MORTGAGE LOAN PURCHASE AGREEMENT
Mortgage Loan Purchase Agreement, dated as of May 1, 1997 (the
"Agreement"), between First Union National Bank of North Carolina (the "Seller")
and First Union Commercial Mortgage Securities, Inc. (the "Purchaser").
The Seller intends to sell and the Purchaser intends to purchase certain
multifamily and commercial mortgage loans (the "Mortgage Loans") as provided
herein. The Purchaser intends to deposit them, together with the LBHI Mortgage
Loans (as defined below), into a trust fund (the "Trust Fund"), the beneficial
ownership of which will be evidenced by multiple classes (each, a "Class") of
mortgage pass-through certificates (the "Certificates"). One or more "real
estate mortgage investment conduit" ("REMIC") elections will be made with
respect to the Trust Fund. The Trust Fund will be created and the Certificates
will be issued pursuant to a Pooling and Servicing Agreement (the "Pooling and
Servicing Agreement"), dated as of May 1, 1997 (the "Cut-off Date"), among the
Purchaser as depositor, First Union National Bank of North Carolina as master
servicer (in such capacity, the "Master Servicer"), CRIIMI MAE Services Limited
Partnership as special servicer (in such capacity, the "Special Servicer") and
State Street Bank and Trust Company as trustee (the "Trustee"). Concurrently
with the purchase of Mortgage Loans pursuant to this Agreement, the Purchaser
will also purchase multifamily and commercial mortgage loans pursuant to a
Mortgage Loan Purchase Agreement, dated as of May 1, 1997, between ▇▇▇▇▇▇
Brothers Holdings Inc. ("LBHI") and the Purchaser (the "LBHI Agreement"). Such
mortgage loans (the "LBHI Mortgage Loans") will likewise be deposited into the
Trust Fund. Capitalized terms used but not defined herein have the respective
meanings set forth in the Pooling and Servicing Agreement.
Now, therefore, in consideration of the premises and the mutual agreements
set forth herein, the parties agree as follows:
SECTION 1. Agreement to Purchase.
(a) The Seller agrees to sell, and the Purchaser agrees to purchase, the
Mortgage Loans identified on the schedule (the "Mortgage Loan Schedule") annexed
hereto as Exhibit A. The Mortgage Loan Schedule may be amended to reflect the
actual Mortgage Loans accepted by the Purchaser pursuant to the terms hereof.
(The Mortgage Loans identified on the Mortgage Loan Schedule shall hereinafter
be referred to as the "First Union Mortgage Loans.") The First Union Mortgage
Loans will have an aggregate principal balance of $521,259,642.31 (the "First
Union Balance") as of the close of business on the Cut-off Date, after giving
effect to any payments due on or before such date whether
or not received. The First Union Balance and the LBHI Balance (as defined in the
LBHI Agreement) together equal an aggregate principal balance (the "Initial Pool
Balance") of $1,305,448,224. The purchase and sale of the First Union Mortgage
Loans shall take place on May 1, 1997 or such other date as shall be mutually
acceptable to the parties hereto (the "Closing Date"). The consideration for the
First Union Mortgage Loans shall consist of (A) a cash amount equal to 100% of
the aggregate principal balance of the First Union Mortgage Loans, plus (B)
interest accrued on each First Union Mortgage Loan at the related Net Mortgage
Rate, for the period from and including the Cut-off Date up to but not including
the Closing Date, which cash amount shall be paid to the Seller or its designee
by wire transfer in immediately available funds on the Closing Date.
The Purchaser will assign to the Trustee, all of its right, title and
interest in and to the First Union Mortgage Loans.
SECTION 2. Conveyance of Mortgage Loans.
(a) Effective as of the Closing Date, subject only to receipt of the
purchase price referred to in Section 1 hereof, the Seller does hereby sell,
transfer, assign, set over and otherwise convey to the Purchaser, without
recourse, all the right, title and interest of the Seller in and to the First
Union Mortgage Loans identified on the Mortgage Loan Schedule as of such date
other than the primary servicing rights. The Mortgage Loan Schedule, as it may
be amended, shall conform to the requirements set forth in this Agreement and
the Pooling and Servicing Agreement.
(b) The Purchaser or its assignee shall be entitled to receive all
scheduled payments of principal and interest due after the Cut-off Date, and all
other recoveries of principal and interest collected after the Cut-off Date
(other than in respect of principal and interest on the First Union Mortgage
Loans due on or before the Cut-off Date). All scheduled payments of principal
and interest due on or before the Cut-off Date but collected after the Cut-off
Date, and recoveries of principal and interest collected on or before the
Cut-off Date (only in respect of principal and interest on the First Union
Mortgage Loans due on or before the Cut-off Date), shall belong to, and be
promptly remitted to, the Seller.
(c) The Seller hereby represents and warrants that it has, on behalf of the
Purchaser, delivered to the Trustee, the documents and instruments specified
below with respect to each First Union Mortgage Loan (each a "Mortgage File").
All Mortgage Files so delivered will be held by the Trustee in escrow at all
times prior to the Closing Date. Each Mortgage File shall, except as otherwise
disclosed on Exhibit B hereto, contain the following documents:
-2-
(i) the original executed Mortgage Note, endorsed (without recourse,
representation or warranty, express or implied) to the order of
State Street Bank and Trust Company, as trustee for the
registered holders of the First Union-▇▇▇▇▇▇ Brothers Commercial
Mortgage Trust, Commercial, Mortgage Pass-Through Certificates,
Series 1997-C1;
(ii) an original or copy of the Mortgage and of any intervening
assignments thereof, in each case with evidence of recording
indicated thereon;
(iii) an original or copy of any related Assignment of Leases (with
recording information indicated thereon), if such item is a
document separate from the Mortgage;
(iv) an original executed assignment of the Mortgage, any related
Assignment of Leases (if such item is a document separate from
the Mortgage), and any other recorded document relating to the
Mortgage Loan otherwise included in the Mortgage File, in favor
of State Street Bank and Trust Company, as trustee for the
registered holders of the First Union-▇▇▇▇▇▇ Brothers Commercial
Mortgage Trust, Commercial Mortgage Pass-Through Certificates,
Series 1997-C1, in recordable form;
(v) an original assignment of all unrecorded documents relating to
the Mortgage Loan in favor of State Street Bank and Trust
Company, as trustee for the registered holders of the First
Union-▇▇▇▇▇▇ Brothers Commercial Mortgage Trust, Commercial
Mortgage Pass-Through Certificates, Series 1997-C1;
(vi) originals or copies of any written modification agreements in
those instances where the terms or provisions of the Mortgage or
Mortgage Note have been modified;
(vii) the original or a copy of the policy or certificate of lender's
title insurance issued on the date of the origination of such
Mortgage Loan, or, if such policy has not been issued, an
irrevocable, binding commitment to issue such title insurance
policy; and
(viii) filed copies of any prior UCC Financing Statements in favor of
the originator of such Mortgage Loan or in favor of any assignee
prior to the Trustee (but only to the extent the
-3-
Seller had possession of such UCC Financing Statements prior to
the Closing Date) and, if there is an effective UCC Financing
Statement in favor of the Seller on record with the applicable
public office for UCC Financing Statements, an original UCC-2 or
UCC-3, as appropriate, in favor of State Street Bank and Trust
Company, as trustee for the registered holders of the First
Union-▇▇▇▇▇▇ Brothers Commercial Mortgage Trust, Commercial
Mortgage Pass-Through Certificates, Series 1997-C1.
