1
Exhibit 10.5
===============================================================================
MASTER LOAN AND SECURITY AGREEMENT
-----------------------
Dated as of August 21, 1997
-----------------------
ALLIED CAPITAL COMMERCIAL CORPORATION,
as a Borrower
and
BUSINESS MORTGAGE INVESTORS, INC.
as a Borrower
Collectively, the Borrowers
and
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ MORTGAGE CAPITAL INC.
as Lender
===============================================================================
2
TABLE OF CONTENTS
PAGE
----
RECITALS 1
SECTION 1. DEFINITIONS AND ACCOUNTING MATTERS ...............................1
1.01 Certain Defined Terms ............................................1
1.02 Accounting Terms and Determinations ..............................8
SECTION 2. LOANS, NOTE AND PREPAYMENTS ......................................8
2.01 Loans ............................................................8
2.02 Notes ............................................................9
2.03 Procedure for Borrowing ..........................................9
2.04 Limitation on Types of Loans; Illegality ........................10
2.05 Repayment of Loans; Interest ....................................11
2.06 Mandatory Prepayments or Pledge .................................11
2.07 Indemnity .......................................................11
SECTION 3. PAYMENTS; COMPUTATIONS; ETC .....................................12
3.01 Payments ........................................................12
3.02 Computations ....................................................12
3.03 Unutilized Credit Fee ...........................................12
SECTION 4. COLLATERAL SECURITY .............................................12
4.01 Collateral; Security Interest ...................................12
4.02 Further Documentation ...........................................13
4.03 Changes in Locations, Name, etc. ................................13
4.04 Lender's Appointment as Attorney-in-Fact ........................14
4.05 Performance by Lender of Borrower's Obligations .................15
4.06 Proceeds ........................................................15
4.07 Remedies ........................................................15
4.08 Limitation on Duties Regarding Presentation of Collateral .......16
4.09 Powers Coupled with an Interest .................................16
4.10 Release of Security Interest ....................................16
SECTION 5. CONDITIONS PRECEDENT ............................................16
5.01 Initial Loan ....................................................16
5.02 Initial and Subsequent Loans ....................................17
SECTION 6. REPRESENTATIONS AND WARRANTIES ..................................18
6.01 Existence .......................................................19
6.02 Financial Condition .............................................19
6.03 Litigation ......................................................19
-i-
3
6.04 No Breach .........................................................19
6.05 Action ............................................................19
6.06 Approvals .........................................................20
6.07 Margin Regulations ................................................20
6.08 Taxes .............................................................20
6.09 Investment Company Act ............................................20
6.10 Collateral; Collateral Security ...................................20
6.11 Chief Executive Office ............................................21
6.12 Location of Books and Records .....................................21
6.13 Hedging ...........................................................21
6.14 True and Complete Disclosure ......................................21
6.15 Tangible Net Worth ................................................21
SECTION 7. COVENANTS OF THE BORROWER ....................................21
7.01 Financial Statements ..............................................21
7.02 Litigation ........................................................22
7.03 Existence, etc. ...................................................22
7.04 Prohibition of Fundamental Changes ................................23
7.05 Borrowing Base Deficiency .........................................23
7.06 Notices ...........................................................23
7.07 Hedging ...........................................................23
7.08 Reports ...........................................................24
7.09 Underwriting Guidelines ...........................................24
7.10 Transactions with Affiliates ......................................24
7.11 Limitation on Liens ...............................................24
7.12 Limitation on Distributions .......................................24
7.13 Maintenance of Tangible Net Worth .................................24
7.14 Maintenance of Ratio of Total Indebtedness to Tangible Net Worth ..24
7.15 Maintenance of Profitability ......................................24
7.16 Servicing Tape ....................................................25
7.17 Interest Rate Protection Agreements ...............................25
SECTION 8. EVENTS OF DEFAULT ............................................25
SECTION 9. REMEDIES UPON DEFAULT ........................................26
SECTION 10. NO DUTY OF LENDER ............................................27
SECTION 11. MISCELLANEOUS ................................................27
11.01 Waiver ............................................................27
11.02 Notices ...........................................................27
11.03 Indemnification and Expenses ......................................27
11.04 Amendments ........................................................28
11.05 Successors and Assigns ............................................28
11.06 Survival ..........................................................28
-ii-
4
11.07 Captions ..........................................................28
11.08 Counterparts ......................................................28
11.09 Loan Agreement Constitutes Security Agreement; Governing Law ......28
11.10 Submission to Jurisdiction; Waivers ...............................28
11.11 Waiver of Jury Trial ..............................................29
11.12 Acknowledgments ...................................................29
11.13 Hypothecation or Pledge of Loans ..................................29
11.14 Servicing .........................................................30
11.15 Periodic Due Diligence Review .....................................31
11.16 Intent ............................................................31
11.17 Joint and Several Liability .......................................31
SCHEDULES
SCHEDULE 1 Representations and Warranties re: Mortgage Loans
SCHEDULE 2 Filing Jurisdictions and Offices
EXHIBITS
EXHIBIT A Form of Promissory Note
EXHIBIT B Form of Custodial Agreement
EXHIBIT C Form of Opinion of Counsel to Borrower
EXHIBIT D Form of Request for Borrowing
EXHIBIT E-1 Form of Borrower's Release Letter
EXHIBIT E-2 Form of Warehouse Lender's Release Letter
EXHIBIT F Underwriting Guidelines
-iii-
5
MASTER LOAN AND SECURITY AGREEMENT
MASTER LOAN AND SECURITY AGREEMENT, dated as of August 21, 1997, among
ALLIED CAPITAL COMMERCIAL CORPORATION, a Maryland corporation, as a Borrower
and BUSINESS MORTGAGE INVESTORS, INC., a Maryland corporation, as a Borrower
(each a "Borrower" collectively, the "Borrowers") and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ MORTGAGE
CAPITAL INC., a Delaware corporation (the "Lender").
RECITALS
Each Borrower has requested that the Lender from time to time make
revolving credit loans to it to finance certain multifamily and commercial
mortgage loans owned by such Borrower, and the Lender is prepared to make such
loans upon the terms and conditions hereof. Accordingly, the parties hereto
agree as follows:
Section 1. Definitions and Accounting Matters.
1.01 Certain Defined Terms. As used herein, the following terms shall
have the following meanings (all terms defined in this Section 1.01 or in other
provisions of this Loan Agreement in the singular to have the same meanings
when used in the plural and vice versa):
"Affiliate" shall mean, (i) with respect to the Lender, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Group Inc. and MS & Co. and (ii) with respect to each Borrower, any
"affiliate" of such Borrower as such term is defined in the United States
Bankruptcy Code in effect from time to time.
