothing in this Section 8.02
shall be deemed to constitute (or to reflect) the assignment of the Shared
Policies, or any of them, to Healthcare.
Section 8.03. ADMINISTRATION AND RESERVES
(a) Notwithstanding the provisions of Article III, but subject to any
contrary provisions of any Related Agreement, from and after the Distribution
Date:
(i) Healthcare shall be entitled to any reserves established
by LTC or any of its Subsidiaries, or the benefit of reserves held by any
insurance carrier, with respect to the Healthcare Liabilities; and
(ii) LTC shall be entitled to any reserves established by LTC
or any of its Subsidiaries, or the benefit of reserves held by any
insurance carrier, with respect to the LTC Retained Liabilities.
(b) INSURANCE PREMIUMS. Healthcare shall have the right but not the
obligation to pay the premiums, to the extent that LTC does not pay premiums
with respect to the LTC Retained Liabilities (retrospectively-rated or
otherwise), with respect to Shared Policies and the Healthcare Policies, as
required under the terms and conditions of the respective Policies, whereupon
LTC shall forthwith reimburse Healthcare for that portion of such premiums paid
by Healthcare as are attributable to the LTC Retained Liabilities. LTC shall
provide continued coverage under its director and officer liability insurance
policy, if any, for a period of not less than three years for acts which took
place or were alleged to have taken place prior to the
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Distribution Date covering persons who were directors and officers of LTC prior
to the Distribution Date. Fifty percent of the additional premiums, if any, for
such coverage shall be reimbursed by Healthcare within 15 days of the
Distribution Date.
(c) ALLOCATION OF INSURANCE PROCEEDS. Insurance Proceeds received
with respect to claims, costs and expenses under the Policies shall be paid to
Healthcare with respect to the Healthcare Liabilities and to LTC with respect to
the LTC Retained Liabilities. Payment of the allocable portions of indemnity
costs of Insurance Proceeds resulting from the liability policies will be made
to the appropriate party upon receipt from the insurance carrier. In the event
that the aggregate limits on any Shared Policies are exceeded, the parties agree
to provide an equitable allocation of Insurance Proceeds received after the
Distribution Date based upon their respective bona fide claims. The parties
agree to use their best efforts to cooperate with respect to insurance matters.
Section 8.04. AGREEMENT FOR WAIVER OF CONFLICT AND SHARED DEFENSE
In the event that Insured Claims of LTC and Healthcare exist relating
to the same occurrence, such parties agree to jointly defend and to waive any
conflict of interest necessary to the conduct of that joint defense. Nothing in
this Section 8.04 shall be construed to limit or otherwise alter in any way the
indemnity obligations of the parties to this Agreement, including those created
by this Agreement, by operation of law or otherwise.
ARTICLE IX.
MISCELLANEOUS
Section 9.01. COMPLETE AGREEMENT; CONSTRUCTION
This Agreement, including the Schedules and Exhibits and the Related
Agreements and other agreements and documents referred to herein constitutes the
entire agreement and supersedes all prior agreements, understandings,
negotiations and discussions, whether written or oral, between the parties
hereto with respect to the subject matter hereof, so that no such external or
separate agreement relating to the subject matter of this Agreement shall have
any effect or be binding, unless the same is referred to specifically in this
Agreement or is executed by the parties after the date hereof. Notwithstanding
any other provisions in this Agreement to the contrary, in the event and to the
extent that there shall be a conflict between the provisions of this Agreement
and the provisions of the Related Agreements, the Related Agreements shall
control.
Section 9.02. EXPENSES
Except as otherwise set forth in this Agreement or any Related
Agreement, all costs and expenses in connection with the preparation, execution,
delivery and implementation of this Agreement, the Distribution and with the
consummation of the transactions contemplated by this Agreement shall be charged
to the party for whose benefit the expenses are incurred, with any expenses
which cannot be allocated on such basis to be split equally between the parties.
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<PAGE>
Section 9.03. GOVERNING LAW
This Agreement and the rights and obligations of the parties hereunder
shall be governed by the laws of the State of California, without regard to the
principles of choice of law thereof, except with respect to matters of law
concerning the internal corporate affairs of any corporate entity which is a
party to or subject of this Agreement, and as to those matters the law of the
jurisdiction under which the respective entity derives its powers shall govern.
Section 9.04. NOTICES
Notices shall be sent to the parties at the following addresses:
LTC Properties, Inc.
300 Esplanade Drive, Suite 1860
Oxnard, California 93030
Attn: James J. Pieczynski
Facsimile: (805) 981-8663
LTC Healthcare, Inc.
300 Esplanade Drive, Suite 1860
Oxnard, California 93030
Attn: James J. Pieczynski
Facsimile: (805) 981-8663
Notices may be hand-delivered or sent by certified mail, return
receipt requested, Federal Express or comparable overnight delivery service, or
facsimile. Notice shall be deemed received at the time delivered by hand, on
the fourth business day following deposit in the U.S. mail, and on the first
business day following deposit with Federal Express or other delivery service,
or transmission by facsimile. Any party to this Agreement may change its
address for notice by giving written notice to the other party at the address
and in accordance with the procedures provided above.
Section 9.05. AMENDMENTS; WAIVERS
No termination, cancellation, modification, amendment, deletion,
addition or other change in this Agreement, or any provision hereof, or waiver
of any right or remedy herein provided, shall be effective for any purpose
unless such change or waiver is specifically set forth in a writing signed by
the party or parties to be bound thereby. The waiver of any right or remedy
with respect to any occurrence on one occasion shall not be deemed a waiver of
such right or remedy with respect to such occurrence on any other occasion.
Section 9.06. SUCCESSORS AND ASSIGNS
This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective successors and assigns. This Agreement
shall not be assigned without the express written consent of each of the parties
hereto.
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<PAGE>
Section 9.07. TERMINATION
This Agreement may be terminated and the Distribution abandoned at any
time prior to the Distribution Date by and in the sole discretion of the LTC
Board without the approval of Healthcare or of the stockholders of LTC. In the
event of such termination, no party shall have any liability to any other party
pursuant to this Agreement.
Section 9.08. SUBSIDIARIES
Each of the parties hereto shall cause to be performed, and hereby
guarantees the performance of, all actions, agreements and obligations set forth
herein to be performed by any Subsidiary of such party which is contemplated to
be a Subsidiary of such party on and after the Distribution Date.
Section 9.09. NO THIRD-PARTY BENEFICIARIES
Except for the provisions of Article V relating to Indemnities, this
Agreement is solely for the benefit of the parties hereto and their respective
Subsidiaries and Affiliates and should not be deemed to confer upon
third-parties any remedy, claim, Liability, reimbursement, claim of action or
other right in excess of those existing without reference to this Agreement.
Section 9.10. TITLES AND HEADINGS
Titles and headings to sections herein are inserted for the
convenience of reference only and are not intended to be a part of or to affect
the meaning or interpretation of this Agreement.
Section 9.11. EXHIBITS AND SCHEDULES
The Exhibits and Schedules shall be construed with and as an integral
part of this Agreement to the same extent as if the same had been set forth
verbatim herein.
Section 9.12. LEGAL ENFORCEABILITY
Any provision of this Agreement which is prohibited or unenforceable
in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions hereof. Any such prohibition or unenforceability in any jurisdiction
shall not invalidate or render unenforceable such provision in any other
jurisdiction. Without prejudice to any rights or remedies otherwise available
to any party hereto, each party hereto acknowledges that damages would be an
inadequate remedy for any breach of the provisions of this Agreement and agrees
that the obligations of the parties hereunder shall be specifically enforceable.
Section 9.13. ARBITRATION OF DISPUTES
(a) Any controversy or claim arising out of this Agreement, or any
breach of this Agreement, including any controversy relating to a determination
of whether specific assets
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<PAGE>
constitute Healthcare Assets or LTC Retained Assets or whether specific
Liabilities constitute Healthcare Liabilities or LTC Retained Liabilities, shall
be settled by arbitration in accordance with the Rules of the American
Arbitration Association then in effect, as modified by this Section 9.13 or by
the further agreement of the parties.
(b) Such arbitration shall be conducted in Los Angeles, California.
(c) Any judgment upon the award rendered by the arbitrators may be
entered in any court having jurisdiction thereof. The arbitrators shall have
the authority to award to the prevailing party its attorneys' fees and costs
incurred in such arbitration. The arbitrators shall not, under any
circumstances, have any authority to award punitive, exemplary or similar
damages, and may not, in any event, make any ruling, finding or award that does
not conform to the terms and conditions of this Agreement.
(d) Nothing contained in this Section 9.13 shall limit or restrict in
any way the right or power of a party at any time to seek injunctive relief in
any court and to litigate the issues relevant to such request for injunctive
relief before such court (i) to restrain any other party from breaching this
Agreement or (ii) for specific enforcement of this Section 9.13. The parties
agree that any legal remedy available to a party with respect to a breach of
this Section 9.13 will not be adequate and that, in addition to all other legal
remedies, each party is entitled to an order specifically enforcing this Section
9.13.
(e) The parties hereby consent to the jurisdiction of the federal
courts located in Los Angeles, California for all purposes under this Agreement.
(f) Neither the parties nor the arbitrators may disclose the
existence or results of any arbitration under this Agreement or any evidence
presented during the course of the arbitration without the prior written consent
of the parties, except as required to fulfill applicable disclosure and
reporting obligations, or as otherwise required by law.
(g) Except as provided in Section 9.13(c), each party shall bear its
own costs incurred in the arbitration. If any party refuses to submit to
arbitration any dispute required to be submitted to arbitration pursuant to this
Section 9.13, and instead commences any other proceeding, including, without
limitation, litigation, then the party who seeks enforcement of the obligation
to arbitrate shall be entitled to its attorneys' fees and costs incurred in any
such proceeding.
Section 9.14. SEVERABILITY
In the event that one or more of the terms or provisions of this
Agreement or the application thereof to any person(s) or in any circumstance(s)
shall, for any reason and to any extent be found by a court of competent
jurisdiction to be invalid, illegal or unenforceable, such court shall have the
power, and hereby is directed, to substitute for or limit such invalid term(s),
provision(s) or application(s) and to enforce such substituted or limited terms
or provisions, or the application thereof. Subject to the foregoing, the
invalidity, illegality or enforceability of any one or more of the terms or
provisions of this Agreement, as the same may be amended from
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<PAGE>
time to time, shall not affect the validity, legality or enforceability of any
other term or provision hereof.
Section 9.15. COUNTERPARTS
This Agreement may be executed in two or more counterparts, each of
which together shall be deemed to be an original and all of which together shall
be deemed to constitute one and the same agreement.
Section 9.16. RELATIONSHIP OF PARTIES
Nothing in this Agreement shall be deemed or construed by the parties
or any third party as creating the relationship of principal and agent,
partnership or joint venture between the parties, it being understood and agreed
that no provision contained herein, and no act of the parties, shall be deemed
to create any relationship between the parties other than the relationship set
forth herein.
Section 9.17. FURTHER ACTION
Healthcare and LTC each shall cooperate in good faith and take such
steps and execute such papers as may be reasonably requested by the other party
to implement the terms and provisions of this Agreement.
Section 9.18. PREDECESSORS AND SUCCESSORS
To the extent necessary to give effect to the purposes of this
Agreement, any reference to any corporation shall also include any predecessor
or successor thereto, by operation of law or otherwise.
{SIGNATURE PAGE FOLLOWS}
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the day and year first above written.
LTC PROPERTIES, INC.
BY: /s/ ANDRE C. DIMITRIADIS
---------------------------------------
Name: Andre C. Dimitriadis
Title: Chairman and Chief Executive Officer
LTC HEALTHCARE, INC.
By: /s/ JAMES J. PIECZYNSKI
---------------------------------------
Name: James J. Pieczynski
Title: President and Chief Financial Officer
S-1
<PAGE>
SCHEDULES
Schedule 1.01(a): LTC Shares
Schedule 1.01(b): LTC Real Estate Assets
Schedule 1.01(c): Healthcare Liabilities
Schedule 1.01(d): Healthcare Board
<PAGE>
SCHEDULE 1.01(a)
LTC SHARES
30,847 shares of common stock of Assisted Living Concepts, Inc.
69,000 shares of common stock of Regent Assisted Living, Inc.
<PAGE>
SCHEDULE 1.01(b)
LTC REAL ESTATE ASSETS
Coronado Care Center
Park Villa Convalescent Center
Casa Maria Nursing Home
Casa Arena Blanca
Sunrise Golden Age Care & Rehabilitation
Sunrise High Plains Care & Rehabilitation
Boulevard Manor
Karrington on the Scioto
Karrington of Bexley
Karrington at Tucker Creek
Karrington Place
Karrington of Rocky River
Karrington of Presque Isle
<PAGE>
SCHEDULE 1.01(c)
HEALTHCARE LIABILITIES
$20 million 10% unsecured revolving note payable to LTC Properties, Inc. due
March 31, 2008
<PAGE>
SCHEDULE 1.01(d)
HEALTHCARE BOARD
Andre C. Dimitriadis
James J. Pieczynski
Steven Stuart
Bary G. Bailey
<PAGE>
EXHIBITS
Exhibit A: Administrative Services Agreement
Exhibit B: Healthcare Bylaws
Exhibit C: Healthcare Articles
Exhibit D: Healthcare Employees
Exhibit E: Tax Sharing Agreement
<PAGE>
EXHIBIT A
FORM OF ADMINISTRATIVE SERVICES AGREEMENT
This ADMINISTRATIVE SERVICES AGREEMENT (this "Agreement") is made and
entered into as of __________, 1998, by and between LTC PROPERTIES, INC., a
Maryland corporation ("LTC"), and LTC HEALTHCARE, INC., a Nevada corporation
("Healthcare," and collectively with LTC, the "Parties"), effective as of the
Distribution Date (as hereinafter defined).
R E C I T A L S
WHEREAS, subject to certain conditions, LTC intends to spin-off
certain businesses and assets by distributing to LTC common stockholders,
Series C preferred stockholders and debentureholders 1/10 of a share of
common stock, $.01 par value per share, of Healthcare for each share of
common stock, $.01 par value per share ("LTC Common Stock"), of LTC held and
for each share of LTC Common Stock into which shares of Series C preferred
stock and debentures may be converted as of the close of business on the
Record Date (the "Distribution");
WHEREAS, in connection with the Distribution, LTC and Healthcare have
entered into a Distribution Agreement of even date herewith (the "Distribution
Agreement");
WHEREAS, after the Distribution, Healthcare will need office space for
its principal corporate office and certain management and administrative
services to be provided by LTC to Healthcare for a period of time from and
after the Distribution Date; and
WHEREAS, in connection with the Distribution, Healthcare has requested
LTC to provide, and LTC has agreed to provide, office space and certain
management and administrative services to Healthcare from and after the
Distribution Date pursuant to the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, and other valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, LTC and Healthcare agree as follows:
1. DEFINITIONS. As used in this Agreement, the following terms shall have
the meanings indicated below:
"Affiliate" -- with respect to any specified Person, any other Person
directly or indirectly controlling or controlled by, or under direct or indirect
common control with, such specified Person. For purposes of this definition,
"control," when used with respect to any Person, means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" shall have meanings correlative to the foregoing.
Notwithstanding the foregoing, (i) the Affiliates of LTC shall not include
Healthcare or any other Person which would be an Affiliate of LTC by reason of
LTC's ownership of the capital stock of Healthcare prior to the Distribution or
the fact that any officer or director of Healthcare shall also serve as an
officer or director of LTC, and (ii) the Affiliates of Healthcare shall not
include LTC or any other Person which would be an Affiliate of Healthcare by
reason of LTC's ownership of the capital stock of
<PAGE>
Healthcare prior to the Distribution or the fact that any officer or director of
Healthcare shall also serve as an officer or director of LTC.
"Agreement" -- shall have the meaning set forth in the introductory
paragraph hereof.
"Change in Control" shall mean a change in ownership or control of a
party effected through either of the following transactions:
(i) any person or related group of persons (other than
such party or a Affiliate of such party) directly or indirectly acquires
beneficial ownership (within the meaning of Rule 13d-3 under the
Securities Exchange Act of 1934, as amended) of securities possessing
more than fifty percent (50%) of the total combined voting power of such
party's outstanding securities; or
(ii) there is a change in the composition of such party's
board of directors over a period of thirty-six (36) consecutive months
(or less) such that a majority of the board members (rounded up to the
nearest whole number) ceases, by reason of one or more proxy contests for
the election of board members, to be comprised of individuals who either
(A) have been board members continuously since the beginning of such
period or (B) have been elected or nominated for election as board
members during such period by at least a majority of the board members
described in clause (A) who were still in office at the time such
election or nomination was approved by the board; or
(iii) there is a change in the composition of such party's
senior executive management such that both Andre C. Dimitriadis and James
J. Pieczynski cease to be employed by such party.
"Distribution" -- shall have the meaning set forth in the first recital
of this Agreement.
"Distribution Agreement" -- the agreement described in the second
recital of this Agreement.
"Distribution Date" -- the date on which the Distribution occurs, as
defined in the Distribution Agreement.
"Employee Benefit Plan" -- any plan, policy, arrangement, contract or
agreement providing compensation benefits for any group of LTC Employees or
former LTC Employees or individual LTC Employee or former LTC Employee, or the
dependents or beneficiaries of any such LTC Employee or former LTC Employee,
whether formal or informal or written or unwritten, and including, without
limitation, any means, whether or not legally required, pursuant to which any
benefit is provided by LTC to any LTC Employee or former LTC Employee or the
beneficiaries of any such LTC Employee or former LTC Employee, adopted or
entered into by LTC prior to, upon or after the Distribution. The term
"Employee Benefit Plan" as used in this Agreement does not include any contract,
agreement or understanding entered into by LTC relating to settlement of actual
or potential LTC Employee related litigation claims.
2
<PAGE>
"First Month" -- In the event that the Distribution Date does not fall
on the first day of a month, the month that includes the Distribution Date.
"Full Month" -- A full calendar month during the Term.
"Healthcare" -- shall have the meaning set forth in the introductory
paragraph hereof.
"Healthcare Business" -- any business or operation of Healthcare which
is, pursuant to the Distribution Agreement, to be conducted by Healthcare after
the Distribution.
"Healthcare Employee" -- any individual who (i) is independently hired by
Healthcare after the Distribution Date as an employee of Healthcare, and (ii) is
not an employee or director of LTC.
"Last Month" -- In the event that the Termination Date does not fall on
the last day of a month, the month that includes the Termination Date.
"LTC" -- shall have the meaning set forth in the introductory paragraph
hereof.
"LTC Employee" -- any individual who is an employee or director of LTC
and is not a Healthcare Employee.
"Month" -- a Full Month, First Month or Last Month, as the case may be.
"Monthly Fee" -- The amount payable by Healthcare to LTC under Section
4.1 herein with respect to a particular Full Month or any First Month or Last
Month.
"Parties" -- shall have the meaning set forth in the introductory
paragraph hereof.
"Person" -- any individual, corporation, partnership, association, trust,
estate or other entity or organization, including any governmental entity or
authority.
"Principal Office" -- shall have the meaning set forth in Section 4.2
hereof.
"Record Date" -- _________, 1998.
"Services" -- shall have the meaning set forth in Section 2 hereof.
"Term" -- shall have the meaning set forth in Section 3 hereof.
"Termination Date" -- shall have the meaning set forth in Section 3
hereof.
2. ENGAGEMENT OF LTC. During the term of this Agreement, LTC shall
provide to Healthcare office space and certain management and administrative
services ("Services"), as more fully described and defined below, as may be
necessary or desirable, or as Healthcare may reasonably request or require,
in connection with the business, operations and affairs of Healthcare.
"Services" means and includes, without limitation, the furnishing of advice,
assistance, guidance, equipment office space and the services of LTC
Employees in connection with, among other things, (i) the Healthcare
3
<PAGE>
Business and (ii) the use of LTC's management information and accounting
system, the administration of insurance and worker's compensation programs,
legal and employee benefit services and the preparation of payrolls.
3. TERM; TERMINATION. This Agreement shall commence as of the date
hereof for a term of ten years and continue thereafter unless and until
terminated upon the earlier of (a) not less than thirty (30) days' prior
written notice by either Party to the other at any time for any reason or
(b) a Change in Control of LTC (the "Termination Date", with the term of this
Agreement as set forth in this Section 3 being referred to as the "Term").