(d) Within 30 days following the Closing Date, the Purchaser shall submit
or cause to be submitted for recordation or filing, as the case may be, in the
appropriate public office for real property records or Uniform Commercial Code
financing statements, as appropriate, each assignment of Mortgage and each
assignment of Assignment of Leases referred to in clauses (iv) and (v) of
subsection (c) above and each UCC-2 and UCC-3 in favor of and delivered to the
Trustee constituting part of the Mortgage File. If any such document or
instrument is lost or returned unrecorded or unfiled, as the case may be,
because of a defect therein, then the Seller shall prepare a substitute therefor
or cure such defect or cause such to be done, as the case may be, and the Seller
shall deliver such substitute or corrected document or instrument to the
Purchaser or its designee.
(e) All documents necessary to the servicing of the First Union Mortgage
Loans and in the Seller's possession (the "Additional Mortgage Loan Documents")
that are not required to be delivered to the Trustee shall be delivered or
caused to be delivered by the Seller to the Master Servicer or at the direction
of the Master Servicer to the appropriate sub-servicer.
SECTION 3. Representations, Warranties and Covenants of Seller.
(a) The Seller hereby represents and warrants to and covenants with the
Purchaser, as of the date hereof, that:
(i) The Seller is a national banking association validly existing
under the laws of the United States of America and possesses all requisite
authority, power, licenses, permits and franchises to carry on its business
as currently conducted by it and to execute, deliver and comply with its
obligations under the terms of this Agreement.
(ii) This Agreement has been duly and validly authorized, executed and
delivered by the Seller and, assuming due authorization, execution and
delivery hereof by the Purchaser, constitutes a legal, valid and binding
obligation of the Seller, enforceable against the Seller in accordance with
its terms, except as such enforcement may be limited by bankruptcy,
insolvency, reorganization,
-4-
moratorium and other laws affecting the enforcement of creditors' rights in
general, as they may be applied in the context of the insolvency of a
National Banking Association, and by general equity principles (regardless
of whether such enforcement is considered in a proceeding in equity or at
law), or by public policy considerations underlying the securities laws, to
the extent that such public policy considerations limit the enforceability
of the provisions of this Agreement which purport to provide
indemnification from liabilities under applicable securities laws.
(iii) The execution and delivery of this Agreement by the Seller and
the Seller's performance and compliance with the terms of this Agreement
will not (A) violate the Seller's Articles of Association or By-Laws, (B)
violate any law or regulation or any administrative decree or order to
which it is subject or (C) 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, any material contract, agreement or other
instrument to which the Seller is a party or by which the Seller is bound.
(iv) The Seller 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 or body, which default might have
consequences that would, in the Seller's reasonable and good faith
judgment, materially and adversely affect the condition (financial or
other) or operations of the Seller or its properties or have consequences
that would materially and adversely affect its performance hereunder.
(v) The Seller is not a party to or bound by any agreement or
instrument or subject to any articles of association, bylaws or any other
corporate restriction or any judgment, order, writ, injunction, decree, law
or regulation that would, in the Seller's reasonable and good faith
judgment, materially and adversely affect the ability of the Seller to
perform its obligations under this Agreement or that requires the consent
of any third person to the execution of this Agreement or the performance
by the Seller of its obligations under this Agreement.
(vi) No consent, approval, authorization or order of any court or
governmental agency or body is required for the execution, delivery and
performance by the Seller of or compliance by the Seller with this
Agreement or the consummation of the transactions contemplated by this
Agreement and no bulk sale law applies to such transactions.
(vii) No litigation is pending or, to the best of the Seller's
knowledge, threatened against the Seller that would, in the Seller's good
faith and reasonable judgment, prohibit its entering into this Agreement or
-5-
materially and adversely affect the performance by the Seller of its
obligations under this Agreement.
(viii) Under generally accepted accounting principles ("GAAP") and for
federal income tax purposes, the Seller will report the transfer of the
First Union Mortgage Loans to the Purchaser as a sale of the First Union
Mortgage Loans to the Purchaser in exchange for consideration consisting of
[(A) a cash amount equal to 100% of the aggregate principal balance of the
First Union Mortgage Loans, plus (B) interest accrued on each First Union
Mortgage Loan at the related Net Mortgage Rate, for the period from and
including the Cut-off Date up to but not including the Closing Date]. The
consideration received by the Seller upon the sale of the First Union
Mortgage Loans to the Purchaser will constitute reasonably equivalent value
and fair consideration for the First Union Mortgage Loans. The Seller will
be solvent at all relevant times prior to, and will not be rendered
insolvent by, the sale of the First Union Mortgage Loans to the Purchaser.
The Seller is not selling the First Union Mortgage Loans to the Purchaser
with any intent to hinder, delay or defraud any of the creditors of the
Seller.
(b) The Seller hereby represents and warrants for the benefit of the
Purchaser and the Trustee for the benefit of the Certificateholders as of the
Closing Date, with respect to each First Union Mortgage Loan, that:
(i) The information pertaining to each Mortgage Loan set forth in the
Mortgage Loan Schedule was true and correct in all material respects as of
the Cut-Off Date;
(ii) If such Mortgage Loan was originated by the Seller or an
affiliate thereof, then, as of the date of its origination, such Mortgage
Loan complied in all material respects with, or was exempt from, all
requirements of federal, state or local law relating to the origination of
such Mortgage Loan; and, if such Mortgage Loan was not originated by the
Seller or an affiliate thereof, then, to the best of the Seller's knowledge
after having performed the type of due diligence customarily performed by
prudent institutional commercial and multifamily mortgage lenders, as of
the date of its origination, such Mortgage Loan complied in all material
respects with, or was exempt from, all requirements of federal, state or
local law relating to the origination of such Mortgage Loan;
(iii) The Seller owns the Mortgage Loan, has good and marketable title
thereto, has full right and authority to sell, assign and transfer the
Mortgage Loan and is transferring the Mortgage Loan free and clear of any
and all liens, pledges, charges or security interests of any nature
encumbering such Mortgage Loan, and no provision of the
-6-
Mortgage Note, Mortgage or other loan document relating to such Mortgage
Loan prohibits or restricts the Seller's right to assign or transfer such
Mortgage Loan;
(iv) The proceeds of such Mortgage Loan have been fully disbursed and
there is no requirement for future advances thereunder;
(v) Each of the related Mortgage Note, Mortgage(s), Assignment of
Leases, if any, and other agreements executed in connection therewith is
the legal, valid and binding obligation of the maker thereof (subject to
any non-recourse provisions therein and any state anti-deficiency
legislation), enforceable in accordance with its terms, except as such
enforcement may be limited by bankruptcy, insolvency, reorganization or
other similar laws affecting the enforcement of creditors' rights
generally, and by general principles of equity (regardless of whether such
enforcement is considered in a proceeding in equity or at law), and a legal
opinion to such effect was obtained by the originator of such Mortgage Loan
at the time of origination;
(vi) As of the date of its origination, there was no valid offset,
defense, counterclaim or right to rescission with respect to any of the
related Mortgage Note, Mortgage(s) or other agreements executed in
connection therewith, and, as of the Cut-off Date, to the best knowledge of
the Seller, there is no valid offset, defense, counterclaim or right to
rescission with respect to such Mortgage Note, Mortgage(s) or other
agreements;
(vii) The assignment of the related Mortgage and assignment of leases
to the Trustee constitutes the legal, valid, binding and enforceable
assignment of such Mortgage in accordance with its terms, except as such
enforcement may be limited by bankruptcy, insolvency, reorganization or
other similar laws affecting the enforcement of creditors' rights
generally, and by general principles of equity (regardless of whether such
enforcement is considered in a proceeding in equity or at law);
(viii) Each related Mortgage is a valid and enforceable first lien on
the related Mortgaged Property, which Mortgaged Property is free and clear
of all encumbrances and liens having priority over or on a parity with the
first lien of such Mortgage, except for (a) liens for real estate taxes and