"Allied" shall mean Allied Capital Commercial Corporation.
"Applicable Collateral Percentage" shall mean (a) with respect to all
Eligible Mortgage Loans that can be readily deposited in a Standard
Securitization Transaction, 85% to 88%, as determined by the Lender and (b)
with respect to all Eligible Mortgage Loans that are not readily deposited in a
Standard Securitization Transaction, as determined by the Lender on a
case-by-case basis.
"Applicable Margin" shall mean 100 basis points (1%).
"Bailee Agreement" shall mean a Bailee Agreement, among the Borrower, the
Lender and a Settlement Agent, in form and substance acceptable to the Lender.
"Bankruptcy Code" shall mean the United States Bankruptcy Code of 1978, as
amended from time to time.
"Borrower" or "Borrowers" shall have the meaning provided in the heading
hereof.
"Borrowing Base" shall mean the aggregate Collateral Value of all Eligible
Mortgage Loans.
"Borrowing Base Deficiency" shall have the meaning provided in Section
2.06 hereof.
-1-
6
"Business Day" shall mean any day other than (i) a Saturday or Sunday or
(ii) a day on which the New York Stock Exchange, the Federal Reserve Bank of
New York or the Custodian is authorized or obligated by law or executive order
to be closed.
"Capital Expenditures" shall mean, as to any Person for any period, the
aggregate amount paid or accrued by such Person and its Affiliates for the
rental, lease, purchase (including by way of the acquisition of securities of
any Person), construction or use of any Property during such period, the value
or cost of which, in accordance with GAAP, would appear on such Person's
consolidated balance sheet in the category of property, plant or equipment at
the end of such period.
"Capital Lease Obligations" shall mean, for any Person, all obligations of
such Person to pay rent or other amounts under a lease of (or other agreement
conveying the right to use) Property to the extent such obligations are
required to be classified and accounted for as a capital lease on a balance
sheet of such Person under GAAP, and, for purposes of this Loan Agreement, the
amount of such obligations shall be the capitalized amount thereof, determined
in accordance with GAAP.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time.
"Collateral" shall have the meaning provided in Section 4.01(b) hereof.
"Collateral Value" shall mean, with respect to each Mortgage Loan, the
lesser of (a) the Applicable Collateral Percentage of the Market Value of such
Mortgage Loan, and (b) the outstanding principal balance of such Mortgage Loan;
provided, that:
(i) the Collateral Value shall be deemed to be zero with respect to each
Mortgage Loan (1) in respect of which there is a breach of a representation and
warranty set forth on Schedule 1 (assuming each representation and warranty is
made as of the date Collateral Value is determined), (2) in respect of which
there is a delinquency in the payment of principal and/or interest which
continues for a period 60 days or more (without regard to any applicable grace
periods), (3) which remains pledged to the Lender hereunder later than 365 days
after the date on which it is first included in the Collateral, unless otherwise
waived by the Lender, (4) which has been released from the possession of the
Custodian under the Custodial Agreement to the Borrower for a period in excess
of 14 days; or (5) a Wet-Ink Mortgage Loan for which the Custodian has failed to
receive the original Mortgage Loan Documents by 10:00 a.m., New York time on the
fourth Business Day following the applicable Funding Date;
(ii) subject to clause (i)(2) above, the Collateral Value of Mortgage
Loans in respect of which there is a delinquency in the payment of principal
and/or interest which continuous unremedied for a period of 30 days or more may
not exceed 10% of the Maximum Credit; and
(iii) the aggregate Collateral Value of Eligible Mortgage Loans which are
Wet-Ink Mortgage Loans may not exceed $30,000,000, unless otherwise approved by
the Lender in its sole discretion.
"Committed Loan" shall have the meaning assigned thereto in Section
2.01(a) hereof.
"Custodial Agreement" shall mean the Custodial Agreement, dated as of the
date hereof, among the Borrowers, the Custodian and the Lender, substantially
in the form of Exhibit B hereto, as the same shall be modified and supplemented
and in effect from time to time.
-2-
7
"Custodian" shall mean LaSalle National Bank, as custodian under the
Custodial Agreement, and its successors and permitted assigns thereunder.
"Default" shall mean an Event of Default or an event that with notice or
lapse of time or both would become an Event of Default.
"Dollars" and "$" shall mean lawful money of the United States of America.
"Due Diligence Fee" shall have the meaning provided in Section 5.01(h)
hereof.
"Due Diligence Review" shall mean the performance by the Lender of any or
all of the reviews permitted under Section 11.15 hereof with respect to any or
all of the Mortgage Loans, as desired by the Lender from time to time.
"Effective date" shall mean the date upon which the conditions precedent
forth in Section 5.01 shall have been satisfied.
"Eligible Mortgage Loans" shall mean the collective reference to (a) any
Mortgage Loan secured by a first mortgage lien on a retail, office, hotel or
other commercial property and (b) any Mortgage Loan secured by a first mortgage
lien on a five-or-more family residential property; provided, however, that, in
each case, with respect to each Mortgage Loan either (A) (i) the
representations and warranties in Section 6.10 and Part I of Schedule 1 hereof
are correct in all material respects (ii) each Mortgage Loan is underwritten in
accordance with the Borrowers' Underwriting Guidelines and (iii) each Mortgage
Loan is eligible for inclusion in a Standard Securitized Transaction or (B)
each Mortgage Loan is otherwise expressly approved as an Eligible Mortgage Loan
by the Lender in writing.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"ERISA Affiliate" shall mean any corporation or trade or business that is
a member of any group of organizations (i) described in Section 414(b) or (c)
of the Code of which either Borrower is a member and (ii) solely for purposes
of potential liability under Section 302(c)(11) of ERISA and Section 412(c)(11)
of the Code and the lien created under Section 302(f) of ERISA and Section
412(n) of the Code, described in Section 414(m) or (o) of the Code of which
either Borrower is a member.
"Eurodollar Rate" shall mean with respect to each day during each Interest
Period pertaining to such Loan, the rate per annum equal to the rate appearing
at page 5 of the Telerate Screen, on the first day of such Interest Period, for
the one-month term, as applicable, corresponding to such Interest Period, and
if such rate shall not be so quoted, the rate per annum at which the Lender is
offered Dollar deposits at or about 10:00 A.M., New York City time, on the
first day of such Interest Period, by prime banks in the interbank eurodollar
market where the eurodollar and foreign currency and exchange operations in
respect of its Loans are then being conducted for delivery on the first day of
such Interest Period for the number of days comprised therein and in an amount
comparable to the amount of the Loans to be outstanding during such Interest
Period.