4. PAYMENTS TO LTC.
4.1. GENERALLY.
(a) FULL MONTH. With respect to each Full Month, in
consideration of the Services provided by LTC hereunder, Healthcare shall pay
to LTC fees equal to 25% of (1) the aggregate amount of all wages, salaries
and bonuses paid to LTC Employees and (2) the aggregate amount of rent paid
by LTC for rental of its principal corporate office located at 300 Esplanade
Drive, Suite 1860, Oxnard, CA 93030 (the "Principal Office") during the Full
Month.
(b) FIRST MONTH AND LAST MONTH. With respect to any First
Month or Last Month, in consideration of the Services provided by LTC
hereunder, Healthcare shall pay to LTC fees equal to the product of:
(i) 25% of (1) the aggregate amount of all wages,
salaries and bonuses paid to LTC Employees and (2) the aggregate amount of
rent paid by LTC for rental of the Principal Office during the First Month or
Last Month, as the case may be; and
(ii) the number of days in the First Month or the Last
Month, as the case may be, which are included in the Term, divided by the
total number of days in the First Month or the Last Month, as the case may be.
4.2. STATEMENT FROM LTC. Promptly and in any event not later than
ten (10) days following the end of each Month, LTC shall provide to
Healthcare a statement setting forth (i) a list of the LTC Employees, (ii)
the aggregate amount of all wages, salaries and bonuses paid to LTC Employees
during the Month and (iii) the aggregate amount of rent paid by LTC for
rental of the Principal Office during the Month.
4.3. PAYMENT BY HEALTHCARE. Promptly and in any event not later
than five (5) days after delivery by LTC of each statement referred to in
Section 4.2, Healthcare shall pay to LTC the Monthly Fee applicable to the
Month to which such statement relates.
5. EMPLOYEE BENEFIT PLANS. From and after the Distribution Date, LTC
shall permit the LTC Employees to continue to participate in the Employee
Benefit Plans on the same basis as such persons participated immediately
prior to the Distribution Date, provided, however, nothing contained in this
Agreement shall prohibit LTC from modifying or terminating any one or more of
the Employee Benefit Plans so long as such modification or termination shall
apply to all participants in such Employee Benefit Plans. LTC shall provide
Healthcare with thirty (30)
4
<PAGE>
days' prior written notice of its intent to terminate any Employee Benefit Plan
or effect the modification thereof in a manner adverse to Healthcare; provided
that no such notice shall be required for any Employee Benefit Plan which
terminates by its terms without any action by LTC.
6. EMPLOYEES. Nothing in this Agreement shall prohibit Healthcare from
independently hiring one or more Healthcare Employees; provided, however, that
(i) all wages, salaries, payroll taxes, and employee benefits with respect to
Healthcare Employees shall be Healthcare's sole responsibility, and
(ii) Healthcare Employees shall not be subject to this Agreement.
7. GENERAL.
7.1. RELATIONSHIP OF PARTIES. Nothing in this Agreement shall be
deemed or construed by the Parties or any third party as creating the
relationship of principal and agent, partnership or joint venture between the
Parties, it being understood and agreed that no provision contained herein, and
no act of the Parties, shall be deemed to create any relationship between the
Parties other than the relationship set forth herein.
7.2. ACCESS TO INFORMATION; COOPERATION. LTC and Healthcare and their
authorized agents shall be given reasonable access to and may take copies of all
information relating to the subjects of this Agreement (to the extent permitted
by federal and state confidentiality laws) in the custody of the other Party,
including any agent, contractor, subcontractor, agent or any other person or
entity under the contract of such Party.
7.3. SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit
of and be binding upon the Parties hereto and their respective successors and
assigns. This Agreement shall not be assigned without the express written
consent of each of the Parties hereto.
7.4. TITLES AND HEADINGS. Titles and headings to sections herein are
inserted for the convenience of reference only and are not intended to be a part
of or to affect the meaning or interpretation of this Agreement.
7.5. SEVERABILITY. In the event that one or more of the terms or
provisions of this Agreement or the application thereof to any person(s) or in
any circumstance(s) shall, for any reason and to any extent be found by a court
of competent jurisdiction to be invalid, illegal or unenforceable, such court
shall have the power, and hereby is directed, to substitute for or limit such
invalid term(s), provision(s) or application(s) and to enforce such substituted
or limited terms or provisions, or the application thereof. Subject to the
foregoing, the invalidity, illegality or enforceability of any one or more of
the terms or provisions of this Agreement, as the same may be amended from time
to time, shall not affect the validity, legality or enforceability of any other
term or provision hereof.
5
<PAGE>
7.6. NOTICES. Notices shall be sent to the Parties at the following
addresses:
LTC Properties, Inc.
300 Esplanade Drive, Suite 1860
Oxnard, California 93030
Attn: James J. Pieczynski
Facsimile: (805) 981-8663
LTC Healthcare, Inc.
300 Esplanade Drive, Suite 1860
Oxnard, California 93030
Attn: James J. Pieczynski
Facsimile: (805) 981-8663
Notices may be hand-delivered or sent by certified mail, return receipt
requested, Federal Express or comparable overnight delivery service, or
facsimile. Notice shall be deemed received at the time delivered by hand, on
the fourth business day following deposit in the U.S. mail, and on the first
business day following deposit with Federal Express or other delivery service,
or transmission by facsimile. Any Party to this Agreement may change its
address for notice by giving written notice to the other Party at the address
and in accordance with the procedures provided above.
7.7. FURTHER ACTION. Healthcare and LTC each shall cooperate in good
faith and take such steps and execute such papers as may be reasonably requested
by the other Party to implement the terms and provisions of this Agreement.
7.8. AMENDMENTS; WAIVERS. No termination, cancellation, modification,
amendment, deletion, addition or other change in this Agreement, or any
provision hereof, or waiver of any right or remedy herein provided, shall be
effective for any purpose unless such change or waiver is specifically set forth
in a writing signed by the Party or Parties to be bound thereby. The waiver of
any right or remedy with respect to any occurrence on one occasion shall not be
deemed a waiver of such right or remedy with respect to such occurrence on any
other occasion.
7.9. GOVERNING LAW. This Agreement and the rights and obligations of
the Parties hereunder shall be governed by the laws of the State of California,
without regard to the principles of choice of law thereof, except with respect
to matters of law concerning the internal corporate affairs of any corporate
entity which is a Party to or subject of this Agreement, and as to those matters
the law of the jurisdiction under which the respective entity derives its powers
shall govern.
7.10. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
and supersedes all prior agreements, understandings, negotiations and
discussions, whether written or oral, between the Parties hereto with respect to
the subject matter hereof, so that no such external or separate agreement
relating to the subject matter of this Agreement shall have any effect or be
6
<PAGE>
binding, unless the same is referred to specifically in this Agreement or is
executed by the Parties after the date hereof. To the extent that the terms of
this Agreement and similar terms of the Distribution Agreement are in conflict,
this Agreement shall govern.
7.11. DISPUTE RESOLUTION. Any dispute arising under this Agreement
shall be resolved by binding arbitration in the manner contemplated by Section
9.13 of the Distribution Agreement, including the attorneys fees provisions
referred to therein.
7.12. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which together shall be deemed to be an original and all
of which together shall be deemed to constitute one and the same agreement.
7.13. NO THIRD PARTY BENEFICIARIES. This Agreement is solely for the
benefit of the Parties hereto and shall not be deemed to confer upon third
parties any remedy, claim, liability, reimbursement, claim of action or other
right in excess of those existing without this Agreement.
7.14. EXPENSES. Except as otherwise set forth in this Agreement, all
costs and expenses in connection with the preparation, execution, delivery and
implementation of this Agreement and with the consummation of the transactions
contemplated by this Agreement shall be charged to the Party for whose benefit
the expenses are incurred, with any expenses which cannot be allocated on such
basis to be split equally between the Parties.
7.15. LEGAL ENFORCEABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof. Any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. Without prejudice to
any rights or remedies otherwise available to any Party hereto, each Party
hereto acknowledges that damages would be an inadequate remedy for any breach of
the provisions of this Agreement and agrees that the obligations of the Parties
hereunder shall be specifically enforceable.
7.16. PREDECESSORS AND SUCCESSORS. To the extent necessary to give
effect to the purposes of this Agreement, any reference to any corporation shall
also include any predecessor or successor thereto, by operation of law or
otherwise.
[SIGNATURE PAGE FOLLOWS]
7
<PAGE>
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the
date first above written.
LTC PROPERTIES, INC., a Maryland corporation
By: ______________________________________
Name: _______________________________
Title: _______________________________
LTC HEALTHCARE, INC., a Nevada corporation
By: _____________________________________
Name: _______________________________
Title: _______________________________
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EXHIBIT B
FORM OF
AMENDED AND RESTATED BYLAWS
OF
LTC HEALTHCARE, INC.
ARTICLE I
OFFICES
SECTION 1.01 REGISTERED OFFICE. The registered office of the
corporation shall be in the City of Las Vegas, County of Clark, State of Nevada.
The corporation may, from time to time, in the manner provided by law, change
the registered office within the State of Nevada.
SECTION 1.02 OTHER OFFICES. The corporation may also maintain an office
or offices at such other places within or without the State of Nevada as the
Board of Directors may form time to time determine or the business of the
corporation may require.
ARTICLE II
STOCKHOLDERS
SECTION 2.01 ANNUAL MEETING. The annual meeting of stockholders shall
be held each year on a date and time designated by the Board of Directors. Any
previously scheduled annual meeting of the stockholders may be postponed by
resolution of the Board of Directors upon public notice given prior to the date
previously scheduled for such annual meeting of the stockholders.
SECTION 2.02 SPECIAL MEETINGS.
(a) Except as otherwise required by law and subject to the rights
of the holders of Preferred Stock, special meetings of stockholders may be
called only by the Board of Directors pursuant to a resolution approved by a
majority of the entire Board of Directors, the chairman of the board, chief
executive officer, or president. Each special meeting shall be held at such
date, time and place either within or without the State of Nevada as shall be
designated by the Board of Directors at least ten (10) days prior to such
meeting.
(b) No business shall be acted upon at a special meeting except
as set forth in the notice calling the meeting, unless one of the conditions for
the holding of a meeting without notice set forth in Section 2.05 shall be
satisfied, in which case any business (except as noted in Section 2.12
immediately below) may be transacted and the meeting shall be valid for all
purposes.
SECTION 2.03 PLACE OF MEETINGS. Any meeting of the stockholders of the
corporation may be held at its registered office in the State of Nevada or at
such other place in or out of the
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United States as the Board of Directors may designate. A waiver of notice
signed by stockholders entitled to vote may designate any place for the holding
of such meeting.
SECTION 2.04 NOTICE OF MEETINGS.
(a) The president, a vice president, the secretary, an
assistant secretary or any other individual designated by the Board of
Directors shall sign and deliver written notice of any meeting at least ten
(10) days, but not more than sixty (60) days, before the date of such meeting
to each stockholder of record entitled to vote at the meeting. In addition, a
copy of such notice shall be delivered to the Pacific Exchange at least ten
(10) days prior to the date of such meeting. The notice shall state the
place, date and time of the meeting and the purpose or purposes for which the
meeting is called.
(b) In the case of an annual meeting, subject to Section 2.12,
any proper business may be presented for action, except that action on any of
the following items shall be taken only if the general nature of the proposal is
stated in the notice:
(1) Action with respect to any contract or transaction
between the corporation and one or more of its directors or officers or between
the corporation and any corporation, firm or association in which one or more of
the corporation's directors or officers is a director or officer or is
financially interested;
(2) Adoption of amendments to the Articles of
Incorporation; or
(3) Action with respect to a merger, share exchange,
reorganization, partial or complete liquidation, or dissolution of the
corporation.
(c) A copy of the notice shall be personally delivered or
mailed postage prepaid to each stockholder of record entitled to vote at the
meeting at the address appearing on the records of the corporation, and the
notice shall be deemed delivered the date the same is deposited in the United
States mail for transmission to such stockholder. If the address of any
stockholder does not appear upon the records of the corporation, it will be
sufficient to address any notice to such stockholder at the registered office of
the corporation.
(d) The written certificate of the individual signing a notice
of meeting, setting forth the substance of the notice or having a copy thereof
attached, the date the notice was mailed or personally delivered to the
stockholders and the addresses to which the notice was mailed, shall be prima
facie evidence of the manner and fact of giving such notice.
(e) Any stockholder may waive notice of any meeting by a signed
writing, either before or after the meeting.
SECTION 2.05 MEETING WITHOUT NOTICE.
(a) Whenever all persons entitled to vote at any meeting
consent, either by:
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(1) A writing on the records of the meeting or filed
with the secretary; or
(2) Presence at such meeting and oral consent entered on
the minutes; or
(3) Taking part in the deliberations at such meeting
without objection; The doings of such meeting shall be as valid as if had at a
meeting regularly called and noticed.
(b) At such meeting any business may be transacted which is not
excepted from the written consent or to the consideration of which no objection
for want of notice is made at the time.
(c) If any meeting be irregular for want of notice or of such
consent, provided a quorum was present at such meeting, the proceedings of the
meeting may be ratified and approved and rendered likewise valid and the
irregularity or defect therein waived by a writing signed by all parties having
the right to vote at such meeting.
(d) Such consent or approval may be by proxy or power of
attorney, but all such proxies and powers of attorney must be in writing.
SECTION 2.06 DETERMINATION OF STOCKHOLDERS OF RECORD.
(a) For the purpose of determining the stockholders entitled to
notice of and to vote at any meeting of stockholders or any adjournment thereof,
or entitled to receive payment of any distribution or the allotment of any
rights, or entitled to exercise any rights in respect of any change, conversion,
or exchange of stock or for the purpose of any other lawful action, the
directors may fix, in advance, a record date, which shall not be more than sixty
(60) days nor less than ten (10) days before the date of such meeting, nor more
than sixty (60) days prior to any other action.
(b) If no record date is fixed, the record date for determining
stockholders: (i) entitled to notice of and to vote at a meeting of stockholders
shall be at the close of business on the day next preceding the day on which
notice is given, or, if notice is waived, at the close of business on the day
next preceding the day on which the meeting is held and (ii) for any other
purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto. A determination of
stockholders of record entitled to notice of or to vote at any meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.
SECTION 2.07 QUORUM; ADJOURNED MEETINGS.
(a) Unless the Articles of Incorporation provide for a
different proportion, stockholders holding at least a majority of the voting
power of the corporation's stock, represented in person or by proxy, are
necessary to constitute a quorum for the transaction of
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business at any meeting. If, on any issue, voting by classes is required by the
laws of the State of Nevada, the Articles of Incorporation or these Bylaws, at
least a majority of the voting power within each such class is necessary to
constitute a quorum of each such class.
(b) If a quorum is not represented, a majority of the voting
power so represented may adjourn the meeting from time to time until holders of
the voting power required to constitute a quorum shall be represented. At any
such adjourned meeting at which a quorum shall be represented, any business may
be transacted which might have been transacted as originally called. When a
stockholders' meeting is adjourned to another time or place hereunder, notice
need not be given of the adjourned meeting if the time and place thereof are
announced at the meeting at which the adjournment is taken. The stockholders
present at a duly convened meeting may continue to transact business until
adjournment, notwithstanding the withdrawal of enough stockholders to leave less
than a quorum of the voting power.
SECTION 2.08 VOTING.
(a) Unless otherwise provided in the Articles of Incorporation,
or in the resolution providing for the issuance of the stock adopted by the
Board of Directors pursuant to authority expressly vested in it by the
provisions of the Articles of Incorporation, each stockholder of record, or such
stockholder's duly authorized proxy or attorney-in-fact, shall be entitled to
one (1) vote for each share of voting stock standing registered in such
stockholder's name on the record date. No stockholder of the corporation shall
be entitled to cumulative voting for the election of directors.
(b) Except as otherwise provided herein, all votes with respect
to shares standing in the name of an individual on the record date (included
pledged shares) shall be cast only by that individual or such individual's duly
authorized proxy, attorney-in-fact, or voting trustee(s) pursuant to a voting
trust. With respect to shares held by a representative of the estate of a
deceased stockholder, guardian, conservator, custodian or trustee, votes may be
cast by such holder upon proof of capacity, even though the shares do not stand
in the name of such holder. In the case of shares under the control of a
receiver, the receiver may cast votes carried by such shares even though the
shares do not stand in the name of the receiver; provided, that the order of the
court of competent jurisdiction which appoints the receiver contains the
authority to cast votes carried by such shares. If shares stand in the name of
a minor, votes may be cast only by the duly appointed guardian of the estate of
such minor if such guardian has provided the corporation with written proof of
such appointment.
(c) With respect to shares standing in the name of another
corporation, partnership, limited liability company or other legal entity on the
record date, votes may be cast: (i) in the case of a corporation, by such
individual as the bylaws of such other corporation prescribe, by such individual
as may be appointed by resolution of the board of directors of such other
corporation or by such individual (including the officer making the
authorization) authorized in writing to do so by the chairman of the board of
directors, president or any vice-president of such corporation and (ii) in the
case of a partnership, limited liability company
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or other legal entity, by an individual representing such stockholder upon
presentation to the corporation of satisfactory evidence of his authority to do
so.
(d) Notwithstanding anything to the contrary herein contained,
no votes may be cast for shares owned by this corporation or its subsidiaries,
if any. If shares are held by this corporation or its subsidiaries, if any, in
a fiduciary capacity, no votes shall be cast with respect thereto on any matter
except to the extent that the beneficial owner thereof possesses and exercises
either a right to vote or to give the corporation holding the same binding
instructions on how to vote.
(e) Any holder of shares entitled to vote on any matter may
cast a portion of the votes in favor of such matter and refrain from casting the
remaining votes or cast the same against the proposal, except in the case of
elections of directors. If such holder entitled to vote fails to specify the
number of affirmative votes, it will be conclusively presumed that the holder is
casting affirmative votes with respect to all shares held.
(f) With respect to shares standing in the name of two or more
persons, whether fiduciaries, members of a partnership, joint tenants, tenants
in common, husband and wife as community property, tenants by the entirety,
voting trustees, persons entitled to vote under a stockholder voting agreement
or otherwise and shares held by two or more persons (including proxy holders)
having the same fiduciary relationship in respect to the same shares, votes may
be cast in the following manner:
(1) If only one person votes, the vote of such person
binds all.
(2) If more than one person casts votes, the act of the
majority so voting binds all.
(3) If more than one person casts votes, but the vote is
evenly split on a particular matter, the votes shall be deemed cast
proportionately, as split.
(g) If a quorum is present, unless the Articles of
Incorporation provide for a different proportion, the affirmative vote of
holders of at least a majority of the voting power represented at the meeting
and entitled to vote on any matter shall be the act of the stockholders, unless
voting by classes is required for any action of the stockholders by the laws of
the State of Nevada, the Articles of Incorporation or these Bylaws, in which
case the affirmative vote of holders of a least a majority of the voting power
of each such class shall be required.
SECTION 2.09 PROXIES. At any meeting of stockholders, any holder of
shares entitled to vote may designate, in a manner permitted by the laws of the
State of Nevada, another person or persons to act as a proxy or proxies. No
proxy is valid after the expiration of six (6) months from the date of its
creation, unless it is coupled with an interest or unless otherwise specified in
the proxy. In no event shall the term of a proxy exceed seven (7) years from
the date of its creation. Every proxy shall continue in full force and effect
until its expiration or revocation in a manner permitted by the laws of the
State of Nevada.
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SECTION 2.10 ORDER OF BUSINESS. At the annual stockholder's meeting,
the regular order of business shall be as follows:
1. Determination of stockholders present and existence of
quorum, in person or by proxy;
2. Reading and approval of the minutes of the previous meeting
or meetings;
3. Reports of the Board of Directors, and, if any, the
president, treasurer and secretary of the corporation;
4. Reports of committees;
5. Election of directors;
6. Unfinished business;
7. New business;
8. Adjournment.
SECTION 2.11 ABSENTEES' CONSENT TO MEETINGS. Transactions of any
meeting of the stockholders are as valid as though had at a meeting duly held
after regular call and notice if a quorum is represented, either in person or by
proxy, and if, either before or after the meeting, each of the persons entitled
to vote, not represented in person or by proxy (and those who, although present,
either object at the beginning of the meeting to the transaction of any business
because the meeting has not been lawfully called or convened or expressly object
at the meeting to the consideration of matters not included in the notice which
are legally required to be included therein), signs a written waiver of notice
and/or consent to the holding of the meeting or an approval of the minutes
thereof. All such waivers, consents, and approvals shall be filed with the
corporate records and made a part of the minutes of the meeting. Attendance of
a person at a meeting shall constitute a waiver of notice of such meeting,
except when the person objects at the beginning of the meeting to the
transaction of any business because the meeting is not lawfully called or
convened and except that attendance at a meeting is not a waiver of any right to
object to the consideration of matters not properly included in the notice if
such objection is expressly made at the time any such matters are presented at
the meeting. Neither the business to be transacted at nor the purpose of any
regular or special meeting of stockholders need be specified in any written
waiver of notice or consent, except as otherwise provided in Section 2.04(a) and
(b) or Section 2.12 (if applicable) of these Bylaws.