special assessments not yet due and payable, (b) 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 customarily acceptable to mortgage lending institutions
generally or specifically reflected in the appraisal of such Mortgaged
Property made in connection with the origination of such Mortgage Loan and
(c) other matters to
-7-
which like properties are commonly subject and which do not, individually
or in the aggregate, materially interfere with the benefits of the security
intended to be provided by such Mortgage or materially affect the value or
marketability of such Mortgaged Property, and such encumbrances do not
materially interfere with the current use or operation of the related
Mortgaged Property or the ability of the related Mortgagor to timely pay in
full the principal and interest on the related Mortgage Note; there exists
with respect to such Mortgaged Property an assignment of leases and rents
provision, whether as part of the related Mortgage or as a separate
document or instrument, which establishes and creates a first priority
security interest in and to leases and rents arising in respect of the
related Mortgaged Property, subject only to encumbrances described in
subsections (a), (b) and (c) of this subparagraph (viii);
(ix) The Seller has filed and/or recorded in all appropriate public
filing and recording offices all UCC-1 financing statements necessary to
create and perfect a security interest in and lien on the items of personal
property described therein (or, if not filed and/or recorded, has submitted
such UCC-1 financing statements for filing and/or recording and such UCC-1
financing statements are in form and substance acceptable for filing and/or
recording), to the extent perfection may be effected pursuant to applicable
law by recording or filing;
(x) All taxes and governmental assessments that prior to the Cut-off
Date became due and owing in respect of, and affect, each related Mortgaged
Property have been paid, or an escrow of funds in an amount sufficient to
cover such payments has been established;
(xi) As of the date of its origination, there was no proceeding
pending for the total or partial condemnation of each related Mortgaged
Property that materially affects the value thereof, and such Mortgaged
Property was free of material damage; and, as of the Cut-off Date, the
Seller has not received any notice of the commencement of any proceeding
for the total or partial condemnation of any related Mortgaged Property
that materially affects the value thereof, and such Mortgaged Property is
free of material damage;
(xii) Each related Mortgaged Property is covered by an ALTA (or its
equivalent) lender's title insurance policy insuring that each related
Mortgage is a valid first lien on such Mortgaged Property in the original
principal amount of the Mortgage Loan after all advances of principal, or
there is a binding commitment from a title insurer qualified and licensed
in the applicable jurisdiction, as required, to issue such policy; such
title insurance policy, if issued, is in full force and effect, is freely
assignable and will inure solely to the benefit of the Trustee as mortgagee
of record,
-8-
or any such commitment is a legal, valid and binding obligation of such
insurer; no claims have been made under such title insurance policy, if
issued; and to the best knowledge of the Seller, no prior mortgagee has
done, by act or omission, anything which would materially impair the
coverage of any such title insurance policy;
(xiii) As of the date of its origination, all insurance required under
each related Mortgage, which insurance covered such risks as were
customarily acceptable to prudent commercial and multifamily mortgage
lending institutions lending on the security of property comparable to the
related Mortgaged Property in the jurisdiction in which such Mortgaged
Property is located, and with respect to a fire and extended perils
insurance policy, was in an amount (subject to a customary deductible) at
least equal to 100% of the full insurable replacement cost of the
improvements located on such Mortgaged Property, was in full force and
effect with respect to each related Mortgaged Property; and, as of the
Cut-off Date, to the best knowledge of the Seller, all insurance required
under each Mortgage, which insurance covers such risks and is in such
amounts as are customarily acceptable to prudent commercial and multifamily
mortgage lending institutions lending on the security of property
comparable to the related Mortgaged Property in the jurisdiction in which
such Mortgaged Property is located, is in full force and effect with
respect to each related Mortgaged Property; and no notice of termination or
cancellation with respect to any such insurance policy has been received by
the Seller; except for certain amounts not greater than amounts which would
be considered prudent by an institutional commercial mortgage lender with
respect to a similar mortgage loan and which are set forth in the related
Mortgage, any insurance proceeds in respect of a casualty loss or taking,
will be applied either to the repair or restoration of all or part of the
related Mortgaged Property;
(xiv) Other than payments due but not yet 30 days or more delinquent,
(A) there is no material default, breach, violation or event of
acceleration, and there is no other material default, breach, violation or
event of acceleration, existing under the related Mortgage Note or each
related Mortgage, and (B) to the best of the Seller's knowledge, after due
inquiry, there is no event 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 under any of the
documents referred to in clause (A), and, to the knowledge of the Seller,
there is no event which, with the passage of time or with notice and the
expiration of any grace or cure period, would constitute any other material
default, breach, violation or event of acceleration under any of the
documents referred to in clause (A); the Seller has not waived any material
default, breach, violation or event of acceleration under any of the
documents
-9-
referred to in clause (A), and the Seller has not waived any other material
default, breach, violation or event of acceleration under such documents;
and under the terms of each Mortgage Loan, each related Mortgage Note, each
related Mortgage and the other loan documents in the related Mortgage File,
no person or party other than the Mortgagee may declare an event of default
or accelerate the related indebtedness under such Mortgage Loan, Mortgage
Note or Mortgage;
(xv) As of the Cut-off Date, the Mortgage Loan is not, and in the
prior 12 months (or since the date of origination if such Mortgage Loan has
been originated within the past 12 months), has not been, 30 days or more
past due in respect of any Scheduled Payment;
(xvi) Except with respect to the Mortgage Loans listed in Exhibit E
hereto which accrue interest on the basis of the actual number of days
elapsed over a 360 day year, the Mortgage Loan accrues interest (payable
monthly in arrears) at a fixed Mortgage Rate on the basis of a 360-day year
consisting of twelve 30-day months;
(xvii) Each related Mortgage does not provide for or permit, without
the prior written consent of the holder of the Mortgage Note, each related
Mortgaged Property to secure any other promissory note or obligation,
except as expressly described in such Mortgage and other than another
Mortgage Loan in the Trust Fund;
(xviii) Such Mortgage Loan is or constitutes part of a "qualified
mortgage" within the meaning of Section 860G(a)(3) of the Code;
(xix) One or more environmental site assessments were performed by an
environmental consulting firm independent of the Seller and the Seller's
affiliates with respect to each related Mortgaged Property during the
18-month period preceding the Cut-off Date, and the Seller, having made no
independent inquiry other than to review the report(s) prepared in
connection with the assessment(s) referenced herein, has no knowledge of
any material and adverse environmental condition or circumstance affecting
such Mortgaged Property that was not disclosed in such report(s);
(xx) The related Mortgage Note, Mortgage(s) and Assignment of Leases,
if any, contain 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 or properties of the benefits of the
security, including realization by judicial or, if applicable, non-judicial
foreclosure, subject to applicable reorganization, insolvency, moratorium
and other similar laws affecting creditors' rights generally as from time
to time, in effect, and to general principles of equity
-10-
(regardless of whether such enforceability is considered in a proceeding in
equity or at law);
(xxi) To the best of the Seller's knowledge, after due inquiry, the
related Mortgagor is not a debtor in any bankruptcy, reorganization,
insolvency or comparable proceeding;
(xxii) Such Mortgage Loan is secured by either a mortgage on a fee
simple interest or a leasehold estate in a commercial property or
multifamily property owned by the related Mortgagor, including all of the
related Mortgagor's interest in all improvements on the related Mortgaged
Property;
(xxiii) Such Mortgage Loan does not provide for negative amortization;
(xxiv) Such Mortgage Loan is a whole loan, contains no equity
participation by the lender or shared appreciation feature and does not
provide for any contingent or additional interest in the form of
participation in the cash flow of the related Mortgaged Property;
(xxv) The related Mortgage contains provisions for the acceleration of
the payment of the unpaid principal balance of such Mortgage Loan if,