"Federal Funds Rate" shall mean, for any day, the weighted average of the
rates on overnight federal funds transactions with members of the Federal
Reserve System arranged by federal funds brokers, as published on the next
succeeding Business Day by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day which is a Business Day, the average of the
-3-
8
quotations for the day of such transactions received by the Lender from three
federal funds brokers of recognized standing selected by it.
"Funding Date" shall mean the date on which a Loan is made hereunder.
"GAAP" shall mean generally accepted accounting principles as in effect
from time to time in the United States.
"Governmental Authority" shall mean any nation or government, any state or
other political subdivision thereof, any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government and any court or arbitrator having jurisdiction over either
Borrower, any of its Subsidiaries or any of its properties.
"Guarantee" shall mean, as to any Person, any obligation of such Person
directly or indirectly guaranteeing any Indebtedness of any other Person or in
any manner providing for the payment of any Indebtedness of any other Person or
otherwise protecting the holder of such Indebtedness against loss (whether by
virtue of partnership arrangements, by agreement to keep-well, to purchase
assets, goods, securities or services, or to take-or-pay or otherwise);
provided that the term "Guarantee" shall not include (i) endorsements for
collection or deposit in the ordinary course of business, or (ii) obligations
to make servicing advances for delinquent taxes and insurance or other
obligations in respect of a Mortgaged Property, to the extent required by the
Lender. The amount of any Guarantee of a Person shall be deemed to be an amount
equal to the stated or determinable amount of the primary obligation in respect
of which such Guarantee is made or, if not stated or determinable, the maximum
reasonably anticipated liability in respect thereof as determined by such
Person in good faith. The terms "Guarantee" and "Guaranteed" used as verbs
shall have correlative meanings.
"Indebtedness" shall mean, for any Person: (a) obligations created, issued
or incurred by such Person for borrowed money (whether by loan, the issuance
and sale of debt securities or the sale of Property to another Person subject
to an understanding or agreement, contingent or otherwise, to repurchase such
Property from such Person); (b) obligations of such Person to pay the deferred
purchase or acquisition price of Property or services, other than trade
accounts payable (other than for borrowed money) arising, and accrued expenses
incurred, in the ordinary course of business so long as such trade accounts
payable are payable within 90 days of the date the respective goods are
delivered or the respective services are rendered; (c) Indebtedness of others
secured by a Lien on the Property of such Person, other than the respective
Indebtedness so secured that has not been assumed by such Person; (d)
obligations (contingent or otherwise) of such Person in respect of letters of
credit or similar instruments issued or accepted by banks and other financial
institutions for account of such Person; (e) Capital Lease Obligations of such
Person; (f) obligations of such Person under repurchase agreements or like
arrangements; (g) Indebtedness of other Guaranteed by such Person; (h) all
obligations of such Person incurred in connection with the acquisition or
carrying of fixed assets by such Person; and (i) Indebtedness of general
partnerships of which such Person is a general partner.
"Interest Period" shall mean, with respect to any Loan, (a) initially, the
period commencing on the applicable Funding Date to but excluding the first
Payment Date; and (b) thereafter, each period commencing on a Payment Date to
but excluding the next Payment Date; provided that, notwithstanding the
foregoing, (i) an Interest Period may be for a term of fewer days as mutually
agreed upon between the Borrower and the Lender and (ii) no Interest Period may
end after the Termination Date.
-4-
9
"Interest Rate Protection Agreement" shall mean, any interest rate swap,
cap or collar agreement or similar arrangements providing for protection against
fluctuations in interest rates or the exchange of nominal interest obligations,
either generally or under specific contingencies, entered into by either
Borrower and reasonably acceptable to the Lender.
"Lender" shall have the meaning provided in the heading hereto.
"Lien" shall mean any mortgage, lien, pledge, charge, security interest or
similar encumbrance.
"Loan" shall mean any Committed Loan or Uncommitted Loan, as applicable,
and collectively "Loans" shall mean the sum of all Committed Loans and
Uncommitted Loans.
"Loan Agreement" shall mean this Master Loan and Security Agreement, as
the same may be amended, supplemented or otherwise modified from time to time.
"Loan Documents" shall mean, collectively, this Loan Agreement, the Note
and the Custodial Agreement.
"Market Value" shall mean, as of any date in respect of an Eligible
Mortgage Loan, the price at which such Eligible Mortgage Loan could readily be
sold as determined in good faith by the Lender, which price may be determined
to be zero. The Lender's determination of Market Value shall be conclusive upon
the parties absent manifest error on the part of the Lender.
"Material Adverse Effect" shall mean a material adverse effect on (a) the
Property, business, operations, financial condition or prospects of either
Borrower, (b) the ability of either Borrower to perform its obligations under
any of the Loan Documents to which it is a party, (c) the validity or
enforceability of any of the Loan Documents, (d) the rights and remedies of the
Lender under any of the Loan Documents, (e) the timely payment of the principal
of or interest on the Loans or other amounts payable in connection therewith or
(f) the Collateral.
"Maximum Committed Amount" shall mean $100,000,000.
"Maximum Credit" shall mean the sum of the Maximum Committed Amount and
the Maximum Uncommitted Amount, which shall equal $250,000,000.
"Maximum Uncommitted Amount" shall mean $150,000,000.
"Mortgage" shall mean the mortgage, deed of trust or other instrument
securing a Mortgage Note, which creates a first lien on the fee in real
property securing the Mortgage Note and the assignment of rents and leases
related thereto.
"Mortgage File" shall have the meaning assigned thereto in the Custodial
Agreement.
"Mortgage Loan" shall mean a mortgage loan which the Custodian has been
instructed to hold for the Lender pursuant to the Custodial Agreement, and
which Mortgage Loan includes, without limitation, (i) a Mortgage Note and
related Mortgage and (ii) all right, title and interest of the Borrower in and
to the Mortgaged Property covered by such Mortgage.
-5-
10
"Mortgage Loan Documents" shall mean, with respect to a Mortgage Loan, the
documents comprising the Mortgage File for such Mortgage Loan.
"Mortgage Loan Schedule" shall have the meaning assigned thereto in the
Custodial Agreement.
"Mortgage Loan Schedule and Exception Report" shall mean the mortgage loan
schedule and exception report prepared by the Custodian pursuant to the
Custodial Agreement.
"Mortgage Loan Tape" shall mean a computer-readable magnetic tape with
respect to each Mortgage Loan, to be delivered by each Borrower to the Lender
pursuant to Section 2.03(a) hereof, containing tape fields as shall be mutually
agreed upon by each Borrower and the Lender.