SECTION 2.12 BUSINESS TO BE CONDUCTED AT MEETING. At an annual or
special meeting of the stockholders, only such business shall be conducted as
shall have been properly brought before the meeting. To be properly brought
before a meeting, business must be (a) specified in the notice of meeting (or
any supplement thereto) given by or at the direction of the Board of
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Directors, (b) brought before the meeting by or at the direction of the Board of
Directors, (c) properly brought before an annual meeting by a stockholder, or
(d) if, and only if, the notice of a special meeting provides for business to be
brought before the meeting by stockholders, properly brought before the meeting
by a stockholder who is a stockholder of record at the time of serving of the
notice pursuant to Section 2.04, who shall be entitled to vote at such meeting
and who complies with the notice procedures set forth in this Section 2.12. For
business to be properly brought before a meeting by a stockholder pursuant to
the preceding clauses (c) or (d), the stockholder must have given timely notice
thereof in writing to the secretary of the corporation. To be timely, a
stockholder's notice must be delivered to, or mailed and received by, the
secretary at the principal executive office of the corporation not less than
thirty-five (35) days prior to the meeting; PROVIDED, HOWEVER, that in the event
less than forty-five (45) days notice or public disclosure of the date of the
meeting is given or made to the stockholders, notice by the stockholder to be
timely must be so received not later than the fifth (5th) day following the day
on which such notice of the date of the meeting was mailed or such disclosure
was made. In no event shall the public disclosure of an adjournment of an
annual or special meeting commence a new time period for the giving of
stockholder's notice as described above. A stockholder's notice to the
secretary shall set forth as to each matter the stockholder proposes to bring
before the meeting (a) a brief description of the business desired to be brought
before the meeting and the reasons for conducting such business at the meeting,
(b) the name and address, as they appear on the corporation's books, of the
stockholder proposing such business, and the name and address of the beneficial
owner, if any, on whose behalf the proposal is made, (c) the class and number of
shares of the corporation which are owned beneficially and of record by such
stockholder of record and by the beneficial owner, if any, on whose behalf the
proposal is made, and (d) any material interest of such stockholder of record
and the beneficial owner, if any, on whose behalf the proposal is made in such
business. Notwithstanding anything in the Bylaws to the contrary, no business
shall be conducted at a meeting except in accordance with the procedures set
forth in this Section 2.12. The presiding officer at the meeting shall, if the
facts warrant, determine and declare to the meeting that business was not
brought in accordance with this Section 2.12, and if he should so determine, he
shall so declare to the meeting and any such business not properly brought
before the meeting shall not be transacted. Notwithstanding the foregoing
provisions of this Section 2.12, a stockholder shall also comply with all
applicable requirements of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the rules and regulations therunder with respect to the
matters set forth herein. As used herein, "public disclosure" shall mean
disclosure in a press release reported by the Dow Jones News Association, the
Associated Press, or comparable news service or in a document publicly filed
with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d)
of the Exchange Act.
SECTION 2.13 NO STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING.
Stockholders may take action only at a regular or special meeting of
stockholders.
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ARTICLE III
DIRECTORS
SECTION 3.01 NUMBER, ELECTION, TENURE, AND QUALIFICATIONS. Except as
otherwise fixed by resolution of the Board of Directors pursuant to the Articles
of Incorporation relating to the authorization of the Board of Directors to
provide by resolution for the issuance of Preferred Stock and to determine the
rights of the holders of such Preferred Stock to elect directors, the Board of
Directors shall consist of at least one (1) individual who shall be elected at
the annual meeting of the stockholders of the corporation and who shall hold
office for one (1) year or until his or her successor is elected and qualify. A
director need not be a stockholder of the corporation.
SECTION 3.02 CHANGE IN NUMBER. Subject to any limitation in the laws of
the State of Nevada, the Articles of Incorporation or these Bylaws, the number
of directors may be changed from time to time by resolution adopted by the Board
of Directors.
SECTION 3.03 REDUCTION IN NUMBER. No reduction in the number of
directors shall have the effect of removing any director prior to the expiration
of his term in office.
SECTION 3.04 NOMINATION OF DIRECTORS. Except as otherwise fixed by
resolution of the Board of Directors pursuant to the Articles of Incorporation
relating to the authorization of the Board of Directors to provide by resolution
for the issuance of Preferred Stock and to determine the rights of the holders
of such Preferred Stock to elect directors, nominations for the election of
directors may be made by the Board of Directors, by a committee appointed by the
board of directors, or by any stockholder of record at the time of giving of
notice provided for herein. However, any stockholder entitled to vote in the
election of directors as provided herein may nominate one or more persons for
election as directors at a meeting only if written notice of such stockholder's
intent to make such nomination or nominations has been delivered to or mailed
and received by the secretary of the corporation not later than, (a) with
respect to an election to be held at an annual meeting of stockholders, 120
calendar days in advance of the first anniversary of the date the corporation's
proxy statement was released to security holders in connection with the
preceding year's annual meeting; PROVIDED, HOWEVER, that in the event that the
date of the annual meeting is changed by more than thirty (30) days from such
anniversary date, notice by the stockholder to be timely must be received not
later than the close of business on the tenth (10th) day following the earlier
of the day on which notice of the date of the meeting was mailed or public
disclosure was made, and (b) with respect to an election to be held at a special
meeting of stockholders for the election of directors, not earlier than the
close of business on the 90th day prior to such special meeting and not later
than the close of business on the later of the 60th day prior to such special
meeting or the tenth (10th) day following the day on which public disclosure is
first made of the date of the special meeting and the nominees proposed by the
board of directors to be elected at such a meeting. Notwithstanding any of the
foregoing to the contrary, in the event that the number of directors to be
elected by the Board of Directors of the corporation is increased and there is
no public disclosure by the corporation naming the nominees for director or
specifying the size of the increased Board of Directors at least seventy (70)
days prior to the first anniversary of the date of the preceding year's annual
meeting, a
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stockholder's notice required hereunder shall also be considered timely, but
only with respect to nominees for any new positions created by such increase, if
it shall be delivered to the secretary at the principal executive office of the
corporation not later than the close of business on the tenth (10th) day
following the earlier of day on which notice of the meeting is mailed or such
public disclosure is first made by the corporation. In no event shall the
public announcement of an adjournment of an annual or special meeting commence a
new time period for the giving of a stockholder's notice as describe above.
Each such notice shall set forth: (a) the name and address of the stockholder
who intends to make the nomination and of the person or persons to be nominated;
(b) a representation that the stockholder is a holder of record of stock of the
corporation entitled to vote at such meeting and intends to appear in person or
by proxy at the meeting to nominate the person or persons specified in the
notice; (c) the class and number of shares of the corporation which are
beneficially owned by such stockholder and also which are owned of record by
such stockholder; (d) as to the beneficial owner, if any, on whose behalf the
nomination is made, (i) the name and address of such person and (ii) the class
and number of shares of the corporation which are beneficially owned by such
person; (e) a description of all arrangements or understandings between the
stockholder and each nominee and any other person or persons (naming such person
or persons) pursuant to which the nomination or nominations are to be made by
the stockholder; (f) such other information regarding each nominee proposed by
such stockholder as would be required to be included in a proxy statement filed
pursuant to the proxy rules of the Securities and Exchange Commission, had such
nominee been nominated, or intended to be nominated, by the Board of Directors;
and (g) the written consent of each nominee to being named as nominee in the
proxy statement and to serving as a director of the corporation if so elected.
At the request of the Board of Directors, any person nominated by the Board of
Directors for election as a director shall furnish to the secretary of the
corporation, that information required to be set forth in a stockholder's notice
of nomination which pertains to the nominee. The presiding officer of the
meeting may refuse to acknowledge the nomination of any person not made in
compliance with the foregoing procedure. As used herein, "public disclosure"
shall have the meaning set forth in Section 2.12. No person shall be eligible
to serve as a director of the corporation unless nominated in accordance with
the procedures set forth in this Section 3.04. The presiding officer at the
meting shall, if the facts warrant, determine and declare to the meeting that a
nomination was not made in accordance with the procedures prescribed by this
Section 3.04, and if he should so determine, he shall so declare to the meeting
and the defective nomination shall be disregarded. Notwithstanding the
foregoing provisions hereof, a stockholder shall also comply with all applicable
requirements of the Exchange Act and the rules and regulations thereunder with
respect to the matters set forth herein.
SECTION 3.05 VACANCIES; NEWLY CREATED DIRECTORSHIPS. Except as
otherwise fixed by resolution of the Board of Directors pursuant to the Articles
of Incorporation relating to the authorization of the Board of Directors to
provide by resolution for the issuance of Preferred Stock and to determine the
rights of the holders of such Preferred Stock to elect directors, any vacancies
on the Board of Directors resulting from death, resignation, retirement,
disqualification, removal from office, or other cause, and newly created
directorships resulting from any increase in the authorized number of directors,
may be filled only by a majority vote of the directors then in office, though
less than a quorum, or by a sole remaining director, and the director(s) so
chosen shall hold office (i) in the case of the replacement of a director,
during the
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remainder of the term of office of the replaced director and (ii) in the case of
an increase in the number of directors, until the next annual meeting of
stockholders at which directors are elected, unless sooner displaced.
SECTION 3.06. REMOVAL OF DIRECTORS. Subject to any rights of the holders
of Preferred Stock, any director may be removed from office by the affirmative
vote of the holders of at least two-thirds (2/3rds) of the voting power of all
shares of the corporation entitled to vote generally in the election of
directors (voting as a single class).
SECTION 3.07 ANNUAL AND REGULAR MEETINGS. Immediately following the
adjournment of, and at the same place as, the annual or any special meeting of
the stockholders at which directors are elected other than pursuant to Section
3.06 of this Article, the Board of Directors, including directors newly elected,
shall hold its annual meeting without notice, other than this provision, to
elect officers and to transact such further business as may be necessary or
appropriate. The Board of Directors may provide by resolution the place, date,
and hour for holding regular meetings between annual meetings.
SECTION 3.08 SPECIAL MEETINGS. Except as otherwise required by law, and
subject to the rights, if any, of the holders of Preferred Stock, special
meetings of the Board of Directors may be called by the chairman, or if there be
no chairman, by the president or secretary and shall be called by the chairman,
the president or the secretary upon the request of any two (2) directors. If
the chairman, or if there be no chairman both the president and secretary,
refuses or neglects to call such special meeting, a special meeting may be
called by notice signed by any two (2) directors.
SECTION 3.09 PLACE OF MEETINGS. Any regular or special meeting of the
directors of the corporation may be held at such place as the Board of
Directors, or in the absence of such designation, as the notice calling such
meeting, may designate. A waiver of notice signed by directors may designate
any place for the holding of such meeting.
SECTION 3.10 NOTICE OF MEETINGS. Except as otherwise provided in
Section 3.07, there shall be delivered to all directors, at least forty-eight
(48) hours before the time of such meeting, a copy of a written notice of any
meeting by delivery of such notice personally by mailing such notice postage
prepaid or by telegram. Such notice shall be addressed in the manner provided
for notice to stockholders in Section 2.04(c). If mailed, the notice shall be
deemed delivered two (2) business days following the date the same is deposited
in the United States mail, postage prepaid. Any director may waive notice of
any meeting, and the attendance of a director at a meeting and oral consent
entered on the minutes of the meeting or taking part in deliberations of the
meeting without objection shall constitute a waiver of notice of such meeting.
Attendance for the express purpose of objecting to the transaction of business
thereat because the meeting is not properly called or convened shall not
constitute presence nor a waiver of notice for purposes hereof.
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SECTION 3.11 QUORUM; ADJOURNED MEETINGS.
(a) A majority of the directors in office, at a meeting duly
assembled, is necessary to constitute a quorum for the transaction of business.
(b) At any meeting of the Board of Directors where a quorum is
not present, a majority of those present may adjourn, from time to time, until a
quorum is present, and no notice of such adjournment shall be required. At any
adjourned meeting where a quorum is present, any business may be transacted
which could have been transacted at the meeting originally called.
SECTION 3.12 BOARD OF DIRECTORS' DECISIONS. The affirmative vote of a
majority of the directors present at a meeting at which a quorum is present is
the act of the Board of Directors.
SECTION 3.13 TELEPHONIC MEETINGS. Members of the Board of Directors or
of any committee designated by the Board of Directors may participate in a
meeting of the Board of Directors or committee by means of a telephone
conference or similar method of communication by which all persons participating
in such meeting can hear each other. Participation in a meeting pursuant to
this Section 3.13 constitutes presence in person at the meeting.
SECTION 3.14 ACTION WITHOUT MEETING. Any action required or permitted
to be taken at a meeting of the Board of Directors or of a committee thereof may
be taken without a meeting if, before or after the action, a written consent
thereto is signed by all of the members of the Board of Directors or the
committee. The written consent may be signed in counterparts and must be filed
with the minutes of the proceedings of the Board of Directors or committee.
SECTION 3.15 POWERS AND DUTIES.
(a) Except as otherwise restricted in the laws of the State of
Nevada or the Articles of Incorporation, the Board of Directors has full control
over the affairs of the corporation. The Board of Directors may delegate any of
its authority to manage, control or conduct the business of the corporation to
any standing or special committee, as more fully set forth in Article V of these
Bylaws, or to any officer or agent and to appoint any persons to be agents of
the corporation with such powers, including the power to subdelegate, and upon
such terms as may be deemed fit.
(b) The Board of Directors may present to the stockholders at
annual meetings of the stockholders, and when called for by a majority vote of
the stockholders at an annual meeting or, subject to Section 2.12, a special
meeting of the stockholders shall so present, a full and clear report of the
condition of the corporation.
(c) The Board of Directors, in its discretion, or the officer
of the corporation presiding at a meeting of stockholders, in his discretion,
may require that any votes cast at such meeting shall be cast by written ballot
and may submit any contract or act for approval or
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ratification at any annual meeting of the stockholders or any special meeting
properly called for the purpose of considering any such contract or act,
provided a quorum is present.
SECTION 3.16. COMPENSATION. The directors shall be paid their expenses of
attendance at each meeting of the board of directors and any applicable
committee and may be paid a fixed fee for attendance at each meeting of the
board of directors and any applicable committee or a stated salary as director
and member of an applicable committee. No such payment shall preclude any
director from serving the corporation in any other capacity and receiving
compensation therefor.
SECTION 3.17 BOARD OF DIRECTORS' OFFICERS.
(a) At its annual meeting, the Board of Directors shall elect,
from among its members, a chairman who shall preside at meetings of the Board of
Directors and the stockholders. The Board of Directors may also elect such
other officers of the Board of Directors and for such term as it may, from time
to time, determine advisable.
(b) Any vacancy in any office of the Board of Directors because
of death, resignation, removal or otherwise may be filled by the Board of
Directors for the unexpired portion of the term of such office.
SECTION 3.18 ORDER OF BUSINESS. The order of business at any meeting of
the Board of Directors shall be as follows:
1. Determination of members present and existence of quorum;
2. Reading and approval of the minutes of any previous meeting
or meetings;
3. Reports of officers and committeemen;
4. Election of officers (annual meeting);
5. Unfinished business;
6. New business;
7. Adjournment.
ARTICLE IV
COMMITTEES
SECTION 4.01 STANDING COMMITTEES. The Board of Directors shall
designate an audit committee and a compensation committee, each committee to
consist of two or more directors to serve at the pleasure of the Board. The
Board may designate one or more directors as alternate members of any committee,
who may replace any absent or disqualified member at any meeting of the
committee. In the absence or disqualification of a member of a committee, the
member or
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members thereof present at any meeting and not disqualified from voting, whether
or not he or they constitute a quorum, may unanimously appoint another member of
the board of directors to act at the meeting in the place of any such absent or
disqualified member. The committees shall keep regular minutes of their
proceedings and report the same to the Board when required
(a) AUDIT COMMITTEE. The audit committee will review the
annual audits of the corporation's independent public accountants, review and
evaluate internal accounting controls, recommend the selection of the
corporation's independent public accountants, review and pass upon (or ratify)
related party transactions, and conduct such reviews and examinations as it
deems necessary with respect to the practices and policies of, and the
relationship between, the corporation and its independent public accountants.
(b) COMPENSATION COMMITTEE. The Compensation Committee will
review salaries, bonuses and stock options of senior officers of the corporation
and administer the corporation's executive compensation policies and stock
option plan.
SECTION 4.02 SPECIAL COMMITTEES. In addition to the standing committees
provided in Section 4.01 above, the Board of Directors may, by resolution passed
by a majority of the whole board, designate one or more special committees, each
committee to consist of one or more of the directors of the corporation. The
Board may designate one or more directors as alternate members of any committee,
who may replace any absent or disqualified member at any meeting of the
committee. In the absence or disqualification of a member of a committee, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absent or disqualified member. Such committee or committees shall have
such name or names as may be determined from time to time by resolution adopted
by the Board of Directors. The committees shall keep regular minutes of their
proceedings and report the same to the Board when required. Subject to
applicable law and to the extent provided in the resolution of the Board of
Directors, any committee designated hereunder shall have and may exercise all
the powers of the Board of Directors, except with respect to: (i) the approval
of any action which, under Chapter 78 of the Nevada Revised Statutes, also
requires the approval of the full Board of Directors, or the stockholders of the
outstanding shares; (ii) the filling of vacancies on the Board of Directors or
in any committee; (iii) the amendment or repeal of bylaws or the adoption of
new bylaws; (iv) the amendment or repeal of any resolution of the Board of
Directors which by its express terms is not so amendable or repealable; (v) a
distribution to the stockholders of the corporation, except at a rate or in a
periodic amount or within a price range determined by the Board of Directors; or
(vi) the appointment of any other committees of the Board of Directors or the
members thereof.
SECTION 4.03 MEETINGS AND ACTIONS OF COMMITTEES. Meetings and actions
of committees shall be governed by, and held and taken in accordance with
Sections 3.07 (annual and regular meetings), 3.08 (special meetings), 3.09
(place of meetings). 3.10 (notice of meetings), 3.11 (quorum and adjourned
meetings), 3.13 (telephonic meetings), and 3.13 (action without a meeting) of
these Bylaws, with such changes in the context of those bylaws as are necessary
to substitute the committee and its members for the Board of Directors, and
notice of
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special meetings of committees shall also be given to all alternate members, who
shall have the right to attend all meetings of the committee. The Board of
Directors may adopt rules for the government of any committee not inconsistent
with the provisions of these Bylaws.
ARTICLE V
OFFICERS
SECTION 5.01 ELECTION. The Board of Directors, at its annual meeting,
shall elect a president, a secretary and a treasurer to hold office for a term
of one (1) year or until their successors are chosen and qualify. Any
individual may hold two or more offices. The Board of Directors may, from time
to time, by resolution, elect one or more vice-presidents, assistant
secretaries, assistant treasurers or other officers, and appoint agents of the
corporation, prescribe their duties and fix their compensation.
SECTION 5.02 REMOVAL; RESIGNATION. Any officer or agent elected or
appointed by the Board of Directors may be removed by it with or without cause.
Any officer may resign at any time upon written notice to the corporation. Any
such removal or resignation shall be subject to the rights, if any, of the
respective parties under any contract between the corporation and such officer
or agent.
SECTION 5.03 VACANCIES. Any vacancy in any office because of death,
resignation, removal or otherwise may be filled by the Board of Directors for
the unexpired portion of the term of such office.
SECTION 5.04 CHAIRMAN OF THE BOARD. The chairman shall be the chief
executive officer of the corporation and shall, subject to the control of the
Board of Directors, have general supervision, direction and control of the
business and affairs of the corporation and shall preside at meetings of the
stockholders and the Board of Directors.
SECTION 5.05 PRESIDENT.
(a) The president shall be the chief operations officer of the
corporation, subject to the supervision and control of the Board of Directors,
and shall direct the corporate affairs, with full power to execute all
resolutions and orders of the Board of Directors not expressly delegated to some
other officer or agent of the corporation. If the chairman of the Board of
Directors elects not to preside or is absent, the president shall preside at
meetings of the stockholders and Board of Directors and perform such other
duties as shall be prescribed by the Board of Directors.