without the prior written consent of the Mortgagee, each related Mortgaged
Property or any interest therein, is directly or indirectly encumbered in
connection with subordinate financing; provided, however, the eight
Mortgage Loans listed in Exhibit F hereto, are encumbered by subordinated
debt;
(xxvi) Except with respect to (W) transfers of certain non-controlling
interests in the Mortgagors as specified in the related Mortgage, (X) the
Mortgage Loans listed in Exhibit G hereto, which permit a transfer of the
related Mortgaged Property to a person that satisfies certain criteria
(including criteria related to bankruptcy remoteness and apartment
management experience) specified in the related Mortgage, (Y) the Mortgage
Loans listed in Exhibit H hereto, which permit a one-time transfer of the
Mortgaged Property, subject to payment of an assumption fee and certain
other conditions, and (Z) the Mortgage Loans listed in Exhibit I hereto,
which permit two separate transfers of the related Mortgaged Property,
subject to payment of an assumption fee and certain other conditions, the
related Mortgage contains either (A) provisions for the acceleration of the
payment of the unpaid principal balance of such Mortgage Loan if each
related Mortgaged Property, or any
-11-
interest therein, is directly or indirectly transferred or sold without the
prior written consent of the Mortgagee, or (b) provisions for the
acceleration of the payment of the unpaid principal balance of such
Mortgage Loan if each related Mortgaged Property, or any interest therein,
is directly or indirectly transferred or sold without the related Mortgagor
having satisfied certain conditions specified in the related Mortgage with
respect to permitted transfers;
(xxvii) The Mortgage Loan, together with any other Mortgage Loan made
to the same Mortgagor or to an affiliate of such Mortgagor, does not
represent more than 5% of the aggregate Stated Principal Balance of the
Mortgage Pool;
(xxviii) Except as set forth in the related Mortgage File, the terms
of the related Mortgage Note and Mortgage(s) have not been waived,
modified, altered, satisfied, impaired, cancelled, subordinated or
rescinded in any manner which materially interferes with the security
intended to be provided by such Mortgage;
(xxix) Each related Mortgaged Property was inspected by or on behalf
of the related originator during the 12 month period prior to the related
origination date;
(xxx) Except for the Mortgage Loans listed in Exhibit J hereto, the
terms of the related Mortgage Note or Mortgage do not provide for the
release of any material portion of the related Mortgaged Property from the
lien of such Mortgage without payment in full of the Mortgage Loan;
(xxxi) The related Mortgagor has covenanted in the Mortgage Loan
documents to maintain the related Mortgaged Property in compliance with all
applicable laws, zoning ordinances, rules, covenants and restrictions
affecting the construction, occupancy, use and operation of such Mortgaged
Property, and the related originator performed the type of due diligence in
connection with the origination of such Mortgage Loan customarily performed
by prudent institutional commercial and multifamily mortgage lenders with
respect to the foregoing matters; the Seller has received no notice of any
material violation of any applicable laws, zoning ordinances, rules,
covenants or restrictions affecting the construction, occupancy, use or
operation of such Mortgaged Property; to the Seller's knowledge (based on
surveys and/or title insurance obtained in connection with the origination
of such Mortgage Loan), as of the date of such origination, no improvement
that was included for the purpose of determining the appraised value of the
related Mortgaged Property at the time of origination of such Mortgage Loan
lay outside the boundaries and building restriction lines of such property
to an extent which would have a material adverse affect on the related
Mortgagor's use and operation of such Mortgaged Property (unless
affirmatively covered by the title insurance referred to in paragraph (xii)
above), and no improvements on adjoining properties encroached upon such
Mortgaged Property to any material extent;
-12-
(xxxii) The related Mortgagor has covenanted in the Mortgage Loan
documents to deliver each year to the Mortgagee an operating statement of
each related Mortgaged Property covering the twelve-month period identified
therein;
(xxxiii) If the Mortgage Loan had an original principal balance
greater than $5,000,000, the related Mortgagor has covenanted in its
organizational documents and/or the Mortgage Loan documents to own no
significant asset other than the related Mortgaged Property and assets
incidental to its ownership and operation of such Mortgaged Property;
(xxxiv) With respect to any Mortgage Loan that is secured in whole or
in material part by the interest of a Mortgagor as a lessee under a Ground
Lease but not by the related fee interest;
(A) Such Ground Lease or a memorandum thereof has been or will be
duly recorded and such Ground Lease permits the interest of the lessee
thereunder to be encumbered by the related Mortgage or, if consent of
the lessor thereunder is required, it has been obtained prior to t
Closing Date;
(B) The Mortgagor's interest in such Ground Lease is assignable
to the Trustee without the consent of the lessor thereunder (or, if
any such consent is required, it has been obtained prior to the
Closing Date) and, in the event that it is so assigned, is further
assignable by the Trustee and its successors without a need to obtain
the consent of such lessor;
(C) Such Ground Lease may not be amended, modified, canceled or
terminated without the prior written consent of the Mortgagee
thereunder and that any such action without such consent is not
binding on such Mortgagee, its successors or assigns;
(D) Unless otherwise set forth in the Ground Lease, the Ground
Lease does not permit any increase in the amount of rent payable by
the ground lessee thereunder during the term of the Mortgage Loan;
(E) To the actual knowledge of the Seller, at the Closing Date,
such Ground Lease is in full force and effect and other than payments
due but not yet 30 days or more delinquent, (A) there is no material
default, and (B) there is no event which, with the passage of time or
with notice and the expiration of any grace or cure period, would
constitute a material default under such Ground Lease;
(F) Such Ground Lease or an estoppel or consent letter received
by the Mortgagee from the lessor, requires
-13-
the lessor thereunder to give notice of any default by the lessee to
the Mortgagee; and such Ground Lease, or an estoppel or consent letter
received by the Mortgagee from the lessor, further provides that no
notice of termination given under such Ground Lease is effective
against the Mortgagee unless a copy has been delivered to the
Mortgagee in the manner described in such Ground Lease, estoppel or
consent letter;
(G) 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 and any exceptions stated in the related title
insurance policy or opinion of title, which exceptions do not and will
not materially and adversely interfere with (1) the ability of the
related Mortgagor timely to pay in full the principal and interest on
the related Mortgage Note, (2) the use of such Mortgaged Property for
the use currently being made thereof, or (3) the value of the
Mortgaged Property;
(H) A Mortgagee is permitted a reasonable opportunity to cure any
curable default under such Ground Lease before the lessor thereunder
may terminate such Ground Lease;
(I) Such Ground Lease has an original term (including any
extension options set forth therein) that extends not less than 10
years beyond the Maturity Date of the related Mortgage Loan;
(J) Under the terms of such Ground Lease, any estoppel or consent
letter received by the Mortgagee from the lessor, and the related
Mortgage, taken together, any related insurance proceeds or
condemnation proceeds will be applied either to the repair or
restoration of all or part of the related Mortgaged Property, with the
Mortgagee or a trustee appointed by it having the right to hold and
disburse such proceeds 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;
(K) Such Ground Lease does not impose any restrictions on
subletting which would be viewed as commercially unreasonable by a
prudent commercial mortgage lender;
(L) The ground lessor under such Ground Lease is required to
enter into a new lease upon termination of the Ground Lease for any
reason, including the rejection of the Ground Lease in bankruptcy, and
(except with respect to Mortgage Loans listed on Exhibit L hereto) for
any reason, upon the request of the lender; and
-14-
(M) The terms of the related Ground Lease have not been waived,
modified, altered, satisfied, impaired, cancelled, subordinated or
rescinded in any manner which materially interferes with the security
intended to be provided by such Mortgage.
(xxxv) With respect to any Mortgage Loan that is secured in whole or
in part by a Mortgage Property which is operated as a residential health
care facility (a "Facility");
(A) All governmental licenses, permits, regulatory agreements or
other approvals or agreements necessary or desirable for the use and
operation of each Facility as intended are held by the related
Mortgagor or the operator of the Facility, 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
applicable department of health for the requisite number of beds, and
approved provider status in any approved provider payment program
(collectively, the "Licenses").