"Mortgage Note" shall mean the original executed promissory note or other
evidence of the indebtedness of a mortgagor/borrower with respect to a Mortgage
Loan.
"Mortgaged Property" shall mean the real property (including all
improvements, buildings, fixtures, building equipment and personal property
thereon and all additions, alterations and replacements made at any time with
respect to the foregoing) and all other collateral securing repayment of the
debt evidenced by a Mortgage Note.
"Mortgagor" shall mean the obligor on a Mortgage Note.
"MS & Co." shall mean ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. Incorporated, a registered
broker-dealer.
"Multiemployer Plan" shall mean a multiemployer plan defined as such in
Section 3(37) of ERISA to which contributions have been or are required to be
made by either Borrower or any ERISA Affiliate and that is covered by Title IV
of ERISA.
"Net Income" shall mean, for any period, the net income of each Borrower
for such period as determined in accordance with GAAP.
"Note" shall mean the promissory note provided for by Section 2.02(a)
hereof for Loans and any promissory note delivered in substitution or exchange
therefor, in each case as the same shall be modified and supplemented and in
effect from time to time.
"Payment Date" shall mean (a) the first Business day of each calendar
month, commencing with the first Business Day of the month following the month
in which the first Funding Date occurs, and (b) the Termination Date.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Person" shall mean any individual, corporation, company, voluntary
association, partnership, joint venture, limited liability company, trust,
unincorporated association or government (or any agency), instrumentality or
political subdivision thereof).
"Plan" shall mean an employee benefit or other plan established or
maintained by the Borrower or any ERISA Affiliate and covered by Title IV of
ERISA, other than a Multiemployer Plan.
-6-
11
"Post-Default Rate" shall mean, in respect of any principal of any Loan or
any other amount under this Loan Agreement, the Note or any other Loan Document
that is not paid when due to the Lender (whether at stated maturity, by
acceleration, by optional or mandatory prepayment or otherwise), a rate per
annum during the period from and including the due date to but excluding the
date on which such amount is paid in full equal to 2% per annum plus the Prime
Rate.
"Prime Rate" shall mean the prime rate announced to be in effect from time
to time, as published as the average rate in The Wall Street Journal.
"Property" shall mean any right or interest in or to property of any kind
whatsoever, whether real, personal or mixed and whether tangible or intangible.
"Regulation G,T,U and X" shall mean Regulations G,T,U and X of the Board of
Governors of the Federal Reserve System (or any successor), as the same may be
modified and supplemented and in effect from time to time.
"Responsible Officer" shall mean, as to any Person, the chief executive
officer or managing director or with respect to financial matters, the chief
financial officer of such Person.
"Secured Obligations" shall have the meaning provided in Section 4.01(c)
hereof.
"Servicer" shall have the meaning provided in Section 11.14(c) hereof.
"Servicing Agreement" shall have the meaning provided in Section 11.14(c)
hereof.
"Servicing Records" shall have the meaning provided in Section 11.14(b)
hereof.
"Settlement Agent" shall mean, with respect to any Loan, the entity
approved by the Lender, in its sole good-faith discretion (which may be a title
company, escrow company or attorney in accordance with local law and practice in
the jurisdiction where the related Wet-Ink Mortgage Loan is being originated) to
which the proceeds of such Loan are to be wired pursuant to the instructions of
the Lender.
"Standard Securitization Transaction" shall mean a securitization
transaction baked by Mortgage loans underwritten or placed on behalf of either
Borrower which transaction has received an investment grade rating from any
nationally-recognized rating agency and otherwise conforms to the current
standards of institutional securitization applicable to mortgage loans
substantially similar in nature to the Mortgage Loans.
"Subsidiary" shall mean, with respect to any Person, any corporation,
partnership or other entity of which at least a majority of the securities or
other ownership interests having by the terms thereof ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions of such corporation, partnership or other entity (irrespective of
whether or not at the time securities or other ownership interests of any other
class or classes of such corporation, partnership or other entity shall have or
might have voting power by reason of the happening of any contingency) is at the
time directly or indirectly owned or controlled by such Person or one or more
Subsidiaries of such Person or by such Person and one or more Subsidiaries of
such Person.
12
"Tangible Net Worth" shall mean, as of particular date,
(a) all amounts which would be included under capital on a balance sheet
of either Borrower at such date, determined in accordance with GAAP,
less
(b) (i) amounts owing to such Borrower from Affiliates in excess of
$10,000,000 in the aggregate and (ii) intangible assets.
"Termination Date" shall mean August 21, 1998 or such earlier date on which
this Loan Agreement shall terminate in accordance with the provisions hereof or
by operation of law.
"Test Period" shall have the meaning provided in Section 7.15 hereof.
"Total Indebtedness" shall mean, for any period, the aggregate
Indebtedness of the Borrower during such period less the amount of any
nonspecific balance sheet reserves maintained in accordance with GAAP.
"Uncommitted Loan" shall have the meaning assigned thereto in Section
2.01(b) hereof.
"Underwriting Guidelines" shall mean the underwriting guidelines attached
as Exhibit E hereto.
"Uniform Commercial Code" shall mean the Uniform Commercial Code as in
effect on the date hereof in the State of New York; provided that if by reason
of mandatory provisions of law, the perfection or the effect of perfection or
non-perfection of the security interest in any Collateral is governed by the
Uniform Commercial Code as in effect in a jurisdiction other than New York,
"Uniform Commercial Code" shall mean the Uniform Commercial Code as in effect in
such other jurisdiction for purposes of the provisions hereof relating to such
perfection or effect of perfection or non-perfection.
"Wet-Ink Mortgage Loan" shall mean a Mortgage Loan which is pledged to the
Lender simultaneously with the origination thereof by either Borrower, which
origination is financed in part or in whole with proceeds of Loans advanced
directly to a Settlement Agent and which Wet-Ink Mortgage Loan is held by the
Settlement Agent pursuant to a Bailee Agreement.
102. Accounting Terms and Determinations. Except as otherwise expressly
provided herein, all accounting terms used herein shall be interpreted, and all
financial statements and certificates and reports as to financial matters
required to be delivered to the Lender hereunder shall be prepared, in
accordance with GAAP.
Section 2. Loans, Note and Prepayments.