(b) The president shall have full power and authority on behalf
of the corporation to attend and to act and to vote, or designate such other
officer or agent of the corporation to attend and to act and to vote, at any
meetings of the stockholders of any corporation in which the corporation may
hold stock and, at any such meetings, shall possess and may exercise any and all
rights and powers incident to the ownership of such stock. The Board
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of Directors, by resolution from time to time, may confer like powers on any
person or persons in place of the president to exercise such powers for these
purposes.
SECTION 5.06 VICE-PRESIDENTS. The Board of Directors may elect one or
more vice-presidents who shall be vested with all the powers and perform all the
duties of the president whenever the president is absent or unable to act and
such other duties as shall be prescribed by the Board of Directors or the
president.
SECTION 5.07 SECRETARY. The secretary shall keep, or cause to be kept,
the minutes of proceedings of the stockholders and the Board of Directors in
books provided for that purpose. The secretary shall attend to the giving and
service of all notices of the corporation, may sign with the president in the
name of the corporation all contracts in which the corporation is authorized to
enter, shall have the custody or designate control of the corporate seal, shall
affix the corporate seal to all certificates of stock duly issued by the
corporation, shall have charge or designate control of stock certificate books,
transfer books and stock ledgers, and such other books and papers as the Board
of Directors or appropriate committee may direct, and shall, in general, perform
all duties incident to the office of the secretary.
SECTION 5.08 ASSISTANT SECRETARIES. The Board of Directors may appoint
one or more assistant secretaries who shall have such powers and perform such
duties as may be prescribed by the Board of Directors or the secretary.
SECTION 5.09 TREASURER. The treasurer shall be the chief financial
officer of the corporation, subject to the supervision and control of the Board
of Directors, and shall have custody of all the funds and securities of the
corporation. When necessary or proper, the treasurer shall endorse on behalf of
the corporation for collection checks, notes, and other obligations, and shall
deposit all moneys to the credit of the corporation in such bank or banks or
other depository as the Board of Directors may designate, and shall sign all
receipts and vouchers for payments made by the corporation. Unless otherwise
specified by the Board of Directors, the treasurer may sign with the president
all bills of exchange and promissory notes of the corporation, shall also have
the care and custody of the stocks, bonds, certificates, vouchers, evidence of
debts, securities, and such other property belonging to the corporation as the
Board of Directors shall designate, and shall sign all papers required by law,
by these Bylaws, or by the Board of Directors to be signed by the treasurer.
The treasurer shall enter, or cause to be entered, regularly in the financial
records of the corporation, to be kept for that purpose, full and accurate
accounts of all moneys received and paid on account of the corporation and,
whenever required by the Board of Directors, the treasurer shall render a
statement of any or all accounts. The treasurer shall at all reasonable times
exhibit the books of account to any director of the corporation and shall
perform all acts incident to the position of treasurer subject to the control of
the Board of Directors.
The treasurer shall, if required by the Board of Directors, give bond to
the corporation in such sum and with such security as shall be approved by the
Board of Directors for the faithful performance of all the duties of treasurer
and for restoration to the corporation, in the event of the treasurer's death,
resignation, retirement or removal from office, of all books, records, papers,
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vouchers, money and other property in the treasurer's custody or control and
belonging to the corporation. The expense of such bond shall be borne by the
corporation.
SECTION 5.10 ASSISTANT TREASURERS. The Board of Directors may appoint
one or more assistant treasurers who shall have such powers and perform such
duties as may be prescribed by the Board of Directors or the treasurer. The
Board of Directors may require an assistant treasurer to give a bond to the
corporation in such sum and with such security as it may approve, for the
faithful performance of the duties of assistant treasurer, and for restoration
to the corporation, in the event of the assistant treasurer's death,
resignation, retirement or removal from office, of all books, records, papers,
vouchers, money and other property in the assistant treasurer's custody or
control and belonging to the corporation. The expense of such bond shall be
borne by the corporation.
ARTICLE VI
CAPITAL STOCK
SECTION 6.01 ISSUANCE. Shares of the corporation's authorized stock
shall, subject to any provisions or limitations of the laws of the State of
Nevada, the Articles of Incorporation or any contracts or agreements to which
the corporation may be a party, be issued in such manner, at such times, upon
such conditions and for such consideration as shall be prescribed by the Board
of Directors.
SECTION 6.02 CERTIFICATES. Ownership in the corporation shall be
evidenced by certificates for shares of stock in such form as shall be
prescribed by the Board of Directors, shall be under the seal of the corporation
and shall be manually signed by the president or a vice-president and also by
the secretary or an assistant secretary; provided, however, whenever any
certificate is countersigned or otherwise authenticated by a transfer agent or
transfer clerk, and by a registrar, then a facsimile of the signatures of said
officers may be printed or lithographed upon the certificate in lieu of the
actual signatures. If the Corporation uses facsimile signatures of its officers
on its stock certificates, it shall not act as registrar of its own stock, but
its transfer agent and registrar may be identical if the institution acting in
those dual capacities countersigns any stock certificates in both capacities.
Each certificate shall contain the name of the record holder, the number,
designation, if any, class or series of shares represented, a statement or
summary of any applicable rights, preferences, privileges or restrictions
thereon, and a statement, if applicable, that the shares are assessable. All
certificates shall be consecutively numbered. If provided by the stockholder,
the name, address and federal tax identification number of the stockholder, the
number of shares, and the date of issue shall be entered in the stock transfer
records of the corporation.
SECTION 6.03 SURRENDERED; LOST OR DESTROYED CERTIFICATES. All
certificates surrendered to the corporation, except those representing shares of
treasury stock, shall be canceled and no new certificate shall be issued until
the former certificate for a like number of shares shall have been canceled,
except that in case of a lost, stolen, destroyed or mutilated certificate, a new
one may be issued therefor. However, any stockholder applying for the issuance
of a stock certificate in lieu of one alleged to have been lost, stolen,
destroyed or
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mutilated shall, prior to the issuance of a replacement, provide the corporation
with his, her or its affidavit of the facts surrounding the loss, theft,
destruction or mutilation and, if required by the Board of Directors, an
indemnity bond in an amount not less than twice the current market value of the
stock, and upon such terms as the treasurer or the Board of Directors shall
require which shall indemnify the corporation against any loss, damage, cost or
inconvenience arising as a consequence of the issuance of a replacement
certificate.
SECTION 6.04 REPLACEMENT CERTIFICATE. When the Articles of
Incorporation are amended in any way affecting the statements contained in the
certificates for outstanding shares of capital stock of the corporation or it
becomes desirable for any reason, in the discretion of the Board of Directors,
including, without limitation, the merger of the corporation with another
corporation or the reorganization of the corporation, to cancel any outstanding
certificate for shares and issue a new certificate therefor conforming to the
rights of the holder, the Board of Directors may order any holders of
outstanding certificates for shares to surrender and exchange the same for new
certificates within a reasonable time to be fixed by the Board of Directors.
The order may provide that a holder of any certificate(s) ordered to be
surrendered shall not be entitled to vote, receive distributions or exercise any
other rights of stockholders of record until the holder has complied with the
order, but the order operates to suspend such rights only after notice and until
compliance.
SECTION 6.05 TRANSFER OF SHARES. Upon surrender to the corporation, or
the transfer agent of the corporation, of a certificate or shares duly endorsed
or accompanied by proper evidence of succession, assignation or authority to
transfer, it shall be the duty of the corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and the record the
transaction upon its books.
SECTION 6.06 TRANSFER AGENT; REGISTRARS. The Board of Directors may
appoint one or more transfer agents, transfer clerk and registrars of transfer
and may require all certificates for shares of stock to bear the signature of
such transfer agent, transfer clerk and/or registrar of transfer.
SECTION 6.07 STOCK TRANSFER RECORDS. The stock transfer records shall
be closed for a period of at least ten (10) days prior to all meetings of the
stockholders and shall be closed for the payment of distributions as provided in
Article VII hereof and during such periods as, from time to time, may be fixed
by the Board of Directors, and, during such periods, no stock shall be
transferable for purposes of Article VII and no voting rights shall be deemed
transferred during such periods. Subject to the forgoing limitations, nothing
contained herein shall cause transfers during such periods to be void or
voidable.
SECTION 6.08 MISCELLANEOUS. The Board of Directors shall have the power
and authority to make such rules and regulations not inconsistent herewith as it
may deem expedient concerning the issue, transfer, and registration of
certificates for shares of the corporation's stock.
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ARTICLE VII
DISTRIBUTIONS
SECTION 7.01 Distributions may be declared, subject to the provisions of
the laws of the State of Nevada and the Articles of Incorporation, by the Board
of Directors at any regular or special meeting and may be paid in cash,
property, shares of corporate stock, or any other medium. The Board of
Directors may fix in advance a record date, as provided in Section 2.06, prior
to the distribution for the purpose of determining stockholders entitled to
receive any distribution. The Board of Directors may close the stock transfer
books for such purpose for a period of not more than ten (10) days prior to the
date of such distribution.
ARTICLE VIII
RECORDS; REPORTS; SEAL; AND FINANCIAL MATTERS
SECTION 8.01 RECORDS. All original records of the corporation, shall be
kept by or under the direction of the secretary or at such places as may be
prescribed by the Board of Directors.
SECTION 8.02 DIRECTORS' AND OFFICERS' RIGHT OF INSPECTION. Every
director and officer shall have the absolute right at any reasonable time for a
purpose reasonably related to the exercise of such individual's duties to
inspect and copy all of the corporation's books, records, and documents of every
kind and to inspect the physical properties of the corporation and/or its
subsidiary corporations. Such inspection may be made in person or by agent or
attorney.
SECTION 8.03 CORPORATE SEAL. The Board of Directors may, by resolution,
authorize a seal, and the seal may be used by causing it, or a facsimile, to be
impressed or affixed or reproduced or otherwise. Except when otherwise
specifically provided herein, any officer of the corporation shall have the
authority to affix the seal to any document requiring it.
SECTION 8.04 FISCAL YEAR-END. The fiscal year-end of the corporation
shall be such date as may be fixed from time to time by resolution of the Board
of Directors.
SECTION 8.05 RESERVES. The Board of Directors may create, by
resolution, such reserves as the directors may, from time to time, in their
discretion, think proper to provide for contingencies, or to equalize
distributions or to repair or maintain any property of the corporation, or for
such other purpose as the Board of Directors may deem beneficial to the
corporation, and the directors may modify or abolish any such reserves in the
manner in which they were created.
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ARTICLE IX
INDEMNIFICATION
SECTION 9.01 INDEMNIFICATION AND INSURANCE.
(a) INDEMNIFICATION OF DIRECTORS AND OFFICERS.
(i) For purposes of this Article, (A) "Indemnitee" shall
mean each director or officer who was or is a party to, or is threatened to be
made a party to, or is otherwise involved in, any Proceeding (as hereinafter
defined), by reason of the fact that he or she is or was a director or officer
of the corporation or is or was serving in any capacity at the request of the
corporation as a director, officer, employee, agent, partner, or fiduciary of,
or in any other capacity for, another corporation or any partnership, joint
venture, trust, or other enterprise; and (B) "Proceeding" shall mean any
threatened, pending, or completed action, or suit (including without limitation
an action, suit or proceeding by or in the right of the corporation), whether
civil, criminal, administrative, or investigative.
(ii) Each Indemnitee shall be indemnified and held
harmless by the corporation for all actions taken by him or her and for all
omissions (regardless of the date of any such action or omission), to the
fullest extent permitted by Nevada law, against all expense, liability and loss
(including without limitation attorneys' fees, judgments, fines, taxes,
penalties, and amounts paid or to be paid in settlement) reasonably incurred or
suffered by the Indemnitee in connection with any Proceeding.
(iii) Indemnification pursuant to this Section shall
continue as to an Indemnitee who has ceased to be a director or officer and
shall inure to the benefit of his or her heirs, executors and administrators.
(b) INDEMNIFICATION OF EMPLOYEES AND OTHER PERSONS.
The corporation may, by action of its Board of Directors
and to the extent provided in such action, indemnify employees and other persons
as though they were Indemnitees.
(c) NON-EXCLUSIVITY OF RIGHTS.
The rights to indemnification provided in this Article
shall not be exclusive of any other rights that any person may have or hereafter
acquire under any statute, provision of the corporation's Articles of
Incorporation or Bylaws, agreement, vote of stockholders or directors, or
otherwise.
(d) INSURANCE.
The corporation may purchase and maintain insurance or make
other financial arrangements on behalf of any person who is or was a director,
officer, employee, or agent of the corporation, or is or was serving at the
request of the corporation as a director,
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officer, employee, or agent of another corporation, partnership, joint venture,
trust, or other enterprise for any liability asserted against him or her and
liability and expenses incurred by him or her in his or her capacity as a
director, officer, employee or agent, or arising out of his or her status as
such, whether or not the corporation has the authority to indemnify him or her
against such liability and expenses.
(e) OTHER FINANCIAL ARRANGEMENTS.
The other financial arrangements which may be made by the
corporation may include the following (i) the creation of a trust fund; (ii) the
establishment of a program of self-insurance; (iii) the securing of its
obligation of indemnification by granting a security interest or other lien on
any assets of the corporation; (iv) the establishment of a letter of credit,
guarantee or surety. No financial arrangement made pursuant to this subsection
may provide protection for a person adjudged by a court of competent
jurisdiction, after exhaustion of all appeals therefrom, to be liable for
intentional misconduct, fraud, or a knowing violation of law, except with
respect to advancement of expenses or indemnification ordered by a court.
(f) OTHER MATTERS RELATING TO INSURANCE OR FINANCIAL
ARRANGEMENTS.
Any insurance or other financial arrangement made on behalf
of a person pursuant to this section may be provided by the corporation or any
other person approved by the Board of Directors, even if all or part of the
other person's stock or other securities is owned by the corporation. In the
absence of fraud:
(i) the decision of the Board of Directors as to the
propriety of the terms and conditions of any insurance or other financial
arrangement made pursuant to this section and the choice of the person to
provide the insurance or other financial arrangement is conclusive; and
(ii) the insurance or other financial arrangement:
(A) is not void or voidable; and
(B) does not subject any director
approving it to personal liability for his
action,
even if a director approving the insurance or other financial arrangement is a
beneficiary of the insurance or other financial arrangement.
SECTION 9.02 AMENDMENT. The provisions of this Article IX relating to
indemnification shall constitute a contract between the corporation and each of
its directors and officers which may be modified as to any director or officer
only with that person's consent or as specifically provided in this Section.
Notwithstanding any other provision of these Bylaws relating to their amendment
generally (including, without limitation, Article X below), any repeal or
amendment of this Article IX which is adverse to any director or officer shall
apply to such director or officer
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only on a prospective basis, and shall not limit the rights of an Indemnitee to
indemnification with respect to any action or failure to act occurring prior to
the time of such repeal or amendment. Notwithstanding any other provision of
these Bylaws, no repeal or amendment of these Bylaws shall affect any or all of
this Article IX so as to limit or reduce the indemnification in any manner
unless adopted by (a) the unanimous vote of the directors of the corporation
then serving, or (b) by the stockholders as set forth in Article X hereof;
provided that no such amendment shall have a retroactive effect inconsistent
with the preceding sentence.
ARTICLE X
AMENDMENT OR REPEAL
SECTION 10.01 AMENDMENT OF BYLAWS. These Bylaws or any provision hereof
may be amended, altered, or repealed (a) by the Board of Directors at an annual
meeting thereof without prior notice or at any special meeting thereof if notice
of such proposed amendment, alteration or repeal is contained in the notice of
such special meeting or (b) by the affirmative vote of at least sixty-six and
two thirds percent (66-2/3%) of the voting power of all the then outstanding
shares of capital stock entitled to vote at any meeting of the stockholders at
which a quorum is present, if notice of such proposed amendment, alteration or
repeal is contained in the notice of such meeting.
SECTION 10.02 ADDITIONAL BYLAWS. Additional bylaws not inconsistent
herewith may be adopted by the Board of Directors. Any bylaws so adopted shall
be subject to alteration, amendment or repeal by the stockholders in accordance
with Section 10.01 of these Bylaws.
ARTICLE XI
CHANGES IN NEVADA LAW
SECTION 11.01 CHANGES IN NEVADA LAW. References in these Bylaws to
Nevada law or to any provision thereof shall be to such law as it existed on the
date these Bylaws were adopted or as such law thereafter may be changed;
provided that (a) in the case of any change which expands the liability of
directors or officers or limits the indemnification rights or the rights to
advancement of expenses which the corporation may provide in Article IX hereof,
the rights to limited liability, to indemnification and to the advancement of
expenses provided in the corporation's Articles of Incorporation and/or these
Bylaws shall continue as theretofore to the extent permitted by law; and (b) if
such change permits the corporation, without the requirement of any further
action by stockholders or directors, to limit further the liability of directors
or officers or to provide broader indemnification rights or rights to the
advancement of expenses than the corporation was permitted to provide prior to
such change, then liability thereupon shall be so limited and the rights to
indemnification and the advancement of expenses shall be so broadened to the
extent permitted by law.
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EXHIBIT C
FORM OF
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
LTC HEALTHCARE, INC.
Pursuant to the provisions of Nevada Revised Statutes ("NRS") Section
78.403, the Articles of Incorporation of the above-referenced corporation are
hereby amended and restated as follows:
ARTICLE I
NAME
The name of the corporation shall be LTC Healthcare, Inc. (the
"Corporation").
ARTICLE II
CAPITAL STOCK
Section 1. AUTHORIZED SHARES. The total number of shares of
stock which the Corporation shall have authority to issue is fifty million
(50,000,000) shares, consisting of two classes to be designated, respectively,
"Common Stock" and "Preferred Stock," with all of such shares having a par value
of $.01 per share. The total number of shares of Common Stock which the
Corporation shall have authority to issue is forty million (40,000,000) shares.
The total number of shares of Preferred Stock which the Corporation shall have
authority to issue is ten million (10,000,000) shares. The Preferred Stock may
be issued in one or more series, each series to be appropriately designated by a
distinguishing letter or title, prior to the issue of any shares thereof. The
voting powers, designations, preferences, limitations, restrictions, and
relative, participating, optional and other rights, and the qualifications,
limitations, or restrictions thereof, of the Preferred Stock shall hereinafter
be prescribed by resolution of the Board of Directors pursuant to Section 3 of
this Article II.
Section 2. COMMON STOCK.
(a) DIVIDEND RATE. Subject to the rights of holders of
any Preferred Stock having preference as to dividends, the holders of Common
Stock shall be entitled to receive dividends when, as and if declared by the
Board of Directors out of assets legally available therefor.
(b) VOTING RIGHTS. The holders of the issued and
outstanding shares of Common Stock shall be entitled to one vote for each share
of Common Stock.
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(c) LIQUIDATION RIGHTS. In the event of liquidation,
dissolution, or winding up of the affairs of the Corporation, whether voluntary
or involuntary, subject to the prior rights of holders of Preferred Stock to
share ratably in the Corporation's assets, the Common Stock and any shares of
Preferred Stock which are not entitled to any preference in liquidation shall
share equally and ratably in the Corporation's assets available for distribution
after giving effect to any liquidation preference of any shares of Preferred
Stock.
(d) NO CUMULATIVE VOTING, CONVERSION, REDEMPTION, OR
PREEMPTIVE RIGHTS. The holders of Common Stock shall not have any cumulative
voting, conversion, redemption, or preemptive rights.
(e) CONSIDERATION FOR SHARES. The Common Stock
authorized by this Article shall be issued for such consideration as shall be
fixed, from time to time, by the Board of Directors.
Section 3. PREFERRED STOCK.
(a) CONSIDERATION. The Board of Directors is hereby
vested with the authority from time to time to provide by resolution for the
issuance of shares of Preferred Stock in one or more series not exceeding the
aggregate number of shares of Preferred Stock authorized by these Amended and
Restated Articles of Incorporation, as amended from time to time (hereinafter,
the "Articles"), and to determine with respect to each such series the voting
powers, if any (which voting powers if granted may be full or limited),
designations, preferences, and relative, participating, optional, or other
special rights, and the qualifications, limitations, or restrictions relating
thereto, including without limiting the generality of the foregoing, the voting
rights relating to shares of Preferred Stock of any series (which may vary over
time and which may be applicable generally only upon the happening and
continuance of stated facts or events or ascertained outside the Articles), the
rate of dividend to which holders of Preferred Stock of any series may be
entitled (which may be cumulative or noncumulative), the rights of holders of
Preferred Stock of any series in the event of liquidation, dissolution, or
winding up of the affairs of the Corporation, the rights, if any, of holders of
Preferred Stock of any series to convert or exchange such shares of Preferred
Stock of such series for shares of any other class or series of capital stock or
for any other securities, property, or assets of the Corporation or any
subsidiary (including the determination of the price or prices or the rate or
rates applicable to such rights to convert or exchange and the adjustment
thereof, the time or times during which the right to convert or exchange shall
be applicable, and the time or times during which a particular price or rate
shall be applicable).