(B) The Licenses (a) may not be, and have not been, transferred
to any location other than the Facility; (b) have not been pledged as
collateral security for any other loan or indebtedness; and (c) are
held free from restrictions or known conflicts which would materially
impair the use or operation of the Facility as intended, and are not
provisional, probationary or restricted in any way.
(C) As of the Cut-off Date and to Seller's knowledge, without
inquiry, as of the Cut-off Date, the Facility has not received a
"Level A" (or equivalent) violation which has not been cured to the
satisfaction of the applicable governmental agency, and no statement
of charges or deficiencies has been made or penalty enforcement action
has been undertaken against the Facility, its operator or the
Mortgagor or against any officer, director or stockholder of such
operator or the Mortgagor by any governmental agency during the last
three calendar years, and there have been no violations over the past
three years which have threatened the Facility's, the operator's or
the Mortgagor's certification for participation in Medicare or
Medicaid or the other third-party payors' programs.
(xxxvi) No advance of funds has been made, directly or indirectly, by
the Seller to the Mortgagor other than pursuant to the Mortgage Note and no
funds have been received from any person other than such Mortgagor for or
on account of payments due on the Mortgage Note;
(xxxvii) To the Seller's actual knowledge, there are no pending
actions, suits or proceedings by or before any
-15-
court or governmental authority against or affecting the related Mortgagor
or the related Mortgaged Property that, if determined adversely to such
Mortgagor or Mortgaged Property, would materially and adversely affect the
value of the Mortgaged Property or the ability of the Mortgagor to pay
principal, interest or any other amounts due under such Mortgage Loan;
(xxxviii) Such Mortgage Loan complied with all applicable usury laws
in effect at its date of origination;
(xxxix) To the extent required under applicable law as of the Closing
Date, the originator of such Mortgage Loan was authorized to do business in
the jurisdiction in which the related Mortgaged Property is located at all
times when it held the Mortgage Loan to the extent necessary to ensure the
enforceability of such Mortgage Loan;
(xl) If the related Mortgage is a deed of trust, a trustee, duly
qualified under applicable law to serve as such, is properly designated and
serving under such Mortgage;
(xli) The related Mortgage Note is not secured by any collateral that
is not in the Trust Fund and each Mortgage Loan that is
cross-collateralized is cross-collateralized only with other Mortgage Loans
sold pursuant to this Agreement;
(xlii) The related Mortgaged Property is not located in a flood hazard
area as defined by the Federal Insurance Administration or is covered by
flood hazard insurance;
(xliii) Except with respect to the Mortgage Loans listed on Exhibit K
hereto, one or more engineering assessments were performed by an
engineering consulting firm independent of the Seller and the Seller's
affiliates with respect to each related Mortgaged Property during the
18-month period preceding the Cut-off Date, and the Seller, having made no
independent inquiry other than to review the report(s) prepared in
connection with the assessment(s) referenced herein, has no knowledge of
any material and adverse engineering condition or circumstance affecting
such Mortgaged Property that was not disclosed in such report(s);
(xliv) All escrow deposits and payments relating to the Mortgage Loan
are under control of the Seller or the servicer of such Mortgage Loan and
all amounts required as of the date hereof under the Mortgage Loan
Documents to be deposited by the related Mortgagor have been deposited;
(xlv) The related Mortgagor has represented to the Seller that as of
the date of origination of the Mortgage Loan, such Mortgagor, the related
lessee, franchisor or
-16-
operator was in possession of all licenses, permits and authorizations then
required for use of the related Mortgaged Property, which were valid and in
full force and effect; and
(xlvi) The origination, servicing and collection practices used by the
Seller or any prior holder of the Mortgage Note have been in all respects
legal, proper and prudent and have met customary industry standards.
(c) If the Seller receives notice of a Document Defect or a Breach (the
"Defect/Breach Notice"), then the Seller shall within 90 days after its receipt
of the Defect/Breach Notice (i) cure such Document Defect or Breach, as the case
may be, in all material respects, which shall include payment of any Additional
Trust Fund Expenses associated therewith, or (ii) repurchase the affected First
Union Mortgage Loan (or the related Mortgaged Property) from the Trustee at a
price equal to the Purchase Price; provided, however, that if such Document
Defect or Breach is capable of being cured but not within such 90-day period and
the Seller has commenced and is diligently proceeding with the cure of such
Document Defect or Breach within such 90-day period, the Seller shall have an
additional 90 days to complete such cure; and provided, further, that with
respect to such additional 90-day period the Seller shall have delivered an
Officer's Certificate to the Trustee setting forth the reason such Document
Defect or Breach is not capable of being cured within the initial 90-day period
and what actions the Seller is pursuing in connection with the cure thereof and
stating that the Seller anticipates that such breach will be cured within the
additional 90-day period. Notwithstanding the foregoing, the delivery of a
commitment to issue a policy of lender's title insurance as described in Section
3(b)(xii) in lieu of the delivery of the actual policy of lender's title
insurance shall not be considered a Document Defect with respect to any Mortgage
File if such actual policy of insurance is delivered to the Trustee or a
Custodian on its behalf not later than the 90th day following the Closing Date.
SECTION 4. Representations and Warranties of the Purchaser. In order to induce
the Seller to enter into this Agreement, the Purchaser hereby represents and
warrants for the benefit of the Seller as of the date hereof that:
(a) The Purchaser is a corporation duly organized, validly existing and in
good standing under the laws of the State of North Carolina. The Purchaser has
the full corporate power and authority and legal right to acquire the First
Union Mortgage Loans from the Seller and t transfer the First Union Mortgage
Loans to the Trustee.
(b) This Agreement has been duly and validly authorized, executed and
delivered by the Purchaser, all requisite action by the Purchaser's directors
and officers has been taken in connection therewith, and (assuming the due
-17-
authorization, execution and delivery hereof by the Seller) this Agreement
constitutes the valid, legal and binding agreement of the Purchaser, enforceable
against the Purchaser in accordance with its terms, except as such enforcement
may be limited by (A) laws relating to bankruptcy, insolvency, reorganization,
receivership or moratorium, (B) other laws relating to or affecting the rights
of creditors generally, or (C) general equity principles (regardless of whether
such enforcement is considered in a proceeding in equity or at law).
(c) Except as may be required under federal or state securities laws (and
which will be obtained on a timely basis), no consent, approval, authorization
or order of, registration or filing with, or notice to, any governmental
authority or court, is required, under federal or state law, for the execution,
delivery and performance by the Purchaser of or compliance by the Purchaser with
this Agreement, or the consummation by the Purchaser of any transaction
described in this Agreement.
(d) None of the acquisition of the First Union Mortgage Loans by the
Purchaser, the transfer of the First Union Mortgage Loans to the Trustee, and
the execution, delivery or performance of this Agreement by the Purchaser,
conflicts or will conflict with, results or will result in a breach of, or
constitutes or will constitute a default under (A) any term or provision of the
Purchaser's Articles of Incorporation or Bylaws, (B) any term or provision of
any material agreement, contract, instrument or indenture, to which the
Purchaser is a party or by which the Purchaser is bound, or (C) any law, rule,
regulation, order, judgment, writ, injunction or decree of any court or
governmental authority having jurisdiction over the Purchaser or its assets.
(e) Under GAAP and for federal income tax purposes, the Purchaser will
report the transfer of the First Union Mortgage Loans by the Seller to the
Purchaser as a sale of the First Union Mortgage Loans to the Purchaser in
exchange for consideration consisting of [(A) a cash amount equal to 100% of the
aggregate principal balance of the First Union Mortgage Loans, plus (B) interest
accrued on each First Union Mortgage Loan at the related Net Mortgage Rate, for
the period from and including the Cut-off Date up to but not including the
Closing Date].
SECTION 5. Closing. The closing of the sale of the Mortgage Loans (the
"Closing") shall be held at the offices of ▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, One
Citicorp Center, ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ at 10:00 A.M.,
New York time, on the Closing Date.