2.01 Loans.
(a) Subject to the fulfillment of the conditions precedent set forth in
Sections 5.01 and 5.02 hereof, and provided that no Default shall have occurred
and be continuing hereunder, the Lender agrees, from time to time, on the terms
and conditions of this Loan Agreement, to make loans (individually, a "Committed
Loan" and, collectively, the "Committed Loans") to the Borrower in Dollars, from
and including the Effective Date to and including the Termination Date in an
aggregate
13
principal amount at any one time outstanding up to but not exceeding the
Maximum Committed Amount as in effect from time to time. To the extent that a
Mortgage Loan is an Eligible Loan solely as a result of clause (B) of the
definition thereof, the Lender may make Loans secured by such Eligible Mortgage
Loans, in its sole discretion and on an uncommitted basis.
(b) In addition to the foregoing, the Lender may from time to time in
its sole discretion, on the terms and conditions of this Loan Agreement, make
loans (individually, an "Uncommitted Loan"; collectively, the "Uncommitted
Loans") to the Borrower in Dollars during the period from and including the
Effective Date to and including the Termination Date in an aggregate principal
amount at any one time outstanding up to but not exceeding the Maximum
Uncommitted Amount as in effect from time to time. In determining whether Loans
outstanding secured by Eligible Mortgage Loans are Committed Loans or
Uncommitted Loans, such Loans shall first be deemed Committed Loans up to the
Maximum Committed Amount, and then the remainder shall be deemed Uncommitted
Loans.
(c) Subject to the terms and conditions of this loan Agreement, during
such period the Borrower may borrow, repay and reborrow hereunder.
(d) In no event shall a Loan be made when any Default or Event
of Default has occurred and is continuing.
2.02 Notes.
(a) The Loans made by the Lenders shall be evidenced by a single
promissory note of the Borrowers substantially in the form of Exhibit A hereto
(the "Note"), dated the date hereof, payable to the Lender in a principal
amount equal to the amount of the Maximum Credit as originally in effect and
otherwise duly completed. The Lender shall have the right to have its Note
subdivided, by exchange for promissory notes of lesser denominations or
otherwise.
(b) The date, amount and interest rate of each Loan made by the Lender
to the Borrowers, and each payment made on account of the principal thereof,
shall be recorded by the Lender on its books and, prior to any transfer of the
Note, endorsed by the Lender on the schedule attached to the Note or any
continuation thereof; provided that the failure of the Lender to make any such
recordation or endorsement shall not affect the obligations of the Borrowers to
make payment when due of any amount owing hereunder, or under the Note in
Respect of the Loans.
2.03 Procedure for Borrowing.
(a) The Borrowers may request a borrowing hereunder, on any Business
Day during the period from and including the Effective Date to and including
the Termination Date, by delivering to the Lender, with a copy to the
Custodian, an irrevocable written request for borrowing, substantially in the
form of Exhibit D attached hereto, which request must be received by the Lender
prior to 11:00 a.m. New York City time, one (1) Business Day prior to the
requested Funding Date. Such request for borrowing shall (i) attach a schedule
identifying the Eligible Mortgage Loans that the Borrower proposes to pledge to
the Lender and to be included in the Borrowing Base in connection with such
borrowing, (ii) specify the requested Funding Date and the requested Loan
amount, (iii) include a Mortgage Loan Tape containing information with respect
to the Eligible Mortgage Loans that the applicable Borrower proposes to pledge
to the Lender and to be included in the Borrowing Base in
-9-
14
connection with such borrowing, and (iv) attach an officer's certificate signed
by a Responsible Officer of the respective Borrower as required by Section
5.02(b) hereof.
(b) Upon the Borrower's request for a borrowing pursuant to Section
2.03(a), the Lender shall, assuming all conditions precedent set forth in
Section 5.01 and 5.02 have been met and provided no Default shall have occurred
and be continuing, make a Committed Loan to the Borrower on the requested
Funding Date, in the amount so requested.
(c) Upon the Borrower's request for a borrowing pursuant to Section
2.03(a), the Lender may at its sole option, assuming all conditions precedent
set forth in Section 5.01 and 5.02 have been met and provided no Default shall
have occurred and be continuing, make an Uncommitted Loan to the Borrower on the
requested Funding Date, in the amount so requested.
(d) The requesting Borrower shall release to the Custodian no later
than 12:00 p.m., New York time, one (1) Business Day prior to the requested
Funding Date, the Mortgage File pertaining to each Eligible Mortgage Loan to be
pledged to the Lender and included in the Borrower Base on such requested
Funding Date, in accordance with terms and conditions of the Custodial
Agreement.
(e) Pursuant to the Custodial Agreement, the Custodian shall deliver
to the Lender and the Borrowers, no later than 11:00 a.m. on a Funding Date, a
Trust Receipt (as defined in the Custodial Agreement) in respect of all
Eligible Mortgage Loans (other than a Wet-Ink Mortgage Loan) pledged to the
Lender on such Funding Date, and a Mortgage Loan Schedule and Exception Report.
Subject to Section 5 hereof, such borrowing will then be made available to the
Borrowers by the Lender transferring, via wire transfer, with respect to Loans
secured by Mortgage Loans other than Wet-Ink Mortgage Loans, to the following
account of the Borrowers: Nationsbank ABA 052-001633 Acct# ▇▇▇-▇▇▇-▇▇▇▇, and,
with respect to Loans secured by Wet-Ink Mortgage Loans, to the Settlement
Agent in accordance with the Borrower's instructions.
2.04 Limitation on Types of Loans; Illegality. Anything herein to the
contrary notwithstanding, if, on or prior to determination of any Eurodollar
Rate:
(a) the Lender determines, which determination shall be conclusive,
that quotations of interest rates for the relevant deposits referred to in the
definition of "Eurodollar Rate" in Section 1.01 hereof are not being provided
in the relevant amounts or for the relevant maturities for purposes of
determining rates of interest for Loans as provided herein; or
(b) the Lender determines, which determination shall be conclusive,
that the relevant rate of interest referred to in the definition of
"Eurodollar Rate" in Section 1.01 hereof upon the basis of which the rate of
interest for Loans is to be determined is not likely adequately to cover the
cost to the Lender of making or maintaining Loans; or
(c) it becomes unlawful for the Lender to honor its obligation to make
or maintain Loans hereunder using a Eurodollar Rate;
then the Lender shall give the Borrowers prompt notice thereof and, so
long as such condition remains in effect, the Lender shall be under no
obligation to make additional Loans (provided that the Borrowers and the Lender
will use their best efforts to mutually agree upon an interest rate for future
Loans, and upon such agreement, the Lender shall be obligated to make such
additional Loans
-10-
15
hereunder bearing such interest rate), and the Borrowers shall at Borrowers'
option, either prepay all such Loans as may be outstanding, without penalty or
premium, or pay interest on such Loans at a rate per annum equal to the Federal
Funds Rate plus 1.5%.