(b) CERTIFICATE. Before the Corporation shall issue any
shares of Preferred Stock of any series, a certificate setting forth a copy of
the resolution or resolutions of the Board of Directors, fixing the voting
powers, designations, preferences, the relative, participating, optional, or
other rights, if any, and the qualifications, limitations, and restrictions, if
any, relating to the shares of Preferred Stock of such series, and the number of
shares of Preferred Stock of such series authorized by the Board of Directors to
be issued shall be made and signed by, acknowledged and filed in the manner
prescribed by the NRS. The Board of
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Directors is further authorized to increase or decrease (but not below the
number of such shares of such series then outstanding) the number of shares of
any series subsequent to the issuance of shares of that series.
Section 4. NON-ASSESSMENT OF STOCK. The capital stock of the
Corporation, after the amount of the subscription price has been paid in money,
property or services, as the directors shall determine, shall not be subject to
assessment to pay the debts of the Corporation, nor for any other purpose, and
no stock issued as fully paid shall ever be assessable or assessed, and the
Articles shall not be amended in this particular. No stockholder of the
Corporation is individually liable for the debts or liabilities of the
Corporation.
ARTICLE III
STOCKHOLDERS
Section 1. SPECIAL MEETINGS OF STOCKHOLDERS. Special meetings
of stockholders of the Corporation for any purpose or purposes may be called
only in the manner provided in the Bylaws.
Section 2. ACTION OF STOCKHOLDERS. No action shall be taken by
the stockholders except at a duly called annual or special meeting of
stockholders. The stockholders may not take action by written consent.
ARTICLE IV
DIRECTORS AND OFFICERS
Section 1. NUMBER OF DIRECTORS. The members of the governing
board of the Corporation are styled as directors. The Board of Directors of the
Corporation shall consist of at least one (1) individual who shall be elected in
such manner as shall be provided in the Bylaws of the Corporation. The number
of directors may be changed from time to time in such manner as shall be
provided in the Bylaws of the Corporation.
Section 2. CURRENT DIRECTORS. The names and post office boxes
or street addresses of each of the four (4) directors constituting the current
Board of Directors are:
NAME ADDRESS
Andre C. Dimitriadis 300 Esplanade Drive, Suite 1860
Oxnard, CA 93030
James J. Pieczynski 300 Esplanade Drive, Suite 1860
Oxnard, CA 93030
Steven Stuart 31 West 52nd Street
New York, NY 10019
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Bary G. Bailey 12225 El Camino Real
San Diego, CA 92130
Section 3. STOCKHOLDER NOMINATION OF DIRECTOR CANDIDATES.
Advance notice of nominations for the election of directors, other than by the
Board of Directors or a duly authorized committee thereof or any authorized
officer of the Corporation to whom the Board of Directors or such committee
shall have delegated such authority, and information concerning nominees, shall
be given in the manner provided in the Bylaws.
Section 4. NEWLY CREATED DIRECTORSHIPS AND VACANCIES. Except
as otherwise fixed pursuant to the provisions of Article II hereof relating to
the rights of the holders of Preferred Stock, newly created directorships
resulting from any increase in the authorized number of directors and any
vacancies on the Board of Directors resulting from death, resignation,
retirement, disqualification, removal from office or other cause shall be filled
by a majority vote of the directors then in office, and directors so chosen
shall hold office for a term expiring at the next annual meeting of stockholders
at which the term of the class to which they have been elected expires. No
decrease in the number of directors constituting the Board of Directors shall
shorten the term of any incumbent director.
Section 5. LIMITATION OF PERSONAL LIABILITY. No director or
officer of the Corporation shall be personally liable to the Corporation or its
stockholders for damages for breach of fiduciary duty as a director or officer;
PROVIDED, HOWEVER, that the foregoing provision does not eliminate or limit the
liability of a director or officer of the Corporation for:
(a) Acts or omissions which involve intentional
misconduct, fraud or a knowing violation of law; or
(b) The payment of distributions in violation of NRS
78.300.
Section 6. PAYMENT OF EXPENSES. In addition to any other
rights of indemnification permitted by the laws of the State of Nevada as may be
provided for by the Corporation in its Bylaws or by agreement, the expenses of
officers and directors incurred in defending a civil or criminal action, suit or
proceeding, involving alleged acts or omissions of such officer or director in
his or her capacity as an officer or director of the Corporation, must be paid
by the Corporation or through insurance purchased and maintained by the
Corporation or through other financial arrangements made by the Corporation, as
they are incurred and in advance of the final disposition of the action, suit or
proceeding, upon receipt of an undertaking by or on behalf of the director or
officer to repay the amount if it is ultimately determined by a court of
competent jurisdiction that he or she is not entitled to be indemnified by the
Corporation.
Section 7. REPEAL AND CONFLICTS. Any repeal or modification of
Sections 5 or 6 above approved by the stockholders of the Corporation shall be
prospective only. In the event of any conflict between Sections 5 or 6 of this
Article and any other Article of the Articles, the terms and provisions of
Sections 5 or 6 of this Article shall control.
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ARTICLE V
VOTING ON CERTAIN TRANSACTIONS
Section 1. MERGER, SALE. The affirmative vote of the holders
of sixty-six and two-thirds percent (66-2/3%) of the outstanding stock of the
Corporation entitled to vote shall be required for:
(a) Any merger, exchange or consolidation to which the
Corporation is a party and which requires stockholder approval under the NRS;
and
(b) Any sale or other disposition by the Corporation of
all or substantially all of its assets.
Section 2. AMENDMENT OF ARTICLES. The Corporation reserves the
right to amend, alter, change or repeal any provision contained in the Articles,
in the manner now or hereafter prescribed by the NRS, and all rights conferred
on stockholders herein are granted subject to this reservation; PROVIDED,
HOWEVER, that no amendment, alteration, change or repeal may be made to: (i)
Section 2 of Article III or (ii) this Article V without the affirmative vote of
the holders of at least sixty-six and two-thirds percent (66-2/3%) of the
outstanding voting stock of the Corporation, voting together as a single class.
Section 3. AMENDMENT OF BYLAWS.
(a) BOARD OF DIRECTORS. In furtherance and not in
limitation of the powers conferred by statute, the Board of Directors is
expressly authorized to adopt, repeal, alter, amend and rescind the Bylaws of
the Corporation.
(b) STOCKHOLDERS. Notwithstanding Section 3(a) of this
Article V, the Bylaws may be rescinded, altered, amended or repealed in any
respect by the affirmative vote of the holders of at least sixty-six and
two-thirds percent (66-2/3%) of the outstanding voting stock of the Corporation,
voting together as a single class.
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EXHIBIT D
HEALTHCARE EMPLOYEES
None.
<PAGE>
EXHIBIT E
FORM OF TAX SHARING AGREEMENT
TAX SHARING AGREEMENT (the "Agreement"), dated as of _______ __,
1998, between LTC Properties, Inc., a Maryland corporation ("LTC"), and LTC
Healthcare, Inc., a Nevada corporation ("Healthcare").
WHEREAS, LTC is the parent corporation of an affiliated group of
corporations that join in filing consolidated federal Income Tax Returns and
certain consolidated, combined or unitary state Income Tax Returns;
WHEREAS, pursuant to the Distribution Agreement (as hereinafter
defined), LTC presently intends to distribute all of the common stock, $.01
par value per share, of Healthcare to its common stockholders, Series C
preferred stockholders and debentureholders (the "Distribution"); and
WHEREAS, LTC and Healthcare desire on behalf of themselves, their
subsidiaries and their successors to set forth their respective rights and
obligations with respect to Taxes (as hereinafter defined).
NOW THEREFORE, in consideration of their mutual promises, the parties
hereby agree as follows:
1. DEFINITIONS.
When used herein the following terms shall have the following
meanings:
"AGREEMENT" -- shall have the meaning set forth in the introductory
paragraph hereof.
"CLOSING DATE" -- the date the Distribution is consummated pursuant to
the terms of the Distribution Agreement.
"CODE" -- the Internal Revenue Code of 1986, as amended, or any
successor thereto, as in effect for the taxable year in question.
"DISTRIBUTION" -- shall have the meaning set forth in the recitals
hereof.
"DISTRIBUTION AGREEMENT" -- the Distribution Agreement dated as of
_______ __, 1998 between LTC and Healthcare.
"HEALTHCARE" -- shall have the meaning set forth in the introductory
paragraph hereof.
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"HEALTHCARE ASSETS" -- the retail properties and other assets
(together with any related liabilities) distributed to Healthcare pursuant to
the Distribution Agreement.
"HEALTHCARE GROUP" -- Healthcare and each corporation filing a
consolidated federal Income Tax Return with Healthcare as the parent
corporation.
"INCOME TAX(ES)" -- with respect to any corporation or group of
corporations, any and all Taxes to the extent based upon or measured by net
income (regardless of whether denominated as an "income tax," a "franchise tax"
or otherwise), imposed by any Taxing Authority, together with any related
interest, penalties or other additions thereto.
"IRS" -- the U.S. Internal Revenue Service.
"LTC" -- shall have the meaning set forth in the introductory
paragraph hereof.
"LTC ASSETS" -- the properties and other assets (together with any
related liabilities) retained by LTC pursuant to the Distribution Agreement.
"LTC GROUP" -- for any taxable year or period, LTC and each
corporation filing a consolidated federal Income Tax Return with LTC as the
parent corporation.
"OTHER TAXES" -- Taxes other than Income Taxes.
"OVERDUE RATE" -- a rate of interest per annum that fluctuates with
the federal short-term rate established from time to time pursuant to Code
Section 6621(b).
"TAX(ES)" -- any net income, gross income, gross receipts, sales, use,
excise, franchise, transfer, payroll, premium, property or windfall profits tax,
alternative or add-on minimum tax, or other tax, fee or assessment, together
with any interest and any penalty, addition to tax or other additional amount
imposed by any Taxing Authority, whether any such tax is imposed directly or
through withholding.
"TAXING AUTHORITY" -- the IRS and any other domestic or foreign
governmental authority responsible for the administration of any Tax.
"TAX RETURN(S)" -- all returns, reports, estimates, information
statements, declarations and other filings relating to, or required to be filed
by any taxpayer in connection with, its liability for, or its payment or receipt
of any refund of, any Tax.
2. PREPARATION AND FILING OF TAX RETURNS; PAYMENT OF TAXES
a. LTC shall prepare and timely file, or cause to be prepared
and timely filed, with the appropriate Taxing Authorities (i) all federal and
state Income and Other Tax Returns of the LTC Group and any member or members
thereof for all taxable years and
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periods ending on or before the Closing Date; and (ii) all federal and state
Income and Other Tax Returns of LTC for all taxable years and periods beginning
after the Closing Date. LTC shall pay, or cause to be paid, all Taxes due with
respect to Tax Returns described in this subsection (a). LTC shall be entitled
to all Tax refunds received or receivable with respect to any and all Income and
Other Taxes attributable to the LTC Assets for all taxable years and periods.
b. Healthcare shall prepare and timely file, or cause to be
prepared and timely filed, with the appropriate Taxing Authorities, all federal
and state Income and Other Tax Returns of the Healthcare Group and any member or
members thereof for taxable years and periods beginning after the Closing Date.
Healthcare shall pay, or cause to be paid, all Taxes due with respect to Tax
Returns described in this subsection (b). Healthcare shall be entitled to all
Tax refunds received or receivable with respect to any and all Income and Other
Taxes attributable to the Healthcare Assets for all taxable years and periods.
3. PAYMENTS.
a. METHOD. Unless the parties otherwise agree, all payments
made by a party pursuant to this Agreement shall be made by wire transfer to a
bank account designated from time to time by the other party. The paying party
shall also provide a notice of payment to the recipient.
b. INTEREST. If any payment is not timely paid, interest shall
accrue on the unpaid amount at the Overdue Rate. A payment will be deemed to be
timely paid only if actually received by the payee within seven (7) days of the
receipt of notice from the other party that such payment is due.
c. CHARACTERIZATION. Any payment (other than interest thereon)
made hereunder shall be treated by all parties for all purposes as a nontaxable
intercompany settlement of liabilities existing immediately before the
Distribution or, to the extent appropriate, as a non-taxable dividend
distribution or capital contribution.
4. CONTESTS AND AUDITS; INDEMNIFICATION.
a. NOTICE. Upon the receipt by LTC or Healthcare, as the case
may be, of notice of any pending or threatened Tax audit or assessment which may
affect the liability for Taxes that are subject to indemnification hereunder,
LTC or Healthcare, as the case may be, shall promptly notify the other in
writing of the receipt of such notice.
b. CONTROL AND SETTLEMENT. From and after the Closing Date,
LTC shall have full control over, and the right to represent the interests of,
LTC and all other corporations involved in or affected by any Tax audit or
administrative, judicial or other proceeding relating, in whole or in part, to
Taxes that are subject to indemnification by LTC hereunder. LTC shall have the
right to employ counsel of its choice at its expense, and shall have the
ultimate control of the contest and any settlement or other resolution thereof.
Any
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liability for Taxes established pursuant to such proceeding shall be allocated
and paid in accordance with Section 2 of this Agreement.
c. AMENDMENT OF TAX RETURNS. LTC shall have sole control over
the preparation and filing of any and all amendments to Tax Returns described in
Section 2(a).
d. INDEMNIFICATION. LTC shall indemnify and hold harmless
Healthcare and the Healthcare Group against any and all Income and Other Taxes
specifically attributable to the LTC Assets for all taxable years and periods.
Healthcare shall indemnify and hold harmless LTC against any and all Income and
Other Taxes specifically attributable to the Healthcare Assets for all taxable
years and periods.
5. COOPERATION; DOCUMENT RETENTION; CONFIDENTIALITY.
a. COOPERATION. Upon reasonable request, LTC and Healthcare
shall promptly provide (and shall cause their respective affiliates to provide)
the requesting party with such cooperation and assistance, documents, and other
information, without charge, as may be necessary or reasonably helpful in
connection with (i) the preparation and filing of any original or amended Tax
Return, (ii) the conduct of any audit, appeal, protest or other examination or
any judicial or administrative proceeding involving to any extent Taxes or Tax
Returns within the scope of this Agreement, or (iii) the verification by a party
of an amount payable hereunder to, or receivable hereunder from, another party.
Such cooperation and assistance shall include, without limitation: (a) the
provision on demand of books, records, Tax Returns, documentation or other
information relating to any relevant Tax Return; (b) the execution of any
document that may be necessary or reasonably helpful in connection with the
filing of any Tax Return, or in connection with any audit, appeal, protest,
proceeding, suit or action of the type generally referred to in the preceding
sentence, including, without limitation, the execution of powers of attorney and
extensions of applicable statutes of limitations; (c) the prompt and timely
filing of appropriate claims for refund; and (d) the use of reasonable best
efforts to obtain any documentation from a governmental authority or a third
party that may be necessary or helpful in connection with the foregoing. Each
party shall make its employees and facilities available on a mutually convenient
basis to facilitate such cooperation.
b. RETENTION. LTC and Healthcare shall retain or cause to be
retained all Tax Returns, and all books, records, schedules, workpapers, and
other documents relating thereto, which Tax Returns and other materials are
within the scope of this Agreement, until the expiration of the later of (i) all
applicable statutes of limitations (including any waivers or extensions
thereof), and (ii) any retention period required by law or pursuant to any
record retention agreement. The parties hereto shall notify each other in
writing of any waivers, extensions or expirations of applicable statutes of
limitations, and shall provide at least thirty (30) days prior written notice of
any intended destruction of the documents referred to in the preceding sentence.
A party giving such a notification shall not dispose of any of the foregoing
materials without first allowing the other party a reasonable opportunity to
copy them at such other party's expense.
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c. CONFIDENTIALITY. Except as required by law or with the
prior written consent of the other party, all Tax Returns, documents, schedules,
work papers and similar items and all information contained therein, which Tax
Returns and other materials are within the scope of this Agreement, shall be
kept confidential by the parties hereto and their representatives, shall not be
disclosed to any other person or entity and shall be used only for the purposes
provided herein.
6. MISCELLANEOUS.
a. EFFECTIVENESS. This Agreement shall be effective from and
after the Closing Date and shall survive until the expiration of all applicable
statutes of limitations with respect to taxable years and periods ending on or
before or including the Closing Date.
b. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement and supersedes all prior agreements, understandings, negotiations and
discussions, whether written or oral, between the parties hereto with respect to
the subject matter hereof, so that no such external or separate agreement
relating to the subject matter of this Agreement shall have any effect or be
binding, unless the same is referred to specifically in this Agreement or is
executed by the parties after the date hereof. To the extent that the terms of
this Agreement and similar terms of the Distribution Agreement are in conflict,
this Agreement shall govern. This Agreement cancels and supersedes, as of the
Closing Date, any and all other agreements with respect to Taxes between LTC and
Healthcare.
c. SEVERABILITY. In the event that one or more of the terms or
provisions of this Agreement or the application thereof to any person(s) or in
any circumstance(s) shall, for any reason and to any extent be found by a court
of competent jurisdiction to be invalid, illegal or unenforceable, such court
shall have the power, and hereby is directed, to substitute for or limit such
invalid term(s), provision(s) or application(s) and to enforce such substituted
or limited terms or provisions, or the application thereof. Subject to the
foregoing, the invalidity, illegality or enforceability of any one or more of
the terms or provisions of this Agreement, as the same may be amended from time
to time, shall not affect the validity, legality or enforceability of any other
term or provision hereof.
d. AMENDMENTS; WAIVERS. No termination, cancellation,
modification, amendment, deletion, addition or other change in this Agreement,
or any provision hereof, or waiver of any right or remedy herein provided, shall
be effective for any purpose unless such change or waiver is specifically set
forth in a writing signed by the party or parties to be bound thereby. The
waiver of any right or remedy with respect to any occurrence on one occasion
shall not be deemed a waiver of such right or remedy with respect to such
occurrence on any other occasion.
e. GOVERNING LAW. This Agreement and the rights and obligations
of the parties hereunder shall be governed by the laws of the State of
California, without regard to
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the principles of choice of law thereof, except with respect to matters of law
concerning the internal corporate affairs of any corporate entity which is a
party to or subject of this Agreement, and as to those matters the law of the
jurisdiction under which the respective entity derives its powers shall govern.
f. NOTICES. All notices, requests, demands, statements, bills
and other communications under this Agreement shall be delivered in accordance
with Section 9.04 of the Distribution Agreement.
g. SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and assigns. This Agreement shall not be assigned without the
express written consent of each of the parties hereto.
h. NO THIRD-PARTY BENEFICIARIES. This Agreement is solely for
the benefit of the parties hereto and shall not be deemed to confer upon third
parties any remedy, claim, liability, reimbursement, claim of action or other
right in excess of those existing without this Agreement.
i. TITLES AND HEADINGS. Titles and headings to sections herein
are inserted for the convenience of reference only and are not intended to be a
part of or to affect the meaning or interpretation of this Agreement.
j. PREDECESSORS AND SUCCESSORS. To the extent necessary to
give effect to the purposes of this Agreement, any reference to any corporation
shall also include any predecessor or successor thereto, by operation of law or
otherwise.
k. TAX ELECTIONS. Nothing in this Agreement is intended to
change or otherwise affect any previous tax election made by or on behalf of the
LTC Group, and LTC shall have sole discretion to make or change any and all
elections affecting the LTC Group or any member or members thereof for all
taxable years and periods ending on or before the Closing Date.
l. EXPENSES. Except as otherwise set forth in this Agreement,
all costs and expenses in connection with the preparation, execution, delivery
and implementation of this Agreement and with the consummation of the
transactions contemplated by this Agreement shall be charged to the party for
whose benefit the expenses are incurred, with any expenses which cannot be
allocated on such basis to be split equally between the parties.
m. DISPUTE RESOLUTION. Any dispute arising under this
Agreement shall be resolved by binding arbitration in the manner contemplated by
Section 9.13 of the Distribution Agreement, including the attorneys fees
provisions referred to therein.
n. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which together shall be deemed to be an original and all
of which together shall be deemed to constitute one and the same agreement.