The Closing shall be subject to each of the following conditions:
-18-
(a) All of the representations and warranties of the Seller set forth in
Sections 3(a), 3(b) and 3(c) of this Agreement and all of the representations
and warranties of the Purchaser set forth in Section 4 of this Agreement shall
be true and correct in all material respects as of the Closing Date; provided
however, that any material inaccuracy in any representation and warranty set
forth in Section 3(b) shall not affect the Purchaser's obligation to purchase
the Mortgage Loans not affected by such inaccuracy;
(b) All documents specified in Section 6 of this Agreement (the "Closing
Documents"), in such forms as are agreed upon and acceptable to the Purchaser in
its reasonable discretion, shall be duly executed and delivered by all
signatories as required pursuant to the respective terms thereof;
(c) The Seller shall have delivered and released to the Custodian and the
Master Servicer, respectively, all documents represented to have been or
required to be delivered to the Trustee and the Master Servicer pursuant to
Section 2 of this Agreement;
(d) All other terms and conditions of this Agreement required to be
complied with on or before the Closing Date shall have been complied with in all
material respects and the Seller shall have the ability to comply with all terms
and conditions and perform all duties and obligations required to be complied
with or performed after the Closing Date; and
(e) The Seller shall have paid all fees and expenses payable by it to the
Purchaser or otherwise pursuant to this Agreement.
Both parties agree to use their best efforts to perform their respective
obligations hereunder in a manner that will enable the Purchaser to purchase the
First Union Mortgage Loans on the Closing Date.
SECTION 6. Closing Documents. The Closing Documents shall consist of the
following:
(a) This Agreement duly executed by the Purchaser and the Seller;
(b) A Certificate of the Seller, executed by a duly authorized officer of
the Seller and dated the Closing Date, and upon which the Purchaser and the
Underwriters may rely, to the effect that: (1) the representations and
warranties of the Seller in this Agreement are true and correct in all material
respects at and as of the Closing Date with the same effect as if made on such
date; and (ii) the Seller has, in all material respects, complied with all the
agreements and satisfied all the conditions on its part that are required under
this Agreement to be performed or satisfied at or prior to the date hereof;
-19-
(c) An Officer's Certificate from an officer of the Seller, in his or her
individual capacity, dated the Closing Date, and upon which the Purchaser may
rely, to the effect that each individual who, as an officer or representative of
the Seller, signed this Agreement or any other document or certificate delivered
on or before the Closing Date in connection with the transactions contemplated
herein, was at the respective times of such signing and delivery, and is as of
the Closing Date, duly elected or appointed, qualified and acting as such
officer or representative, and the signatures of such persons appearing on such
documents and certificates are their genuine signatures;
(d) An Officer's Certificate from an officer of the Seller, in his or her
individual capacity, dated the Closing Date, and upon which the Purchaser and
the Underwriters may rely, to the effect that (i) such officer has carefully
examined the Prospectus (as defined in the Underwriting Agreement, dated as of
May 9, 1997, between the Purchaser and ▇▇▇▇▇▇ Brothers Inc. (the "Underwriting
Agreement")) and nothing has come to his attention that would lead him to
believe that the Prospectus, as of the date of the Prospectus Supplement (as
defined in the Underwriting Agreement) or as of the Closing Date, included or
includes any untrue statement of a material fact relating to the First Union
Mortgage Loans or omitted or omits to state therein a material fact necessary in
order to make the statements therein relating to the First Union Mortgage Loans,
in light of the circumstances under which they were made, not misleading, and
(ii) such officer has examined the Memorandum (as defined in the Certificate
Purchase Agreement, dated as of May 16, 1997, among the Purchaser, ▇▇▇▇▇▇
Brothers Inc. and First Union Capital Markets Corp.) and nothing has come to his
attention that would lead him to believe that the Memorandum, as of the date
thereof or as of the Closing Date, included or includes any untrue statement of
a material fact relating to the First Union Mortgage Loans or omitted or omits
to state therein a material fact necessary in order to make the statements
therein related to the First Union Mortgage Loans, in the light of the
circumstances under which they were made, not misleading.
(e) The resolutions of the requisite loan committee authorizing the
Seller's entering into the transactions contemplated by this Agreement, the
articles of association and by-laws of the Seller, and a certificate of good
standing of the Seller issued by the Office of the Comptroller of the Currency
of the United States not earlier than sixty (60) days prior to the Closing Date;
(f) A written opinion of ▇▇▇▇ ▇. ▇▇▇▇▇▇ III, counsel for the Seller, in
form and substance acceptable to the Purchaser and its counsel, with any
modifications required by the rating agencies identified in the Prospectus
Supplement (the "Rating Agencies"), dated the Closing Date and addressed to the
-20-
Purchaser, the Underwriters and each of the Rating Agencies, together with such
other written opinions as may be required by the Rating Agencies; and
(g) Such further certificates, opinions and documents as the Purchaser may
reasonably request.
SECTION 7. Indemnification.
(a) The Seller shall indemnify and hold harmless the Purchaser, the
Underwriters, their respective officers and directors, and each person, if any,
who controls the Purchaser or any Underwriter within the meaning of either
Section 15 of the Securities Act of 1933, as amended (the "1933 Act") or Section
20 of the Securities Exchange Act of 1934, as amended (the "1934 Act"), against
any and all 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 other
federal or state statutory law or regulation, at common law or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) (i) arise out of or are based upon any untrue statement or alleged
untrue statement of a material fact contained in (A) the Prospectus Supplement,
the Memorandum, the Diskette or, insofar as they are required to be filed as
part of the Registration Statement pursuant to the No-Action Letters, any
Computational Materials or ABS Term Sheets with respect to the Registered
Certificates, or in any revision or amendment of or supplement to any of the
foregoing or (B) any items similar to Computational Materials and ABS Term
Sheets forwarded to prospective investors in the Non-Registered Certificates, or
(ii) arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; but only if and to the extent that (I) any such untrue
statement or alleged untrue statement or omission or alleged omission arises out
of or is based upon an untrue statement or omission with respect to the First
Union Mortgage Loans, the related Mortgagors and/or the related Mortgaged
Properties contained in the Master Tape (it being herein acknowledged that the
Master Tape was used to prepare the Prospectus Supplement including without
limitation Annex A thereto, the Memorandum, the Diskette, the Computational
Materials and ABS Term Sheets with respect to the Registered Certificates and
any items similar to Computational Materials and ABS Term Sheets forwarded to
prospective investors in the Non-Registered Certificates), (II) any such untrue
statement or alleged untrue statement or omission or alleged omission is with
respect to, or arises out of or is based upon an untrue statement or omission
with respect to, the information regarding the First Union Mortgage Loans, the
related Mortgagors, the related Mortgaged Properties and/or the Seller set forth
(X) in the Prospectus Supplement and the Memorandum under the headings "Summary
of the Prospectus Supplement--The Mortgage Pool" or
-21-
"Summary of the Memorandum--The Mortgage Pool", as applicable, "Risk
Factors--The Mortgage Loans" and "Description of the Mortgage Pool" and (Y) on
Annex A to the Prospectus Supplement and, to the extent consistent therewith, on
the Diskette, or (III) any such untrue statement or alleged untrue statement or
omission or alleged omission arises out of or is based upon a breach of the
representations and warranties of the Seller set forth in or made pursuant to
Section 3; provided that the indemnification provided by this Section 7 shall
not apply to the extent that such untrue statement or omission was made as a
result of an error in the manipulation of, or in any calculations based upon, or
in any aggregation of the information regarding the First Union Mortgage Loans,
the related Mortgagors and/or the related Mortgaged Properties set forth in the
Master Tape and Annex A to the Prospectus Supplement, including without
limitation the aggregation of such information with comparable information
relating to the LBHI Mortgage Loans in the Trust Fund. This indemnity agreement
will be in addition to any liability which the Seller may otherwise have.