2.05 Repayment of Loans; Interest.
(a) The Borrowers hereby promise to repay in full on the Termination Date
the then aggregate outstanding principal amount of the Loans. Prepayment on one
or more of the Mortgage Loans may occur at any time and from time to time
without penalty or premium.
(b) The Borrowers hereby promise to pay to the Lender interest on the
unpaid principal amount of each Loan for the period from and including the date
of such Loan to but excluding the date such Loan shall be paid in full, at a
rate per annum equal to the Eurodollar Rate plus the Applicable Margin.
Notwithstanding the foregoing, the Borrowers hereby promise to pay to the
Lender interest at the applicable Post-Default Rate on any principal of any
Loan and on any other amount payable by the Borrowers hereunder or under the
Note that shall not be paid in full when due (whether at stated maturity, by
acceleration or by mandatory prepayment or otherwise) for the period from and
including the due date thereof to but excluding the date the same is paid in
full. Accrued interest on each Loan shall be payable on each Payment Date,
except that interest payable at the Post-Default Rate shall be payable upon
such accrual. Promptly after the determination of any interest rate provided
for herein or any change therein, the Lender shall give notice thereof to the
Borrowers.
(c) It is understood and agreed that, unless and until a Default shall
have occurred and be continuing, the Borrowers shall be entitled to the
proceeds of the Mortgage Loans, including interest and principal payments
thereunder and proceeds from the sale thereof, pledged to the Lender hereunder.
2.06 Mandatory Prepayments or Pledge.
If at any time the aggregate outstanding principal amount of Loans
exceeds the Borrowing Base (a "Borrowing Base Deficiency"), as determined by
the Lender and notified to the Borrowers on any Business Day, the Borrowers
shall no later than one (1) Business Day after receipt of such notice, either
prepay the Loans in part or in whole or pledge additional Eligible Mortgage
Loans (which Collateral shall be in all respects acceptable to the Lender) to
the Lender, such that after giving effect to such prepayment or pledge the
aggregate outstanding principal amount of the Loans does not exceed the
Borrowing Base.
2.07 Indemnity. If either Borrower makes a prepayment of the Loans on any
day which is not a Payment Date, the Borrower shall indemnify the Lender and
hold the Lender harmless from any actual loss or expense which the Lender may
sustain or incur arising from the reemployment of funds obtained by the Lender
to maintain the Loans hereunder or from fees payable to terminate the deposits
from which such funds were obtained. This Section 2.07 shall survive termination
of this Agreement and payment of the Note.
- 11 -
16
Section 3. Payments: Computations; Etc.
3.01 Payments.
(a) Except to the extent otherwise provided herein, all payments of
principal, interest and other amounts to be made by the Borrowers under this
Loan Agreement and the Note, shall be made in Dollars, in immediately available
funds, without deduction, set-off or counterclaim, to the Lender at the
following account maintained by the Lender: Account No. ▇▇▇▇▇▇▇▇, for the A/C
of MSMCI, Citibank, N.A., ABA #▇▇▇▇▇▇▇▇▇, not later than 1:00 p.m., New York
City time, on the date on which such payment shall become due (and each such
payment made after such time on such due date shall be deemed to have been made
on the next succeeding Business Day). The Borrowers acknowledge that it has no
rights of withdrawal from the foregoing account.
(b) Except to the extent otherwise expressly provided herein, if the due
date of any payment under this Loan Agreement or the Note would otherwise fall
on a day that is not a Business Day, such date shall be extended to the next
succeeding Business Day, and interest shall be payable for any principal so
extended for the period of such extension.
3.02 Computations. Interest on the Loans shall be computed on the basis of
a 360-day year for the actual days elapsed (including the first day but not
excluding the last day) occurring in the period for which payable.
3.03 Unutilized Credit Fee. The Borrowers agree to pay to the Lender a
commitment fee from and including the Effective Date to the Termination Date,
computed at the rate of 15 basis points (0.15%) per annum on the average daily
amount of the unutilized portion of the Maximum Committed Amount during the
period for which payment is made, in each case payable quarterly in arrears on
the last day of each September, December, March and June and on the Termination
Date, commencing on September 30, 1997; provided that in the event that the
Lender is no longer obligated to make Loans hereunder pursuant to Section
5.02(g) hereof (the date of such event, the "Commitment Termination Date"),
then the Borrower shall not be required to pay any Commitment Fee accruing from
the Commitment Termination Date.
Section 4. Collateral Security.
4.01 Collateral; Security Interest.
(a) Pursuant to the Custodial Agreement, the Custodian shall hold the
Mortgage Loan Documents as exclusive bailee and agent for the Lender pursuant
to terms of the Custodial Agreement and shall deliver to the Lender Trust
Receipts (as defined in the Custodial Agreement) each to the effect that it has
reviewed such Mortgage Loan Documents in the manner and to the extent required
by the Custodial Agreement and identifying any deficiencies in such Mortgage
Loan Documents as so reviewed.
(b) All of each Borrower's right, title and interest in, to and under
each of the following items of property, whether now owned or hereafter
acquired, now existing or hereafter created and wherever located, is
hereinafter referred to as the "Collateral";
(i) all Mortgage Loans;
-12-
17
(ii) all Mortgage Loan Documents, including without limitation
all promissory notes, and all Servicing Records (as defined in Section
11.14(b) below), servicing agreements and any other collateral pledged
or otherwise relating to such Mortgage Loans, together with all files,
documents, instruments, surveys, certificates, correspondence,
appraisals, computer programs, computer storage media, accounting
records and other books and records relating thereto;
(iii) all mortgage guaranties and insurance (issued by
governmental agencies or otherwise) and any mortgage insurance
certificate or other document evidencing such mortgage guaranties or
insurance relating to any Mortgage Loan and all claims and payments
thereunder;
(iv) all other insurance policies and insurance proceeds
relating to any Mortgage Loan or the related Mortgaged Property;
(v) all "general intangibles" as defined in the Uniform
Commercial Code relating to or constituting any and all of the
foregoing; and
(vi) any and all replacements, substitutions, distributions on
or proceeds of any and all of the foregoing.
(c) Each Borrower hereby assigns, pledges and grants a
security interest in all of its right,title and interest in, to and under the
Collateral to the Lender to secure the repayment of principal of and interest
on all Loans and all other amounts owing to the Lender hereunder, under the Note
and under the other Loan Documents (collectively, the "Secured Obligations").
Each Borrower agrees to ▇▇▇▇ its computer records and tapes to evidence the
interests granted to the Lender hereunder.