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o. RELATIONSHIP OF PARTIES. Nothing in this Agreement shall be
deemed or construed by the parties or any third party as creating the
relationship of principal and agent, partnership or joint venture between the
parties, it being understood and agreed that no provision contained herein, and
no act of the parties, shall be deemed to create any relationship between the
parties other than the relationship set forth herein.
p. FURTHER ACTION. Healthcare and LTC each shall cooperate in
good faith and take such steps and execute such papers as may be reasonably
requested by the other party to implement the terms and provisions of this
Agreement.
q. LEGAL ENFORCEABILITY. Any provision of this Agreement which
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof. Any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction. Without
prejudice to any rights or remedies otherwise available to any party hereto,
each party hereto acknowledges that damages would be an inadequate remedy for
any breach of the provisions of this Agreement and agrees that the obligations
of the parties hereunder shall be specifically enforceable.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
LTC PROPERTIES, INC., A MARYLAND CORPORATION.
By: _____________________________________________
Name: ___________________________________________
Title: __________________________________________
LTC HEALTHCARE INC., A NEVADA CORPORATION
By: _____________________________________________
Name: ___________________________________________
Title: __________________________________________
S-1
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EXHIBIT 10.6
ADMINISTRATIVE SERVICES AGREEMENT
This ADMINISTRATIVE SERVICES AGREEMENT (this "Agreement") is made and
entered into as of September 30, 1998, by and between LTC PROPERTIES, INC., a
Maryland corporation ("LTC"), and LTC HEALTHCARE, INC., a Nevada corporation
("Healthcare," and collectively with LTC, the "Parties"), effective as of the
Distribution Date (as hereinafter defined).
R E C I T A L S
WHEREAS, subject to certain conditions, LTC intends to spin-off
certain businesses and assets by distributing to LTC common stockholders,
Series C preferred stockholders and debentureholders 1/10 of a share of
common stock, $.01 par value per share, of Healthcare for each share of
common stock, $.01 par value per share ("LTC Common Stock"), of LTC held and
for each share of LTC Common Stock into which shares of Series C preferred
stock and debentures may be converted as of the close of business on the
Record Date (the "Distribution");
WHEREAS, in connection with the Distribution, LTC and Healthcare have
entered into a Distribution Agreement of even date herewith (the "Distribution
Agreement");
WHEREAS, after the Distribution, Healthcare will need office space for
its principal corporate office and certain management and administrative
services to be provided by LTC to Healthcare for a period of time from and
after the Distribution Date; and
WHEREAS, in connection with the Distribution, Healthcare has requested
LTC to provide, and LTC has agreed to provide, office space and certain
management and administrative services to Healthcare from and after the
Distribution Date pursuant to the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, and other valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, LTC and Healthcare agree as follows:
1. DEFINITIONS. As used in this Agreement, the following terms shall have
the meanings indicated below:
"Affiliate" -- with respect to any specified Person, any other Person
directly or indirectly controlling or controlled by, or under direct or indirect
common control with, such specified Person. For purposes of this definition,
"control," when used with respect to any Person, means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" shall have meanings correlative to the foregoing.
Notwithstanding the foregoing, (i) the Affiliates of LTC shall not include
Healthcare or any other Person which would be an Affiliate of LTC by reason of
LTC's ownership of the capital stock of Healthcare prior to the Distribution or
the fact that any officer or director of Healthcare shall also serve as an
officer or director of LTC, and (ii) the Affiliates of Healthcare shall not
include LTC or any other Person which would be an Affiliate of Healthcare by
reason of LTC's ownership of the capital stock of
<PAGE>
Healthcare prior to the Distribution or the fact that any officer or director of
Healthcare shall also serve as an officer or director of LTC.
"Agreement" -- shall have the meaning set forth in the introductory
paragraph hereof.
"Change in Control" shall mean a change in ownership or control of a
party effected through either of the following transactions:
(i) any person or related group of persons (other than
such party or a Affiliate of such party) directly or indirectly acquires
beneficial ownership (within the meaning of Rule 13d-3 under the
Securities Exchange Act of 1934, as amended) of securities possessing
more than fifty percent (50%) of the total combined voting power of such
party's outstanding securities; or
(ii) there is a change in the composition of such party's
board of directors over a period of thirty-six (36) consecutive months
(or less) such that a majority of the board members (rounded up to the
nearest whole number) ceases, by reason of one or more proxy contests for
the election of board members, to be comprised of individuals who either
(A) have been board members continuously since the beginning of such
period or (B) have been elected or nominated for election as board
members during such period by at least a majority of the board members
described in clause (A) who were still in office at the time such
election or nomination was approved by the board; or
(iii) there is a change in the composition of such party's
senior executive management such that both Andre C. Dimitriadis and James
J. Pieczynski cease to be employed by such party.
"Distribution" -- shall have the meaning set forth in the first recital
of this Agreement.
"Distribution Agreement" -- the agreement described in the second
recital of this Agreement.
"Distribution Date" -- the date on which the Distribution occurs, as
defined in the Distribution Agreement.
"Employee Benefit Plan" -- any plan, policy, arrangement, contract or
agreement providing compensation benefits for any group of LTC Employees or
former LTC Employees or individual LTC Employee or former LTC Employee, or the
dependents or beneficiaries of any such LTC Employee or former LTC Employee,
whether formal or informal or written or unwritten, and including, without
limitation, any means, whether or not legally required, pursuant to which any
benefit is provided by LTC to any LTC Employee or former LTC Employee or the
beneficiaries of any such LTC Employee or former LTC Employee, adopted or
entered into by LTC prior to, upon or after the Distribution. The term
"Employee Benefit Plan" as used in this Agreement does not include any contract,
agreement or understanding entered into by LTC relating to settlement of actual
or potential LTC Employee related litigation claims.
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"First Month" -- In the event that the Distribution Date does not fall
on the first day of a month, the month that includes the Distribution Date.
"Full Month" -- A full calendar month during the Term.
"Healthcare" -- shall have the meaning set forth in the introductory
paragraph hereof.
"Healthcare Business" -- any business or operation of Healthcare which
is, pursuant to the Distribution Agreement, to be conducted by Healthcare after
the Distribution.
"Healthcare Employee" -- any individual who (i) is independently hired by
Healthcare after the Distribution Date as an employee of Healthcare, and (ii) is
not an employee or director of LTC.
"Last Month" -- In the event that the Termination Date does not fall on
the last day of a month, the month that includes the Termination Date.
"LTC" -- shall have the meaning set forth in the introductory paragraph
hereof.
"LTC Employee" -- any individual who is an employee or director of LTC
and is not a Healthcare Employee.
"Month" -- a Full Month, First Month or Last Month, as the case may be.
"Monthly Fee" -- The amount payable by Healthcare to LTC under Section
4.1 herein with respect to a particular Full Month or any First Month or Last
Month.
"Parties" -- shall have the meaning set forth in the introductory
paragraph hereof.
"Person" -- any individual, corporation, partnership, association, trust,
estate or other entity or organization, including any governmental entity or
authority.
"Principal Office" -- shall have the meaning set forth in Section 4.2
hereof.
"Record Date" -- September 15, 1998.
"Services" -- shall have the meaning set forth in Section 2 hereof.
"Term" -- shall have the meaning set forth in Section 3 hereof.
"Termination Date" -- shall have the meaning set forth in Section 3
hereof.
2. ENGAGEMENT OF LTC. During the term of this Agreement, LTC shall
provide to Healthcare office space and certain management and administrative
services ("Services"), as more fully described and defined below, as may be
necessary or desirable, or as Healthcare may reasonably request or require,
in connection with the business, operations and affairs of Healthcare.
"Services" means and includes, without limitation, the furnishing of advice,
assistance, guidance, equipment office space and the services of LTC
Employees in connection with, among other things, (i) the Healthcare
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Business and (ii) the use of LTC's management information and accounting
system, the administration of insurance and worker's compensation programs,
legal and employee benefit services and the preparation of payrolls.
3. TERM; TERMINATION. This Agreement shall commence as of the date
hereof for a term of ten years and continue thereafter unless and until
terminated upon the earlier of (a) not less than thirty (30) days' prior
written notice by either Party to the other at any time for any reason or
(b) a Change in Control of LTC (the "Termination Date", with the term of this
Agreement as set forth in this Section 3 being referred to as the "Term").
4. PAYMENTS TO LTC.
4.1. GENERALLY.
(a) FULL MONTH. With respect to each Full Month, in
consideration of the Services provided by LTC hereunder, Healthcare shall pay
to LTC fees equal to 25% of (1) the aggregate amount of all wages, salaries
and bonuses paid to LTC Employees and (2) the aggregate amount of rent paid
by LTC for rental of its principal corporate office located at 300 Esplanade
Drive, Suite 1860, Oxnard, CA 93030 (the "Principal Office") during the Full
Month.
(b) FIRST MONTH AND LAST MONTH. With respect to any First
Month or Last Month, in consideration of the Services provided by LTC
hereunder, Healthcare shall pay to LTC fees equal to the product of:
(i) 25% of (1) the aggregate amount of all wages,
salaries and bonuses paid to LTC Employees and (2) the aggregate amount of
rent paid by LTC for rental of the Principal Office during the First Month or
Last Month, as the case may be; and
(ii) the number of days in the First Month or the Last
Month, as the case may be, which are included in the Term, divided by the
total number of days in the First Month or the Last Month, as the case may be.
4.2. STATEMENT FROM LTC. Promptly and in any event not later than
ten (10) days following the end of each Month, LTC shall provide to
Healthcare a statement setting forth (i) a list of the LTC Employees, (ii)
the aggregate amount of all wages, salaries and bonuses paid to LTC Employees
during the Month and (iii) the aggregate amount of rent paid by LTC for
rental of the Principal Office during the Month.
4.3. PAYMENT BY HEALTHCARE. Promptly and in any event not later
than five (5) days after delivery by LTC of each statement referred to in
Section 4.2, Healthcare shall pay to LTC the Monthly Fee applicable to the
Month to which such statement relates.
5. EMPLOYEE BENEFIT PLANS. From and after the Distribution Date, LTC
shall permit the LTC Employees to continue to participate in the Employee
Benefit Plans on the same basis as such persons participated immediately
prior to the Distribution Date, provided, however, nothing contained in this
Agreement shall prohibit LTC from modifying or terminating any one or more of
the Employee Benefit Plans so long as such modification or termination shall
apply to all participants in such Employee Benefit Plans. LTC shall provide
Healthcare with thirty (30)
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days' prior written notice of its intent to terminate any Employee Benefit Plan
or effect the modification thereof in a manner adverse to Healthcare; provided
that no such notice shall be required for any Employee Benefit Plan which
terminates by its terms without any action by LTC.
6. EMPLOYEES. Nothing in this Agreement shall prohibit Healthcare from
independently hiring one or more Healthcare Employees; provided, however, that
(i) all wages, salaries, payroll taxes, and employee benefits with respect to
Healthcare Employees shall be Healthcare's sole responsibility, and
(ii) Healthcare Employees shall not be subject to this Agreement.
7. GENERAL.
7.1. RELATIONSHIP OF PARTIES. Nothing in this Agreement shall be
deemed or construed by the Parties or any third party as creating the
relationship of principal and agent, partnership or joint venture between the
Parties, it being understood and agreed that no provision contained herein, and
no act of the Parties, shall be deemed to create any relationship between the
Parties other than the relationship set forth herein.
7.2. ACCESS TO INFORMATION; COOPERATION. LTC and Healthcare and their
authorized agents shall be given reasonable access to and may take copies of all
information relating to the subjects of this Agreement (to the extent permitted
by federal and state confidentiality laws) in the custody of the other Party,
including any agent, contractor, subcontractor, agent or any other person or
entity under the contract of such Party.
7.3. SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit
of and be binding upon the Parties hereto and their respective successors and
assigns. This Agreement shall not be assigned without the express written
consent of each of the Parties hereto.
7.4. TITLES AND HEADINGS. Titles and headings to sections herein are
inserted for the convenience of reference only and are not intended to be a part
of or to affect the meaning or interpretation of this Agreement.
7.5. SEVERABILITY. In the event that one or more of the terms or
provisions of this Agreement or the application thereof to any person(s) or in
any circumstance(s) shall, for any reason and to any extent be found by a court
of competent jurisdiction to be invalid, illegal or unenforceable, such court
shall have the power, and hereby is directed, to substitute for or limit such
invalid term(s), provision(s) or application(s) and to enforce such substituted
or limited terms or provisions, or the application thereof. Subject to the
foregoing, the invalidity, illegality or enforceability of any one or more of
the terms or provisions of this Agreement, as the same may be amended from time
to time, shall not affect the validity, legality or enforceability of any other
term or provision hereof.
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7.6. NOTICES. Notices shall be sent to the Parties at the following
addresses:
LTC Properties, Inc.
300 Esplanade Drive, Suite 1860
Oxnard, California 93030
Attn: James J. Pieczynski
Facsimile: (805) 981-8663
LTC Healthcare, Inc.
300 Esplanade Drive, Suite 1860
Oxnard, California 93030
Attn: James J. Pieczynski
Facsimile: (805) 981-8663
Notices may be hand-delivered or sent by certified mail, return receipt
requested, Federal Express or comparable overnight delivery service, or
facsimile. Notice shall be deemed received at the time delivered by hand, on
the fourth business day following deposit in the U.S. mail, and on the first
business day following deposit with Federal Express or other delivery service,
or transmission by facsimile. Any Party to this Agreement may change its
address for notice by giving written notice to the other Party at the address
and in accordance with the procedures provided above.
7.7. FURTHER ACTION. Healthcare and LTC each shall cooperate in good
faith and take such steps and execute such papers as may be reasonably requested
by the other Party to implement the terms and provisions of this Agreement.
7.8. AMENDMENTS; WAIVERS. No termination, cancellation, modification,
amendment, deletion, addition or other change in this Agreement, or any
provision hereof, or waiver of any right or remedy herein provided, shall be
effective for any purpose unless such change or waiver is specifically set forth
in a writing signed by the Party or Parties to be bound thereby. The waiver of
any right or remedy with respect to any occurrence on one occasion shall not be
deemed a waiver of such right or remedy with respect to such occurrence on any
other occasion.
7.9. GOVERNING LAW. This Agreement and the rights and obligations of
the Parties hereunder shall be governed by the laws of the State of California,
without regard to the principles of choice of law thereof, except with respect
to matters of law concerning the internal corporate affairs of any corporate
entity which is a Party to or subject of this Agreement, and as to those matters
the law of the jurisdiction under which the respective entity derives its powers
shall govern.
7.10. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
and supersedes all prior agreements, understandings, negotiations and
discussions, whether written or oral, between the Parties hereto with respect to
the subject matter hereof, so that no such external or separate agreement
relating to the subject matter of this Agreement shall have any effect or be
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binding, unless the same is referred to specifically in this Agreement or is
executed by the Parties after the date hereof. To the extent that the terms of
this Agreement and similar terms of the Distribution Agreement are in conflict,
this Agreement shall govern.
7.11. DISPUTE RESOLUTION. Any dispute arising under this Agreement
shall be resolved by binding arbitration in the manner contemplated by Section
9.13 of the Distribution Agreement, including the attorneys fees provisions
referred to therein.
7.12. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which together shall be deemed to be an original and all
of which together shall be deemed to constitute one and the same agreement.
7.13. NO THIRD PARTY BENEFICIARIES. This Agreement is solely for the
benefit of the Parties hereto and shall not be deemed to confer upon third
parties any remedy, claim, liability, reimbursement, claim of action or other
right in excess of those existing without this Agreement.
7.14. EXPENSES. Except as otherwise set forth in this Agreement, all
costs and expenses in connection with the preparation, execution, delivery and
implementation of this Agreement and with the consummation of the transactions
contemplated by this Agreement shall be charged to the Party for whose benefit
the expenses are incurred, with any expenses which cannot be allocated on such
basis to be split equally between the Parties.
7.15. LEGAL ENFORCEABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof. Any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. Without prejudice to
any rights or remedies otherwise available to any Party hereto, each Party
hereto acknowledges that damages would be an inadequate remedy for any breach of
the provisions of this Agreement and agrees that the obligations of the Parties
hereunder shall be specifically enforceable.
7.16. PREDECESSORS AND SUCCESSORS. To the extent necessary to give
effect to the purposes of this Agreement, any reference to any corporation shall
also include any predecessor or successor thereto, by operation of law or
otherwise.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the Parties have executed this Agreement as of the
date first above written.
LTC PROPERTIES, INC., a Maryland corporation
BY: /s/ ANDRE C. DIMITRIADIS
-------------------------------------------
Name: Andre C. Dimitriadis
Title: Chairman and Chief Executive Officer
LTC HEALTHCARE, INC., a Nevada corporation
By: /s/ JAMES J. PIECZYNSKI
-------------------------------------------
Name: James J. Pieczynski
Title: President and Chief Financial Officer
S-1
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EXHIBIT 10.7
INTERCOMPANY AGREEMENT
This INTERCOMPANY AGREEMENT (the "Agreement") is made and entered into
as of the 30th day of September, 1998, by and between LTC Properties, Inc., a
Maryland corporation ("LTC"), and LTC Healthcare, Inc., a Nevada corporation
("Healthcare").
W I T N E S E T H:
WHEREAS, subject to certain conditions, LTC intends to spin-off certain
businesses and assets by distributing to LTC common stockholders, Series C
preferred stockholders and debentureholders 1/10 of a share of common stock,
$.01 par value per share, of Healthcare for each share of common stock, $.01
par value per share ("LTC Common Stock") of LTC held and for each share of
LTC Common Stock into which shares of Series C preferred stock and debentures
may be converted as of the close of business on the Record Date (the
"Distribution");
WHEREAS, in connection with the Distribution, LTC and Healthcare have
entered into a Distribution Agreement of even date herewith (the "Distribution
Agreement");
WHEREAS, LTC may in certain circumstances determine that it is precluded
from pursuing, or is limited in the manner in which it pursues, various business
opportunities due to its status as a real estate investment trust ("REIT") under
Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the
"Code");
WHEREAS, Healthcare is a newly-formed corporation which was organized by
LTC for the purpose of identifying and making opportunistic real estate
investments that are not generally available to REITs; and
WHEREAS, in light of the purpose for which Healthcare was formed, LTC and
Healthcare desire to enter into this Agreement in order to provide to each other
a right of first opportunity and notification right with respect to certain
investment opportunities.
NOW, THEREFORE, in consideration of the mutual agreements, provisions and
covenants contained in this Agreement, the parties hereby agree as follows:
1. Definitions. Except as otherwise may be expressly provided herein,
the following terms shall have the meanings set forth below:
(a) "Affiliate" with respect to any specified Person, any other
Person directly or indirectly controlling or controlled by, or under direct
or indirect common control with, such specified Person. For purposes of this
definition, "control," when used with respect to any Person, means the power
to direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" shall have meanings correlative
to the foregoing. Notwithstanding the foregoing, (i) the Affiliates of LTC
shall not include Healthcare or any other Person which would be an Affiliate
of LTC by reason of LTC's ownership of the capital stock of Healthcare prior
to the Distribution or the fact that any officer or director of Healthcare
shall also serve as an officer or director of LTC, and (ii) the Affiliates of
Healthcare shall not include LTC or any other Person which would be an
Affiliate of Healthcare by reason of LTC's ownership of
<PAGE>
the capital stock of Healthcare prior to the Distribution or the fact that any
officer or director of Healthcare shall also serve as an officer or director of
LTC.
(b) "Agreement" shall have the meaning set forth in the introductory
paragraph hereof.
(c) "Change in Control" shall mean a change in ownership or control
of a party effected through either of the following transactions:
(i) any person or related group of persons (other than such
party or a Affiliate of such party) directly or indirectly acquires beneficial
ownership (within the meaning of Rule 13d-3 under the Securities Exchange Act of
1934, as amended) of securities possessing more than fifty percent (50%) of the
total combined voting power of such party's outstanding securities; or
(ii) there is a change in the composition of such party's board
of directors over a period of thirty-six (36) consecutive months (or less) such
that a majority of the board members (rounded up to the nearest whole number)
ceases, by reason of one or more proxy contests for the election of board
members, to be comprised of individuals who either (A) have been board members
continuously since the beginning of such period or (B) have been elected or
nominated for election as board members during such period by at least a
majority of the board members described in clause (A) who were still in office
at the time such election or nomination was approved by the board; or
(iii) there is a change in the composition of such party's
senior executive management such that both Andre C. Dimitriadis and James J.
Pieczynski cease to be employed by such party.