For purposes of this Agreement, "Registration Statement" shall mean the
registration statement No. 33-97994 filed by the Purchaser on Form S-3,
including without limitation exhibits thereto and information incorporated
therein by reference; "Prospectus" shall mean the prospectus dated April 29,
1997, as supplemented by the prospectus supplement dated May 9, 1997 (the
"Prospectus Supplement"), relating to the Registered Certificates, including all
annexes thereto; "Memorandum" shall mean the private placement memorandum dated
May 9, 1997, relating to the Non-Registered Certificates; "Registered
Certificates" shall mean the Class A-1, Class A-2, Class A-3, Class B, Class C,
Class D, Class E and Class IO Certificates; "Non-Registered Certificates" shall
mean the Certificates other than the Registered Certificates; "Computational
Materials" shall have the meaning assigned thereto in the no-action letter dated
May 20, 1994 issued by the Division of Corporation Finance of the Securities and
Exchange Commission (the "Commission") to ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ Acceptance Corporation
I, ▇▇▇▇▇▇, Peabody & Co. Incorporated, and ▇▇▇▇▇▇ Structured Asset Corporation
and the no- action letter dated May 27, 1994 issued by the Division of
Corporation Finance of the Commission to the Public Securities Association
(together, the "▇▇▇▇▇▇ Letters"); "ABS Term Sheets shall have the meaning
assigned thereto in the no-action letter dated February 17, 1995 issued by the
Division of Corporation Finance of the Commission to the Public Securities
Association (the "PSA Letter" and, together with the ▇▇▇▇▇▇ letters, the
"No-Action Letters"); "Diskette" shall mean the diskette attached to each of the
Prospectus and the Memorandum; and "Master Tape" shall mean the compilation of
information and data regarding the LBHI Mortgage Loans and the First Union
Mortgage Loans covered by the Agreed Upon Procedures Letter dated May 16, 1997
and rendered by Deloitte & Touche LLP (a "hard copy" of which Master Tape was
initiated on behalf of the Seller and the Purchaser).
-22-
(b) Promptly after receipt by any person entitled to indemnification under
this Section 7 (an "indemnified party") of notice of the commencement of any
action, such indemnified party will, if a claim in respect thereof is to be made
against the Seller (the "indemnifying party") under this Section 7, notify the
indemnifying party in writing of the commencement thereof; but the omission so
to notify the indemnifying party will not relieve it from any liability that it
may have to any indemnified party otherwise than under this Section 7. In case
any such action is brought against any indemnified party and it notifies the
indemnifying party of the commencement thereof, the indemnifying party will be
entitled to participate therein, and to the extent that it may elect by written
notice delivered to the indemnified party promptly after receiving the aforesaid
notice from such indemnified party, to assume the defense thereof, with counsel
satisfactory to such indemnified party; provided, however, that if the
defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party or parties shall have reasonably
concluded that there may be legal defenses available to it or them and/or other
indemnified parties that are different from or additional to those available to
the indemnifying party, the indemnified party or parties shall have the right to
select separate counsel to assert such legal defenses and to otherwise
participate in the defense of such action on behalf of such indemnified party or
parties. Upon receipt of notice from the indemnifying party to such indemnified
party of its election so to assume the defense of such action and approval by
the indemnified party of counsel, the indemnifying party will not be liable for
any legal or other expenses subsequently incurred by such indemnified party in
connection with the defense thereof, unless (i) the indemnified party shall have
employed separate counsel in connection with the assertion of legal defenses in
accordance with the proviso to the preceding sentence (it being understood,
however, that the indemnifying party shall not be liable for the expenses of
more than one separate counsel, approved by the Purchaser, representing all the
indemnified parties under Section 7(a) who are parties to such action), (ii) the
indemnifying party shall not have employed counsel satisfactory to the
indemnified party to represent the indemnified party within a reasonable time
after notice of commencement of the action or (iii) the indemnifying party has
authorized the employment of counsel for the indemnified party at the expense of
the indemnifying party; and except that, if clause (i) or (iii) is applicable,
such liability shall only be in respect of the counsel referred to in such
clause (i) or (iii).
(c) If the indemnification provided for in this Section 7 is unavailable to
an indemnified party under Section 7(a) hereof or insufficient in respect of any
losses, claims, damages or liabilities referred to therein, then the
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages or liabilities,
-23-
in such proportion as is appropriate to reflect the relative fault of the
indemnified and indemnifying parties in connection with the statements or
omissions which resulted in such losses, claims, damages or liabilities, as well
as any other relevant equitable considerations. The relative fault of the
indemnified and indemnifying parties shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by such parties.
(d) The Purchaser and the Seller agree that it would not be just and
equitable if contribution pursuant to Section 7(c) were determined by pro rata
allocation or by any other method of allocation that does not take account of
the considerations referred to in Section 7(c) above. The amount paid or payable
by an indemnified party as a result of the losses, claims, damages and
liabilities referred to in this Section 7 shall be deemed to include, subject to
the limitations set forth above, any legal or other expenses reasonably incurred
by such indemnified party in connection with investigating or defending any such
action or claim, except where the indemnified party is required to bear such
expenses pursuant to this Section 7, which expenses the indemnifying party shall
pay as and when incurred, at the request of the indemnified party, to the extent
that the indemnifying party will be ultimately obligated to pay such expenses.
If any expenses so paid by the indemnifying party are subsequently determined to
not be required to be borne by the indemnifying party hereunder, the party that
received such payment shall promptly refund the amount so paid to the party
which made such payment. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the ▇▇▇▇ ▇▇▇) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
(e) The indemnity and contribution agreements contained in this Section 7
shall remain operative and in full force and effect regardless of (i) any
termination of this Agreement, (ii) any investigation made by the Purchaser, the
Underwriters, any of their respective directors or officers, or any person
controlling the Purchaser or the Underwriters, and (iii) acceptance of and
payment for any of the Certificates.
(f) Without limiting the generality or applicability of any other provision
of this Agreement, the Underwriters shall be third-party beneficiaries of the
provisions of this Section 7.
SECTION 8. Costs. The Seller shall pay (or shall reimburse the Purchaser to the
extent that the Purchaser has paid) the Seller's pro rata portion of the
aggregate of the following amounts (the Seller's pro rata portion to be
determined according to the percentage that the First Union Balance represents
of the Initial Pool Balance): (i) the costs and expenses of printing (or
otherwise reproducing) and delivering a preliminary and final
-24-
Prospectus and Memorandum relating to the Certificates; (ii) the initial fees,
costs, and expenses of the Trustee (including reasonable attorneys' fees); (iii)
the filing fee charged by the Securities and Exchange Commission for
registration of the Certificates so registered; (iv) the fees charged by the
Rating Agencies to rate the Certificates so rated; (v) the expense of recording
any assignment of Mortgage or assignment of Assignment of Leases as contemplated
by Section 2 hereof; and (vi) the cost of obtaining a "comfort letter" from a
firm of certified public accountants selected by the Purchaser and the Seller
with respect to numerical information in respect of the First Union Mortgage
Loans included in the Prospectus and Memorandum. All other costs and expenses in
connection with the transactions contemplated hereunder shall be borne by the
party incurring such expense.