4.02 Further Documentation. At any time and from time to time,
upon the written request of the Lender, and at the sole expense of the
Borrowers, the Borrowers will promptly and duly execute and deliver, or will
promptly cause to be executed and delivered, such further instruments and
documents and take such further action as the Lender may reasonably request for
the purpose of obtaining or preserving the full benefits of this Loan Agreement
and of the rights and powers herein granted, including, without limitation, the
filing of any financing or continuation statements under the Uniform Commercial
Code in effect in any jurisdiction with respect to the Liens created hereby.
Each Borrower also hereby authorizes the Lender to file any such financing or
continuation statement without the signature of Borrower to the extent permitted
by applicable law. A carbon, photographic or other reproduction of this Loan
Agreement shall be sufficient as a financing statement for filing in any
jurisdiction.
4.03 Changes in Locations, Name, etc. No Borrower shall (a)
change the location of its chief executive office/chief place of business from
that specified in Section 6 hereof or (b) change its name, identity or
corporate structure (or the equivalent) or change the location where it
maintains its record with respect to the Collateral unless it shall have given
the Lender at least 30 days prior written notice thereof and shall have
delivered to the Lender all Uniform Commercial Code financing statements and
amendments thereto as the Lender shall request and taken all other actions
deemed necessary by the Lender to continue its perfected status in the
Collateral with the same or better priority.
-13-
18
4.04 Lender's Appointment as Attorney-in-Fact.
(a) Each Borrower hereby irrevocably constitutes and appoints
the Lender and any officer or agent thereof, with full power of substitution, as
its true and lawful attorney-in-fact with full irrevocable power and authority
in the place and stead of such Borrower and in the name of such Borrower or in
its own name, from time to time during the continuance of an Event of Default in
the Lender's discretion, for the purpose of carrying out the terms of this Loan
Agreement, to take any and all appropriate action and to execute any and all
documents and instruments which may be necessary or desirable to accomplish the
purposes of this Loan Agreement, and, without limiting the generality of the
foregoing, each Borrower hereby gives the Lender the power and right, on behalf
of the Borrower, without assent by, but with notice to, such Borrower, if an
Event of Default shall have occurred and be continuing, to do the following:
(i) in the name of such Borrower or its own name, or
otherwise, to take possession of and endorse and collect any
checks, drafts, notes, acceptances or other instruments for the
payment of moneys due under any mortgage insurance or with respect to
any other Collateral and to file any claim or to take any other action
or proceeding in any court of law or equity or otherwise deemed
appropriate by the Lender for the purpose of collecting any and all
such moneys due under any such mortgage insurance or with respect to
any other Collateral whenever payable;
(ii) to pay or discharge taxes and Liens levied or placed on or
threatened against the Collateral; and
(iii) (A) to direct any party liable for any payment any
Collateral to make payment of any and all moneys due or to become due
thereunder directly to the Lender or as the Lender shall direct; (B)
to ask or demand for, collect, receive payment of and receipt for, and
all moneys, claims and other amounts due or to become due at any time
in respect of or arising out of any Collateral; (C) to sign and
endorse any invoices, assignments, verifications, notices and other
documents in connection with any of the Collateral; (D) to commence
and prosecute any suits, actions or proceedings at law or in equity in
any court of competent jurisdiction to collect the Collateral or any
thereof and to enforce any other right in respect of any Collateral;
(E) to defend any suit, action or proceeding brought against such
Borrower with respect to any Collateral; (F) to settle, compromise or
adjust any suit, action or proceeding described in clause (E) above
and, in connection therewith, to give such discharges or releases as
the Lender may deem appropriate; and (G) generally, to sell, transfer,
pledge and make any agreement with respect to or otherwise deal with
any of the Collateral as fully and completely as though the Lender
were absolute owner thereof for all purposes, and to do, and the
Lender's option and such Borrowers' expense, at any time, and from time
to time, all acts and things which the Lender deems necessary to
protect, preserve or realize upon the Collateral and the Lender's
Liens thereon and to effect the intent of this Loan Agreement, all as
fully and effectively as such Borrower might do.
The Borrower hereby ratifies all that said attorneys shall lawfully do or cause
to be done by virtue hereof. This power of attorney is a power coupled with an
interest and shall be irrevocable.
(b) The Borrowers also authorizes the Lender, at any time and
from time to time, to execute, in connection with any sale provided for in
Section 4.07 hereof, any endorsements, assignments or other instruments of
conveyance or transfer with respect to the Collateral.
-14-
19
(c) The powers conferred on the Lender are solely to protect the Lender's
interests in the Collateral and shall not impose any duty upon the Lender to
exercise any such powers. The Lender shall be accountable only for amounts that
it actually receives as a result of the exercise of such powers, and neither the
Lender nor any of its officers, directors, or employees shall be responsible to
either Borrower for any act or failure to act hereunder, except for its own
gross negligence or willful misconduct.
4.05 Performance by Lender of Borrowers' Obligations. If either Borrower
fails to perform or comply with any of its agreements contained in the Loan
Documents, upon ten (10) days prior to notice to such Borrower and the Lender
may itself perform or comply, or otherwise cause performance or compliance, with
such agreement, the expenses of the Lender incurred in connection with such
performance or compliance, together with interest thereon at a rate per annum
equal to the Post-Default Rate, shall be payable, subject to Section 11.17
hereof, by the Borrowers to the Lender on demand and shall constitute Secured
Obligations.
4.06 Proceeds. If an Event of Default shall occur and be continuing, (a)
all proceeds of Collateral received by either Borrower consisting of cash,
checks and other near-cash items shall be held by such Borrower in trust for the
Lender, segregated from other funds of such Borrower, and shall forthwith upon
receipt by such Borrower be turned over to the Lender in the exact form received
by the Borrower (duly endorsed by such Borrower to the Lender, if required) and
(b) any and all such proceeds received by the Lender (whether from a Borrower or
otherwise) may, in the sole discretion of the Lender, be held by the Lender as
collateral security for, and/or then or at any item thereafter may be applied by
the Lender against, the Secured Obligations (whether matured or unmatured), such
application to be in such order as the Lender shall elect. Any balance of such
proceeds remaining after the Secured Obligations shall have been paid in full
and this Loan Agreement shall have been terminated shall be paid over to the
Borrowers or to whomsoever may be lawfully entitled to receive the same. For
purposes hereof, proceeds shall include, but not be limited to, all principal
and interest payments, all prepayments and payoffs, insurance claims,
condemnation awards, sale proceeds, real estate owned rents and any other income
and all other amounts received with respect to the Collateral.