(d) "Code" shall have the meaning set forth in the recitals hereof.
(e) "Distribution" shall have the meaning set forth in the first
recital of this Agreement.
(f) "Distribution Agreement" -- the agreement described in the
second recital of this Agreement.
(g) "Healthcare" shall have the meaning set forth in the introductory
paragraph hereof.
(h) "LTC" shall have the meaning set forth in the introductory
paragraph hereof.
(i) "Notice" shall have the meaning set forth in Section 2(a)(i)
hereof.
(j) "Person" shall mean any individual, corporation, partnership,
association, trust, estate or other entity or organization, including any
governmental entity or authority.
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(k) "REIT" shall have the meaning set forth in the recitals hereof.
(l) "REIT Opportunity" shall mean a direct or indirect opportunity
to invest in real estate through mortgage loans, facility lease transactions
and other investments. LTC shall have the right from time to time to provide
written notice to Healthcare specifying certain criteria for a REIT
Opportunity in addition to the criteria specified above in this definition of
REIT Opportunity. Any such written notice from LTC may be modified or
canceled by written notice given by LTC at any time. This definition of REIT
Opportunity shall be modified as appropriate from time to time in accordance
with any such written notices sent by LTC.
(m) "Ten-Day Period" shall have the meaning set forth in Section
2(a)(i) hereof.
(n) "Withdrawal Date" shall have the meaning set forth in Section
2(a)(ii) hereof.
2. RIGHT OF FIRST OPPORTUNITY; NOTIFICATION RIGHT.
(a) RIGHT OF FIRST OPPORTUNITY.
(i) During the term of this Agreement, if Healthcare develops
a REIT Opportunity, or if any REIT Opportunity otherwise becomes available to
Healthcare, Healthcare shall first offer such REIT Opportunity to LTC. The
offer shall be made by written notice (the "Notice") from Healthcare to LTC,
which Notice shall contain a detailed description of the material terms and
conditions of the REIT Opportunity. LTC shall have ten days (the "Ten-Day
Period") from the date of receipt of the Notice to notify Healthcare in writing
that it has accepted or rejected the REIT Opportunity. If LTC does not respond
by the end of the Ten-Day Period, LTC shall be deemed to have rejected the REIT
Opportunity. If LTC accepts a REIT Opportunity, but subsequently decides not to
pursue such opportunity or for any other reason fails to consummate such
opportunity, LTC shall immediately provide written notice that it is no longer
pursuing such REIT Opportunity to Healthcare.
(ii) If LTC rejects a REIT Opportunity, or accepts such REIT
Opportunity but thereafter provides, or is required by the provisions hereof to
provide, written notice to Healthcare that it is no longer pursuing such REIT
Opportunity, Healthcare shall, for a period of one year after the Withdrawal
Date (as hereinafter defined), be entitled to acquire the REIT Opportunity (A)
at a price, and on terms and conditions, that are not more favorable to
Healthcare in any material respect than the price and terms and conditions set
forth in the Notice relating to such REIT Opportunity or (B) if LTC, at any time
after the Notice, negotiated a different price, terms or conditions with the
party providing such REIT Opportunity, then at a price, and on terms and
conditions, that are not more favorable to Healthcare in any material respect
than the price and terms and conditions negotiated by LTC with such party. If
Healthcare does not enter into a binding agreement to acquire the REIT
Opportunity within such one-year period, or if the price and terms and
conditions are more favorable to Healthcare in any material respect than the
price and terms and conditions set forth in the Notice (or, if applicable, than
the
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price and terms and conditions negotiated by LTC with the seller subsequent to
the Notice), Healthcare shall again be required to comply with the procedures
set forth above in Section 2(a)(i) if it desires to acquire such REIT
Opportunity. The "Withdrawal Date" means any one of the following dates, as
applicable: (A) the date that LTC notifies Healthcare that it has rejected the
REIT Opportunity, (B) if LTC does not respond to Healthcare regarding the REIT
Opportunity, the expiration date of the Ten-Day Period, or (C) if LTC accepts
the REIT Opportunity but subsequently ceases to pursue the opportunity, the
earlier of (1) thirty (30) days after the date on which LTC ceases to pursue the
REIT Opportunity or (2) the date of receipt by Healthcare of written notice from
LTC that it is no longer pursuing the REIT Opportunity.
(b) NOTIFICATION RIGHT. In the event that either party hereto
develops or becomes aware of any investment opportunity during the term of this
Agreement (other than a REIT Opportunity), and such party is not interested in
pursuing such opportunity, or the opportunity is otherwise unavailable to such
party, such party shall immediately notify the other party of such opportunity
and provide to the other party a copy of all written information, and a
description of all material terms not set forth in writing, available to such
party concerning such opportunity.
3. GENERAL TERMS AND CONDITIONS FOR FIRST OPPORTUNITY/NOTIFICATION
RIGHTS.
(a) Unless waived or unless agreed to as part of an investment, each
party hereto shall bear its own expenses with respect to any opportunity to
which this Agreement is applicable, and each party agrees that it shall not be
entitled to any compensation from the other party with respect to any such
opportunity.
(b) A party shall not be required to comply with the right of first
opportunity and notification requirements set forth in this Agreement during any
period in which the other party or any Affiliate of such other party is in
default of this Agreement or any other agreement entered into by the parties
hereto or any of their Affiliates, if such default is material and remains
uncured for fifteen (15) days after receipt of notice thereof.
(c) Any opportunity which is offered to and accepted by LTC under
this Agreement may be entered into by or on behalf of LTC or by any designee
which is a Affiliate of LTC. Any opportunity which is offered to and accepted
by Healthcare under this Agreement may be entered into by or on behalf of
Healthcare or by any designee which is a Affiliate of Healthcare.
(d) All first opportunity and notification rights set forth in this
Agreement shall be subordinated to any consent and confidentiality requirements
of any party providing a REIT Opportunity; no party shall be required to comply
with the first opportunity and notification rights set forth in this Agreement
to the extent such compliance would violate any consent or confidentiality
requirements of the party providing such a REIT Opportunity.
(e) While it is the intention of the parties to align their
businesses in accordance with the terms of this Agreement, each party shall act
independently in its own best
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interests, and neither party shall be considered a partner or agent of the other
party or owe any fiduciary or other common law duties to the other party.
4. NO PREPAYMENTS. Healthcare hereby agrees that it shall not prepay
or cause to be prepaid any of its mortgage loans provided by LTC which are
securitized in REMIC transactions.
5. SPECIFIC PERFORMANCE. Each party hereto hereby acknowledges that the
obligations undertaken by it pursuant to this Agreement are unique and that the
other party would likely have no adequate remedy at law if such party shall fail
to perform its obligations hereunder, and such party therefore confirms that the
other party's right to specific performance of the terms of this Agreement is
essential to protect the rights and interests of the other party. Accordingly,
in addition to any other remedies that a party hereto may have at law or in
equity, such party shall have the right to have all obligations, covenants,
agreements and other provisions of this Agreement specifically performed by the
other party hereto and the right to obtain a temporary restraining order or a
temporary or permanent injunction to secure specific performance and to prevent
a breach or threatened breach of this Agreement by the other party.
6. TERM. The term of this Agreement shall commence as of the date of
this Agreement and shall terminate upon the earlier of (a) the tenth (10th)
anniversary of the date of this Agreement, or (b) a Change in Control of LTC.
Notwithstanding the foregoing, a party hereto may terminate this Agreement if
the other party or any Affiliate of such other party is in default of this
Agreement or any other agreement entered into by the parties hereto or any of
their Affiliates, if such default is material and remains uncured for fifteen
(15) days after receipt of notice thereof.
7. MISCELLANEOUS.
(a) NOTICES. Notices shall be sent to the parties at the following
addresses:
LTC Properties, Inc.
300 Esplanade Drive, Suite 1860
Oxnard, California 93030
Attn: James J. Pieczynski
Facsimile: (805) 981-8663
LTC Healthcare, Inc.
300 Esplanade Drive, Suite 1860
Oxnard, California 93030
Attn: James J. Pieczynski
Facsimile: (805) 981-8663
Notices may be hand-delivered or sent by certified mail, return
receipt requested, Federal Express or comparable overnight delivery service, or
facsimile. Notice shall be deemed received at the time delivered by hand, on
the fourth business day following deposit in the U.S. mail, and on the first
business day following deposit with Federal Express or other delivery
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service, or transmission by facsimile. Any party to this Agreement may change
its address for notice by giving written notice to the other party at the
address and in accordance with the procedures provided above.
(b) REASONABLE AND NECESSARY RESTRICTIONS. Each of the parties
hereto hereby acknowledges and agrees that the restrictions, prohibitions and
other provisions of this Agreement are reasonable, fair and equitable in scope,
term and duration, and are necessary to protect the legitimate business
interests of the parties hereto. Each party covenants that it will not sue to
challenge the enforceability of this Agreement or raise any equitable defense to
its enforcement.
(c) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and assigns. This Agreement shall not be assigned without the
express written consent of each of the parties hereto.
(d) AMENDMENTS; WAIVERS. No termination, cancellation, modification,
amendment, deletion, addition or other change in this Agreement, or any
provision hereof, or waiver of any right or remedy herein provided, shall be
effective for any purpose unless such change or waiver is specifically set forth
in a writing signed by the party or parties to be bound thereby. The waiver of
any right or remedy with respect to any occurrence on one occasion shall not be
deemed a waiver of such right or remedy with respect to such occurrence on any
other occasion.
(e) GOVERNING LAW. This Agreement and the rights and obligations of
the parties hereunder shall be governed by the laws of the State of California,
without regard to the principles of choice of law thereof, except with respect
to matters of law concerning the internal corporate affairs of any corporate
entity which is a party to or subject of this Agreement, and as to those matters
the law of the jurisdiction under which the respective entity derives its powers
shall govern.
(f) SEVERABILITY. In the event that one or more of the terms or
provisions of this Agreement or the application thereof to any person(s) or in
any circumstance(s) shall, for any reason and to any extent be found by a court
of competent jurisdiction to be invalid, illegal or unenforceable, such court
shall have the power, and hereby is directed, to substitute for or limit such
invalid term(s), provision(s) or application(s) and to enforce such substituted
or limited terms or provisions, or the application thereof. Subject to the
foregoing, the invalidity, illegality or enforceability of any one or more of
the terms or provisions of this Agreement, as the same may be amended from time
to time, shall not affect the validity, legality or enforceability of any other
term or provision hereof.
(g) ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES. This Agreement
(i) constitutes the entire agreement and supersedes all prior agreements,
understandings, negotiations and discussions, whether written or oral, between
the parties hereto with respect to the subject matter hereof, so that no such
external or separate agreement relating to the subject matter of this Agreement
shall have any effect or be binding, unless the same is referred to
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specifically in this Agreement or is executed by the parties after the date
hereof; and (ii) is solely for the benefit of the parties hereto and shall not
be deemed to confer upon third parties any remedy, claim, liability,
reimbursement, claim of action or other right in excess of those existing
without this Agreement.
(h) TITLES AND HEADINGS. Titles and headings to sections herein are
inserted for the convenience of reference only and are not intended to be a part
of or to affect the meaning or interpretation of this Agreement.
(i) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which together shall be deemed to be an original and all
of which together shall be deemed to constitute one and the same agreement.
(j) DISPUTE RESOLUTION. Any dispute arising under this Agreement
shall be resolved by binding arbitration in the manner contemplated by Section
9.13 of the Distribution Agreement, including the attorneys fees provisions
referred to therein.
(k) EXPENSES. Except as otherwise set forth in this Agreement, all
costs and expenses in connection with the preparation, execution, delivery and
implementation of this Agreement and with the consummation of the transactions
contemplated by this Agreement shall be charged to the party for whose benefit
the expenses are incurred, with any expenses which cannot be allocated on such
basis to be split equally between the parties.
(l) RELATIONSHIP OF PARTIES. Nothing in this Agreement shall be
deemed or construed by the parties or any third party as creating the
relationship of principal and agent, partnership or joint venture between the
parties, it being understood and agreed that no provision contained herein, and
no act of the parties, shall be deemed to create any relationship between the
parties other than the relationship set forth herein.
(m) FURTHER ACTION. Healthcare and LTC each shall cooperate in good
faith and take such steps and execute such papers as may be reasonably requested
by the other party to implement the terms and provisions of this Agreement.
(n) LEGAL ENFORCEABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof. Any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. Without prejudice to
any rights or remedies otherwise available to any party hereto, each party
hereto acknowledges that damages would be an inadequate remedy for any breach of
the provisions of this Agreement and agrees that the obligations of the parties
hereunder shall be specifically enforceable.
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(o) PREDECESSORS AND SUCCESSORS. To the extent necessary to give
effect to the purposes of this Agreement, any reference to any corporation shall
also include any predecessor or successor thereto, by operation of law or
otherwise.
(SIGNATURE PAGE FOLLOWS)
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<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed by one of its duly authorized officers, as of the date
first written above.
LTC PROPERTIES, INC.
BY: /s/ ANDRE C. DIMITRIADIS
-------------------------------------------
Name: Andre C. Dimitriadis
Title: Chairman and Chief Executive Officer
LTC HEALTHCARE, INC.
By: /s/ JAMES J. PIECZYNSKI
-------------------------------------------
Name: James J. Pieczynski
Title: President and Chief Financial Officer
S-1
<PAGE>
EXHIBIT 10.8
TAX SHARING AGREEMENT
TAX SHARING AGREEMENT (the "Agreement"), dated as of September 30,
1998, between LTC Properties, Inc., a Maryland corporation ("LTC"), and LTC
Healthcare, Inc., a Nevada corporation ("Healthcare").
WHEREAS, LTC is the parent corporation of an affiliated group of
corporations that join in filing consolidated federal Income Tax Returns and
certain consolidated, combined or unitary state Income Tax Returns;
WHEREAS, pursuant to the Distribution Agreement (as hereinafter
defined), LTC presently intends to distribute all of the common stock, $.01
par value per share, of Healthcare to its common stockholders, Series C
preferred stockholders and debentureholders (the "Distribution"); and
WHEREAS, LTC and Healthcare desire on behalf of themselves, their
subsidiaries and their successors to set forth their respective rights and
obligations with respect to Taxes (as hereinafter defined).
NOW THEREFORE, in consideration of their mutual promises, the parties
hereby agree as follows:
1. DEFINITIONS.
When used herein the following terms shall have the following
meanings:
"AGREEMENT" -- shall have the meaning set forth in the introductory
paragraph hereof.
"CLOSING DATE" -- the date the Distribution is consummated pursuant to
the terms of the Distribution Agreement.
"CODE" -- the Internal Revenue Code of 1986, as amended, or any
successor thereto, as in effect for the taxable year in question.
"DISTRIBUTION" -- shall have the meaning set forth in the recitals
hereof.
"DISTRIBUTION AGREEMENT" -- the Distribution Agreement dated as of
September 30, 1998 between LTC and Healthcare.
"HEALTHCARE" -- shall have the meaning set forth in the introductory
paragraph hereof.
<PAGE>
"HEALTHCARE ASSETS" -- the retail properties and other assets
(together with any related liabilities) distributed to Healthcare pursuant to
the Distribution Agreement.
"HEALTHCARE GROUP" -- Healthcare and each corporation filing a
consolidated federal Income Tax Return with Healthcare as the parent
corporation.
"INCOME TAX(ES)" -- with respect to any corporation or group of
corporations, any and all Taxes to the extent based upon or measured by net
income (regardless of whether denominated as an "income tax," a "franchise tax"
or otherwise), imposed by any Taxing Authority, together with any related
interest, penalties or other additions thereto.
"IRS" -- the U.S. Internal Revenue Service.
"LTC" -- shall have the meaning set forth in the introductory
paragraph hereof.
"LTC ASSETS" -- the properties and other assets (together with any
related liabilities) retained by LTC pursuant to the Distribution Agreement.
"LTC GROUP" -- for any taxable year or period, LTC and each
corporation filing a consolidated federal Income Tax Return with LTC as the
parent corporation.
"OTHER TAXES" -- Taxes other than Income Taxes.
"OVERDUE RATE" -- a rate of interest per annum that fluctuates with
the federal short-term rate established from time to time pursuant to Code
Section 6621(b).
"TAX(ES)" -- any net income, gross income, gross receipts, sales, use,
excise, franchise, transfer, payroll, premium, property or windfall profits tax,
alternative or add-on minimum tax, or other tax, fee or assessment, together
with any interest and any penalty, addition to tax or other additional amount
imposed by any Taxing Authority, whether any such tax is imposed directly or
through withholding.
"TAXING AUTHORITY" -- the IRS and any other domestic or foreign
governmental authority responsible for the administration of any Tax.
"TAX RETURN(S)" -- all returns, reports, estimates, information
statements, declarations and other filings relating to, or required to be filed
by any taxpayer in connection with, its liability for, or its payment or receipt
of any refund of, any Tax.
2. PREPARATION AND FILING OF TAX RETURNS; PAYMENT OF TAXES
a. LTC shall prepare and timely file, or cause to be prepared
and timely filed, with the appropriate Taxing Authorities (i) all federal and
state Income and Other Tax Returns of the LTC Group and any member or members
thereof for all taxable years and
<PAGE>
periods ending on or before the Closing Date; and (ii) all federal and state
Income and Other Tax Returns of LTC for all taxable years and periods beginning
after the Closing Date. LTC shall pay, or cause to be paid, all Taxes due with
respect to Tax Returns described in this subsection (a). LTC shall be entitled
to all Tax refunds received or receivable with respect to any and all Income and
Other Taxes attributable to the LTC Assets for all taxable years and periods.
b. Healthcare shall prepare and timely file, or cause to be
prepared and timely filed, with the appropriate Taxing Authorities, all federal
and state Income and Other Tax Returns of the Healthcare Group and any member or
members thereof for taxable years and periods beginning after the Closing Date.
Healthcare shall pay, or cause to be paid, all Taxes due with respect to Tax
Returns described in this subsection (b). Healthcare shall be entitled to all
Tax refunds received or receivable with respect to any and all Income and Other
Taxes attributable to the Healthcare Assets for all taxable years and periods.
3. PAYMENTS.
a. METHOD. Unless the parties otherwise agree, all payments
made by a party pursuant to this Agreement shall be made by wire transfer to a
bank account designated from time to time by the other party. The paying party
shall also provide a notice of payment to the recipient.
b. INTEREST. If any payment is not timely paid, interest shall
accrue on the unpaid amount at the Overdue Rate. A payment will be deemed to be
timely paid only if actually received by the payee within seven (7) days of the
receipt of notice from the other party that such payment is due.
c. CHARACTERIZATION. Any payment (other than interest thereon)
made hereunder shall be treated by all parties for all purposes as a nontaxable
intercompany settlement of liabilities existing immediately before the
Distribution or, to the extent appropriate, as a non-taxable dividend
distribution or capital contribution.
4. CONTESTS AND AUDITS; INDEMNIFICATION.
a. NOTICE. Upon the receipt by LTC or Healthcare, as the case
may be, of notice of any pending or threatened Tax audit or assessment which may
affect the liability for Taxes that are subject to indemnification hereunder,
LTC or Healthcare, as the case may be, shall promptly notify the other in
writing of the receipt of such notice.
b. CONTROL AND SETTLEMENT. From and after the Closing Date,
LTC shall have full control over, and the right to represent the interests of,
LTC and all other corporations involved in or affected by any Tax audit or
administrative, judicial or other proceeding relating, in whole or in part, to
Taxes that are subject to indemnification by LTC hereunder. LTC shall have the
right to employ counsel of its choice at its expense, and shall have the
ultimate control of the contest and any settlement or other resolution thereof.
Any
<PAGE>
liability for Taxes established pursuant to such proceeding shall be allocated
and paid in accordance with Section 2 of this Agreement.
c. AMENDMENT OF TAX RETURNS. LTC shall have sole control over
the preparation and filing of any and all amendments to Tax Returns described in
Section 2(a).
d. INDEMNIFICATION. LTC shall indemnify and hold harmless
Healthcare and the Healthcare Group against any and all Income and Other Taxes
specifically attributable to the LTC Assets for all taxable years and periods.
Healthcare shall indemnify and hold harmless LTC against any and all Income and
Other Taxes specifically attributable to the Healthcare Assets for all taxable
years and periods.