SECTION 9. Grant of a Security Interest. It is the express intent of the parties
hereto that the conveyance of the First Union Mortgage Loans by the Seller to
the Purchaser as provided in Section 2 hereof be, and be construed as, a sale of
the First Union Mortgage Loans by the Seller to the Purchaser and not as a
pledge of the First Union Mortgage Loans by the Seller to the Purchaser to
secure a debt or other obligation of the Seller. However, if, notwithstanding
the aforementioned intent of the parties, the First Union Mortgage Loans are
held to be property of the Seller, then, (a) it is the express intent of the
parties that such conveyance be deemed a pledge of the First Union Mortgage
Loans by the Seller to the Purchaser to secure a debt or other obligation of the
Seller, and (b) (i) this Agreement shall also be deemed to be a security
agreement within the meaning of Articles 8 and 9 of the New York Uniform
Commercial Code; (ii) the conveyance provided for in Section 2 hereof shall be
deemed to be a grant by the Seller to the Purchaser of a security interest in
all of the Seller's right, title and interest in and to the First Union Mortgage
Loans, and all amounts payable to the holder of the First Union Mortgage Loans
in accordance with the terms thereof, and all proceeds of the conversion,
voluntary or involuntary, of the foregoing into cash, instruments, securities or
other property, including without limitation all amounts, other than investment
earnings, from time to time held or invested in the Certificate Account, the
Distribution Account or, if established, the REO Account (each as defined in the
Pooling and Servicing Agreement) whether in the form of cash, instruments,
securities or other property; (iii) the assignment to the Trustee of the
interest of the Purchaser as contemplated by Section 1 hereof shall be deemed to
be an assignment of any security interest created hereunder; (iv) the possession
by the Trustee or any of its agents, including, without limitation, the
Custodian, of the Mortgage Notes, and such other items of property as constitute
instruments, money, negotiable documents or chattel paper shall be deemed to be
"possession by the secured party" for purposes of perfecting the security
interest pursuant to Section 9-305 of the New York Uniform Commercial Code; and
(v) notifications to persons (other than the Trustee) holding such property, and
acknowledgments, receipts or confirmations from
-25-
persons holding such property, shall be deemed notifications to, or
acknowledgments, receipts or confirmations from, financial intermediaries,
bailees or agents (as applicable) of the secured party for the purpose of
perfecting such security interest under applicable law. The Seller and the
Purchaser shall, to the extent consistent with this Agreement, take such actions
as may be necessary to ensure that, if this Agreement were deemed to create a
security interest in the First Union Mortgage Loans, 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 and the Pooling and Servicing Agreement.
SECTION 10. Notices. All notices, copies, requests, consents, demands and other
communications required hereunder shall be in writing and telecopied or
delivered to the intended recipient at the "Address for Notices" specified
beneath its name on the signature pages hereof or, as to either party, at such
other address as shall be designated by such party in a notice hereunder to the
other party. Except as otherwise provided in this Agreement, all such
communications shall be deemed to have been duly given when transmitted by
telecopier or personally delivered or, in the case of a mailed notice, upon
receipt, in each case given or addressed as aforesaid.
SECTION 11. Representations, Warranties and Agreements to Survive Delivery. All
representations, warranties and agreements contained in this Agreement,
incorporated herein by reference or contained in the certificates of officers of
the Seller submitted pursuant hereto, shall remain operative and in full force
and effect and shall survive delivery of the First Union Mortgage Loans by the
Seller to the Purchaser (and by the Purchaser to the Trustee).
SECTION 12. Severability of Provisions. Any part, provision, representation,
warranty or covenant of this Agreement that is prohibited or which is held to be
void or unenforceable shall be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof. Any part,
provision, representation, warranty or covenant of this Agreement that is
prohibited or unenforceable or is held to be void or unenforceable in any
particular jurisdiction shall, as to such jurisdiction, be ineffective to the
extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
particular jurisdiction shall not invalidate or render unenforceable such
provision in any other jurisdiction. To the extent permitted by applicable law,
the parties hereto waive any provision of law which prohibits or renders void or
unenforceable any provision hereof.
-26-
SECTION 13. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but which together shall
constitute one and the same agreement.
SECTION 14. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS, DUTIES, OBLIGATIONS
AND RESPONSIBILITIES OF THE PARTIES HERETO SHALL BE GOVERNED IN ACCORDANCE WITH
THE INTERNAL LAWS AND DECISIONS OF NEW YORK. THE PARTIES HERETO INTEND THAT THE
PROVISIONS OF SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW SHALL APPLY
TO THIS AGREEMENT.
SECTION 15. Further Assurances. The Seller and the Purchaser agree to execute
and deliver such instruments and take such further actions as the other party
may, from time to time, reasonably request in order to effectuate the purposes
and to carry out the terms of this Agreement.
SECTION 16. Successors and Assigns. The rights and obligations of the Seller
under this Agreement shall not be assigned by the Seller without the prior
written consent of the Purchaser, except that any person into which the Seller
may be merged or consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Seller is a party, or any person
succeeding to all or substantially all of the business of the Seller, shall be
the successor to the Seller hereunder. The Purchaser has the right to assign its
interest under this Agreement, in whole or in part, as may be required to effect
the purposes of the Pooling and Servicing Agreement, and the assignee shall, to
the extent of such assignment, succeed to the rights and obligations hereunder
of the Purchaser. Subject to the foregoing, this Agreement shall bind and inure
to the benefit of and be enforceable by the Seller, the Purchaser, the
Underwriters (as intended third party beneficiaries hereof) and their permitted
successors and assigns, and the officers, directors and controlling persons
referred to in Section 7.
SECTION 17. Amendments. No term or provision of this Agreement may be waived or
modified unless such waiver or modification is in writing and signed by a duly
authorized officer of the party, or third party beneficiary, against whom such
waiver or modification is sought to be enforced.
-27-
IN WITNESS WHEREOF, the Seller and the Purchaser have caused their names to
be signed hereto by their respective duly authorized officers as of the date
first above written.
SELLER
FIRST UNION NATIONAL BANK OF NORTH CAROLINA
By:
--------------------------------
Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Senior Vice President
Address for Notices:
One First Union Center
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention:
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
PURCHASER
FIRST UNION COMMERCIAL
MORTGAGE SECURITIES, INC.
By:
---------------------------------
Name:
Title
Address for Notices:
Attention:
Telecopier No.:
Telephone No:
-28-
EXHIBIT A
MORTGAGE LOAN SCHEDULE
EXHIBIT B
MORTGAGE FILE SCHEDULE
NONE
EXHIBIT C
MORTGAGE PROPERTIES SUBJECT TO
SECONDARY LIENS
0
EXHIBIT D
LIST OF PRINCIPAL BORROWERS
WITH MULTIPLE MORTGAGE LOANS
EXHIBIT E
LIST OF MORTGAGE LOANS WHICH ACCRUE INTEREST OTHER THAN AT A
FIXED MORTGAGE RATE ON THE BASIS OF A 360-DAY YEAR CONSISTING OF
TWELVE 30-DAY MONTHS
EXHIBIT F
LIST OF MORTGAGE LOANS ENCUMBERED BY SUBORDINATED DEBT
EXHIBIT G
LIST OF MORTGAGE LOANS WHICH PERMIT A TRANSFER OF THE RELATED
MORTGAGED PROPERTY TO A PERSON THAT SATISFIES CERTAIN CRITERIA
EXHIBIT H
LIST OF MORTGAGE LOANS WHICH PERMIT A ONE-TIME TRANSFER OF
THE MORTGAGED PROPERTY, SUBJECT TO PAYMENT OF AN ASSUMPTION FEE AND
CERTAIN OTHER CONDITIONS
EXHIBIT I
LIST OF MORTGAGE LOANS WHICH PERMIT TWO SEPARATE TRANSFERS OF THE
RELATED MORTGAGED PROPERTY, SUBJECT TO PAYMENT OF AN ASSUMPTION
FEE AND CERTAIN OTHER CONDITIONS
EXHIBIT J
LIST OF MORTGAGE LOANS THE TERMS OF WHICH PROVIDE FOR THE RELEASE
OF A MATERIAL PORTION OF THE RELATED MORTGAGED PROPERTY FROM THE
LIEN OF THE MORTGAGE WITHOUT PREPAYMENT
EXHIBIT K
NO ENGINEERING WITHIN LAST 18 MONTHS
EXHIBIT L
GROUND LEASE EXCEPTIONS