5. COOPERATION; DOCUMENT RETENTION; CONFIDENTIALITY.
a. COOPERATION. Upon reasonable request, LTC and Healthcare
shall promptly provide (and shall cause their respective affiliates to provide)
the requesting party with such cooperation and assistance, documents, and other
information, without charge, as may be necessary or reasonably helpful in
connection with (i) the preparation and filing of any original or amended Tax
Return, (ii) the conduct of any audit, appeal, protest or other examination or
any judicial or administrative proceeding involving to any extent Taxes or Tax
Returns within the scope of this Agreement, or (iii) the verification by a party
of an amount payable hereunder to, or receivable hereunder from, another party.
Such cooperation and assistance shall include, without limitation: (a) the
provision on demand of books, records, Tax Returns, documentation or other
information relating to any relevant Tax Return; (b) the execution of any
document that may be necessary or reasonably helpful in connection with the
filing of any Tax Return, or in connection with any audit, appeal, protest,
proceeding, suit or action of the type generally referred to in the preceding
sentence, including, without limitation, the execution of powers of attorney and
extensions of applicable statutes of limitations; (c) the prompt and timely
filing of appropriate claims for refund; and (d) the use of reasonable best
efforts to obtain any documentation from a governmental authority or a third
party that may be necessary or helpful in connection with the foregoing. Each
party shall make its employees and facilities available on a mutually convenient
basis to facilitate such cooperation.
b. RETENTION. LTC and Healthcare shall retain or cause to be
retained all Tax Returns, and all books, records, schedules, workpapers, and
other documents relating thereto, which Tax Returns and other materials are
within the scope of this Agreement, until the expiration of the later of (i) all
applicable statutes of limitations (including any waivers or extensions
thereof), and (ii) any retention period required by law or pursuant to any
record retention agreement. The parties hereto shall notify each other in
writing of any waivers, extensions or expirations of applicable statutes of
limitations, and shall provide at least thirty (30) days prior written notice of
any intended destruction of the documents referred to in the preceding sentence.
A party giving such a notification shall not dispose of any of the foregoing
materials without first allowing the other party a reasonable opportunity to
copy them at such other party's expense.
<PAGE>
c. CONFIDENTIALITY. Except as required by law or with the
prior written consent of the other party, all Tax Returns, documents, schedules,
work papers and similar items and all information contained therein, which Tax
Returns and other materials are within the scope of this Agreement, shall be
kept confidential by the parties hereto and their representatives, shall not be
disclosed to any other person or entity and shall be used only for the purposes
provided herein.
6. MISCELLANEOUS.
a. EFFECTIVENESS. This Agreement shall be effective from and
after the Closing Date and shall survive until the expiration of all applicable
statutes of limitations with respect to taxable years and periods ending on or
before or including the Closing Date.
b. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement and supersedes all prior agreements, understandings, negotiations and
discussions, whether written or oral, between the parties hereto with respect to
the subject matter hereof, so that no such external or separate agreement
relating to the subject matter of this Agreement shall have any effect or be
binding, unless the same is referred to specifically in this Agreement or is
executed by the parties after the date hereof. To the extent that the terms of
this Agreement and similar terms of the Distribution Agreement are in conflict,
this Agreement shall govern. This Agreement cancels and supersedes, as of the
Closing Date, any and all other agreements with respect to Taxes between LTC and
Healthcare.
c. SEVERABILITY. In the event that one or more of the terms or
provisions of this Agreement or the application thereof to any person(s) or in
any circumstance(s) shall, for any reason and to any extent be found by a court
of competent jurisdiction to be invalid, illegal or unenforceable, such court
shall have the power, and hereby is directed, to substitute for or limit such
invalid term(s), provision(s) or application(s) and to enforce such substituted
or limited terms or provisions, or the application thereof. Subject to the
foregoing, the invalidity, illegality or enforceability of any one or more of
the terms or provisions of this Agreement, as the same may be amended from time
to time, shall not affect the validity, legality or enforceability of any other
term or provision hereof.
d. AMENDMENTS; WAIVERS. No termination, cancellation,
modification, amendment, deletion, addition or other change in this Agreement,
or any provision hereof, or waiver of any right or remedy herein provided, shall
be effective for any purpose unless such change or waiver is specifically set
forth in a writing signed by the party or parties to be bound thereby. The
waiver of any right or remedy with respect to any occurrence on one occasion
shall not be deemed a waiver of such right or remedy with respect to such
occurrence on any other occasion.
e. GOVERNING LAW. This Agreement and the rights and obligations
of the parties hereunder shall be governed by the laws of the State of
California, without regard to
<PAGE>
the principles of choice of law thereof, except with respect to matters of law
concerning the internal corporate affairs of any corporate entity which is a
party to or subject of this Agreement, and as to those matters the law of the
jurisdiction under which the respective entity derives its powers shall govern.
f. NOTICES. All notices, requests, demands, statements, bills
and other communications under this Agreement shall be delivered in accordance
with Section 9.04 of the Distribution Agreement.
g. SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and assigns. This Agreement shall not be assigned without the
express written consent of each of the parties hereto.
h. NO THIRD-PARTY BENEFICIARIES. This Agreement is solely for
the benefit of the parties hereto and shall not be deemed to confer upon third
parties any remedy, claim, liability, reimbursement, claim of action or other
right in excess of those existing without this Agreement.
i. TITLES AND HEADINGS. Titles and headings to sections herein
are inserted for the convenience of reference only and are not intended to be a
part of or to affect the meaning or interpretation of this Agreement.
j. PREDECESSORS AND SUCCESSORS. To the extent necessary to
give effect to the purposes of this Agreement, any reference to any corporation
shall also include any predecessor or successor thereto, by operation of law or
otherwise.
k. TAX ELECTIONS. Nothing in this Agreement is intended to
change or otherwise affect any previous tax election made by or on behalf of the
LTC Group, and LTC shall have sole discretion to make or change any and all
elections affecting the LTC Group or any member or members thereof for all
taxable years and periods ending on or before the Closing Date.
l. EXPENSES. Except as otherwise set forth in this Agreement,
all costs and expenses in connection with the preparation, execution, delivery
and implementation of this Agreement and with the consummation of the
transactions contemplated by this Agreement shall be charged to the party for
whose benefit the expenses are incurred, with any expenses which cannot be
allocated on such basis to be split equally between the parties.
m. DISPUTE RESOLUTION. Any dispute arising under this
Agreement shall be resolved by binding arbitration in the manner contemplated by
Section 9.13 of the Distribution Agreement, including the attorneys fees
provisions referred to therein.
n. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which together shall be deemed to be an original and all
of which together shall be deemed to constitute one and the same agreement.
<PAGE>
o. RELATIONSHIP OF PARTIES. Nothing in this Agreement shall be
deemed or construed by the parties or any third party as creating the
relationship of principal and agent, partnership or joint venture between the
parties, it being understood and agreed that no provision contained herein, and
no act of the parties, shall be deemed to create any relationship between the
parties other than the relationship set forth herein.
p. FURTHER ACTION. Healthcare and LTC each shall cooperate in
good faith and take such steps and execute such papers as may be reasonably
requested by the other party to implement the terms and provisions of this
Agreement.
q. LEGAL ENFORCEABILITY. Any provision of this Agreement which
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof. Any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction. Without
prejudice to any rights or remedies otherwise available to any party hereto,
each party hereto acknowledges that damages would be an inadequate remedy for
any breach of the provisions of this Agreement and agrees that the obligations
of the parties hereunder shall be specifically enforceable.
[SIGNATURE PAGE FOLLOWS]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
LTC PROPERTIES, INC., A MARYLAND CORPORATION.
BY: /s/ ANDRE C. DIMITRIADIS
----------------------------------------
Name: Andre C. Dimitriadis
Title: Chairman and Chief Executive Officer
LTC HEALTHCARE INC., A NEVADA CORPORATION
By: /s/ JAMES J. PIECZYNSKI
----------------------------------------
Name: James J. Pieczynski
Title: President and Chief Financial Officer
S-1
<PAGE>
EXHIBIT 10.9
AMENDED AND RESTATED PROMISSORY NOTE
$20,000,000.00 Date: May 19, 1998
Oxnard, California
THIS AMENDED AND RESTATED PROMISSORY NOTE (THIS "NOTE") SUPERSEDES AND
REPLACES THAT CERTAIN PROMISSORY NOTE DATED MARCH 30, 1998 MADE BY LTC
HEALTHCARE, INC. (FORMERLY KNOWN AS LTC EQUITY HOLDING COMPANY, INC.), AS MAKER,
IN FAVOR OF LTC PROPERTIES, INC., AS PAYEE, IN THE MAXIMUM PRINCIPAL AMOUNT OF
EIGHT MILLION DOLLARS ($8,000,000.00) (THE "ORIGINAL NOTE").
In installments as herein stated, for value received, LTC HEALTHCARE, INC.,
a Nevada corporation (formerly known as LTC Equity Holding Company, Inc.)
("Maker"), hereby promises to pay to the order of LTC PROPERTIES, INC., a
Maryland corporation ("Payee"), at Payee's principal place of business in
Oxnard, California, or such other place as Payee may from time to time
designate, the principal sum of Twenty Million Dollars ($20,000,000.00), or so
much thereof as may have been advanced, with interest accruing on the principal
amount from time to time outstanding from the date hereof to and including the
Maturity Date (as defined below) at a rate equal to the lesser of (i) Ten
Percent (10%) per annum, or (ii) the Highest Lawful Rate (defined in Section 11,
below). Principal and interest shall be payable as more particularly set forth
below. All principal and accrued but unpaid interest shall be due on or before
April 1, 2008 (the "Maturity Date"). Principal, interest and all other sums due
hereunder shall be payable in lawful money of the United States.
Maker desires to obtain an unsecured line of credit from Payee to enable
Maker to borrow, from time to time, sums up to, but not exceeding, in the
aggregate the principal sum of Twenty Million Dollars ($20,000,000.00).
Accordingly, this Note represents funds that will be advanced to Maker in a
series of disbursements that will be made, from time to time, up to, but not
exceeding, in the aggregate the principal amount of Twenty Million Dollars
($20,000,000.00). As a condition to Payee's obligation to make each and every
disbursement hereunder, Payee shall receive a request for advance setting forth
the desired amount of the advance and specifying the wiring instructions to
which the advance should be sent (or other method of delivery) not later than
two (2) business days prior to the date on which Maker wishes to receive the
funds. No request for any such advance shall be for an amount less than One
Hundred Thousand Dollars ($100,000.00).
1. PAYMENTS.
(a) PAYMENTS OF INTEREST. Payments of interest only under this Note
shall be made in arrears in bi-annual installments, without set-off, deduction,
demand or notice of any kind or nature whatsoever, on the 1st day of April and
the 1st day of October of each and every calendar year (each a "Payment Date")
in an amount equal to the accrued but unpaid interest for
1
<PAGE>
the immediately preceding six-month period on the principal amount
outstanding from time to time. Notwithstanding the foregoing, Maker
acknowledges and agrees that Maker shall pay to Payee on the first (1st)
Payment Date (I.E., October 1, 1998) the accrued but unpaid interest on
advances made from and including March 30, 1998 to and including September
30, 1998, including, but not limited to, accrued but unpaid interest on
advances made under the Original Note.
(b) PAYMENTS ON MATURITY DATE. Assuming no acceleration by Payee and
no prepayment in full of the Loan by Maker, on the Maturity Date, Maker shall
pay to Payee the entire outstanding principal balance, accrued and unpaid
interest and any and all other outstanding charges, fees or amounts owing to
Payee by Maker under this Note. Maker acknowledges and agrees that the
outstanding principal balance under this Note includes, without limitation, the
principal sum of Four Million Nine Hundred Thirty-Nine Thousand Dollars
($4,939,000.00) advanced by Payee to Maker between March 30, 1998 and May 18,
1998 under the Original Note.
2. PREPAYMENTS. Maker shall have the right to prepay all or any part of
the principal balance of this Note at any time without premium, penalty, or
charge of any kind whatsoever; provided, however, there shall be no discount of
any kind for any prepayment.
3. LATE PAYMENT CHARGE; NO WAIVER. MAKER ACKNOWLEDGES THAT LATE PAYMENT
TO PAYEE OF ANY SUMS DUE HEREUNDER WILL CAUSE PAYEE TO INCUR COSTS NOT
CONTEMPLATED HEREUNDER, THE EXACT AMOUNT OF WHICH WILL BE IMPRACTICABLE OR
EXTREMELY DIFFICULT TO ASCERTAIN. SUCH COSTS INCLUDE, BUT ARE NOT LIMITED TO,
PROCESSING AND ACCOUNTING CHARGES. ACCORDINGLY, IF ANY INSTALLMENT IS NOT
RECEIVED BY PAYEE WHEN DUE, OR IF ANY REMAINING PRINCIPAL AND ACCRUED BUT UNPAID
INTEREST OWING UNDER THIS NOTE IS NOT PAID IN FULL ON THE MATURITY DATE, MAKER
SHALL THEN PAY TO PAYEE AN ADDITIONAL SUM OF FIVE PERCENT (5%) OF THE OVERDUE
AMOUNT AS A LATE CHARGE. THE PARTIES HEREBY AGREE THAT LATE CHARGE REPRESENTS A
FAIR AND REASONABLE ESTIMATE OF THE COSTS PAYEE WILL INCUR BY REASON OF LATE
PAYMENT. THIS PROVISION SHALL NOT, HOWEVER, BE CONSTRUED AS EXTENDING THE TIME
FOR PAYMENT OF ANY AMOUNT HEREUNDER, AND ACCEPTANCE OF SUCH LATE CHARGE BY PAYEE
SHALL IN NO EVENT CONSTITUTE A WAIVER OF MAKER'S DEFAULT WITH RESPECT TO SUCH
OVERDUE AMOUNT NOR PREVENT PAYEE FROM EXERCISING ANY OF ITS OTHER RIGHTS AND
REMEDIES WITH RESPECT TO SUCH DEFAULT.
INITIAL: JJP
-------
MAKER
4. DEFAULT. The occurrence of any of the following shall constitute an
event of default ("Event of Default") under this Note:
2
<PAGE>
(a) failure to make any payment of principal, interest, or any
other sums due hereunder within five (5) business days of the date due;
(b) the occurrence of any breach or default of any other
obligation of Maker, monetary or otherwise, hereunder, which breach or default
shall continue for more than sixty (60) calendar days after Maker has received
written notice thereof from Payee.
5. ACCELERATION RIGHTS. Upon the occurrence of an Event of Default
hereunder, Payee may, in its sole discretion, declare the entire balance of
principal and interest hereon immediately due and payable, together with all
costs of collection, including reasonable attorneys' fees and all other costs
and expenses incurred.
6. ATTORNEYS' FEES AND COSTS. In the event it becomes necessary for
Payee to utilize legal counsel for the enforcement of this Note or any of its
terms, if Payee is successful in such enforcement by legal proceedings or
otherwise, Payee shall be reimbursed immediately by Maker for all reasonable
attorneys' fees and other costs and expenses.
7. WAIVERS. Maker of this Note hereby waives diligence, demand,
presentment for payment, exhibition of this Note, notice of non-payment or
dishonor, protest and notice of protest, notice of demand, notice of election of
any right of holder hereof, any and all exemption rights against this
indebtedness, and expressly agrees that, at Payee's election, the time for
performance of any obligation under this Note may be extended from time to time,
without notice and that no such extension, renewal, or partial release shall
release Maker from its obligation of payment of this Note or any installment
hereof, and consents to offset of any sums owed to Maker by the holder hereof at
any time.
8. ASSIGNMENT/TRANSFER BY PAYEE. Payee, in Payee's sole and absolute
discretion, and without notice to Maker, shall have the absolute right to sell,
assign, gift, transfer, convey, encumber or otherwise dispose of all or a
portion of the holder's rights in this Note or any other agreement related
thereto. Maker may not assign, gift, transfer, convey, encumber or otherwise
dispose of all or a portion of its rights, nor delegate its duties or
obligations under this Note or any other agreement related thereto.
9. GOVERNING LAW. This Note shall in all respects be interpreted,
enforced, and governed by and under the internal laws of the State of California
without resort to choice of law principles.
10. SEVERABILITY. Every provision hereof is intended to be several. If
any provision of this Note is determined by a court of competent jurisdiction to
be illegal, invalid or unenforceable, such illegality, invalidity or
unenforceability shall not affect the other provisions hereof, which shall
remain binding and enforceable.
11. COMPLIANCE WITH USURY LAWS. It is the intention of the parties
hereto to conform strictly to applicable usury laws regarding the use,
forbearance or detention of the
3
<PAGE>
indebtedness evidenced by this Note, whether such laws are now or hereafter
in effect, including the laws of the United States of America or any other
jurisdiction whose laws are applicable, and including subsequent revisions to
or judicial interpretations of those laws, in each case to the extent they
are applicable to this Note (the "Applicable Usury Laws"); provided, however,
if such laws shall hereafter permit higher rates of interest, then the
Applicable Usury Laws shall be the laws allowing the higher rate of interest.
Accordingly, the following shall apply:
(a) if any acceleration of the Maturity Date of this Note or any
payment by Maker or any other person or entity results in the amount of interest
contracted for, charged, taken, reserved, received by or paid by Maker or such
other person or entity on the principal amount outstanding, from time to time,
on the Note being deemed to have been in excess of the Maximum Amount, as
hereinafter defined, or if any transaction contemplated hereby would otherwise
be usurious under any Applicable Usury Laws, then, in that event,
notwithstanding anything to the contrary in this Note, it is agreed as follows:
(i) the provisions of this Section 11 shall govern and control; (ii) the
aggregate of all interest under Applicable Usury Laws that is contracted for,
charged, taken, reserved or received under this Note, or under any of the other
aforesaid agreements or instruments or otherwise shall under no circumstances
exceed the Maximum Amount, and any excess shall either be refunded to Maker or
applied in reduction of principal, if permitted by California law, in the sole
discretion of Payee; (iii) neither Maker nor any other person or entity shall
obligated to pay the amount of such interest to the extent it is in excess of
the Maximum Amount; (iv) any interest contracted for, charged, reserved, taken
or received in excess of the Maximum Amount shall be deemed an accidental or
bona fide error and canceled automatically to the extent of such excess; and (v)
the effective rate of interest on the Loan shall be IPSO FACTO reduced to the
Highest Lawful Rate (defined below), and the provision of this Note shall be
deemed reformed, without the necessity of the execution of any new document, so
as to comply with all Applicable Usury Laws. All sums paid, or agreed to be
paid, to Payee for the use, forbearance, or the detention of the indebtedness of
Maker to Payee evidenced by this Note shall, to the fullest extent permitted by
the Applicable Usury Laws, be amortized, pro-rated, allocated and spread
throughout the full term of the indebtedness evidenced by this Note so that the
actual rate of interest does not exceed the Highest Lawful Rate in effect at any
particular time during the full term thereof. As used herein, the term "Maximum
Amount" means the maximum non-usurious amount of interest which may be lawfully
contracted for, charged, reserved, taken or received by Payee in connection with
the indebtedness evidenced by this Note under all applicable Usury Laws.
(b) If at any time interest on the Loan, together with any fees
and additional amounts payable hereunder or under any other agreements or
instruments that are deemed to constitute interest under Applicable Usury
Laws (the "Additional Interest"), exceeds the Highest Lawful Rate, then the
amount of interest to accrue pursuant to this Note shall be limited,
notwithstanding anything to the contrary in this Note, or any other agreement
or instrument, to the amount of interest that would accrue at the Highest
Lawful Rate; provided, however, that to the fullest extent permitted by
Applicable Usury Laws, any subsequent reductions in the interest rate shall
not reduce the interest to accrue pursuant to this Note below the Highest
Lawful Rate until the aggregate amount of interest actually accrued pursuant
to this Note, together with all Additional Interest, equals the amount of
interest which would have accrued if the Highest
4
<PAGE>
Lawful Rate had at all times been in effect and such Additional Interest, if
any, had been paid in full.
For purposes of this Note, the term "Highest Lawful Rate" means the
maximum rate of interest and other charges (if any such maximum exists) for
the forbearance of the payment of monies, if any that may be charged,
contracted for, reserved, taken or received under all Applicable Usury Laws
on the principal balance of this Note from time to time outstanding.
IN WITNESS WHEREOF, the Maker has caused this Note to be executed as of
the date first above written.
MAKER:
LTC HEALTHCARE, INC.,
A NEVADA CORPORATION
By: /s/ James J. Pieczynski
-------------------------------------
Name: JAMES J. PIECZYNSKI
-------------------------------------
Its: President and Chief Financial Officer
-------------------------------------
5
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM LTC
PROPERTIES, INC.'S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER
30, 1998 FILED HEREWITH AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000887905
<NAME> LTC PROPERTIES, INC.
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