4.07 Remedies. If an Event of Default shall occur and be continuing, the
Lender may exercise, in addition to all other rights and remedies granted to it
in this Loan Agreement and in any other instrument or agreement securing,
evidencing or relating to the Secured Obligations, all rights and remedies of a
secured party under the Uniform Commercial Code. Without limiting the generality
of the foregoing, the Lender without demand of performance or other demand,
presentment, protest, advertisement or notice of any kind (except any notice
required by law referred to below) to or upon the Borrowers or any other Person
(each and all of which demands, presentments, protests, advertisements and
notices are hereby waived), may in such circumstances forthwith collect,
receive, appropriate and realize upon the Collateral, or any part thereof,
and/or may forthwith sell, lease, assign, give option or options to purchase, or
otherwise dispose of and deliver the Collateral or any part thereof (or contract
to do any of the foregoing), in one or more parcels or as an entirety at public
or private sale or sales, at any exchange, broker's board or office of the
Lender or elsewhere upon such terms and conditions as it may deem advisable and
at such prices as it may deem best, for cash or on credit or for future delivery
without assumption of any credit risk. The Lender shall have the right upon any
such public sale or sales, and, to the extent permitted by law, upon any such
private sale or sales, to purchase the whole or any part of the Collateral so
sold, free of any right or equity of redemption in the Borrowers, which right or
equity is hereby waived or released. The Borrowers further agree, at the
Lender's request, to assemble the Collateral and make it available to the Lender
at places which the Lender shall reasonably select, whether at the Borrowers'
premises or elsewhere. The
-15-
20
Lender shall apply the net proceeds of any such collection, recovery, receipt,
appropriation, realization or sale, after deducting all reasonable costs and
expenses incurred therein or incidental to the care or safekeeping of any of the
Collateral or in any way relating to the Collateral or the rights of the Lender
hereunder, including without limitation reasonable attorneys' fees and
disbursements, to the payment in whole or in part of the Secured Obligations, in
such order as the Lender may elect, and only after such application and after
the payment by the Lender of any other amount required or permitted by any
provision of law, including without limitation Section 9-504(1)(c) of the
Uniform Commercial Code, need the Lender account for the surplus, if any, to the
Borrowers. To the extent permitted by applicable law, the Borrowers waive all
claims, damages and demands they may acquire against the Lender arising out of
the exercise by the Lender of any of its rights hereunder, other than those
claims, damages and demands arising from the gross negligence or willful
misconduct of the Lender. If any notice of a proposed sale or other disposition
of Collateral shall be required by law, such notice shall be deemed reasonable
and proper if given at least 10 days before such sale or other disposition. The
Borrowers shall remain liable for any deficiency (plus accrued interest thereon
as contemplated pursuant to Section 2.05(b) hereof) if the proceeds of any sale
or other disposition of the Collateral are insufficient to pay the Secured
Obligations and fees and disbursements of any attorneys employed by the Lender
to collect such deficiency
4.08. Limitation on Duties Regarding Presentation of Collateral. The
Lender's duty with respect to the custody, safekeeping and physical preservation
of the Collateral in its possession, under Section 9-207 of the Uniform
Commercial Code or otherwise, shall be to deal with it in the same manner as the
Lender deals with similar property for its own account. Neither the Lender nor
any of its directors, officers or employees shall be liable for failure to
demand, collect or realize upon all or any part of the Collateral or for any
delay in doing so or shall be under any obligation to sell or otherwise dispose
of any Collateral upon the request of either Borrower or otherwise.
4.09. Powers Coupled with an Interest. All authorizations and agencies
herein contained with respect to the Collateral are irrevocable and powers
coupled with an interest.
4.10 Release of Security Interest. Upon termination of this Loan Agreement
and repayment to the Lender of all Secured Obligations and the performance of
all obligations under the Loan Documents the Lender shall release its security
interest in any remaining Collateral.
Section 5. Conditions Precedent.
5.01 Initial Loan. The obligation of the Lender to make its initial Loan
hereunder is subject to the satisfaction, immediately prior to or concurrently
with the making of such Loan, of the condition precedent that the Lender shall
have received all of the following, each of which shall be reasonably
satisfactory to the Lender and its counsel in form and substance:
(a) Loan Documents.
(i) Note. The Note, duly completed and executed;
(ii) Custodial Agreement. The Custodial Agreement, duly executed and
delivered by the Borrower and the Custodian. In addition, the Borrower shall
have taken such other action as the Lender shall have requested in order to
perfect the security interests created pursuant to the Loan Agreement;
-16-
21
(b) Organizational Documents. A good standing certificate and certified
copies of the charter and by-laws (or equivalent documents) of each Borrower
and of all corporate or other authority for each Borrower with respect to the
execution, delivery and performance of the Loan Documents and each other
document to be delivered by each Borrower from time to time in connection
herewith (and the Lender may conclusively rely on such certificate until it
receives notice in writing from each Borrower to the contrary);
(c) Legal Opinion. A legal opinion of counsel to the Borrowers,
substantially in the form attached hereto as Exhibit C;
(d) Mortgage Loan Schedule and Exception Report. A Mortgage Loan Schedule
and Exception Report, dated the Effective Date, from the Custodian, duly
completed;
(e) Servicing Agreement(s). Any Servicing Agreement, certified as a true,
correct and complete copy of the original, with the letter of the applicable
Servicer consenting to termination of such Servicing Agreement upon the
occurrence of an Event of Default attached; and
(f) Securitization Letter. A letter agreement between the Borrowers and
MS & Co. granting MS & Co. the option to act as underwriter or placement agent,
subject to the terms set forth therein, in connection with any debt or equity
offering made by the Borrowers with respect to the Mortgage Loans, duly
executed and delivered by the Borrowers and MS & Co.;
(g) Other Documents. Such other documents as the Lender may reasonably
request.
(h) Due Diligence Fee. The Borrower shall have paid to the Lender a
one-time due diligence fee (the "Due Diligence Fee") equal to $50,000 to be
paid by wire transfer to the Lender at the account set forth in Section 3.01(a)
hereof.
5.02 Initial and Subsequent Loans. The making of each Loan to the
Borrowers (including the initial Loan) on any Business Day is subject to the
satisfaction of the following further conditions precedent, both immediately
prior to the making of such Loan and also after giving effect thereto and to
the intended use thereof:
(a) no Default or Event of Default shall have occurred and be continuing;
(b) both immediately prior to the making of such Loan and also after
giving effect thereto and to the intended use thereof, the representations and
warranties made by the Borrowers in Section 6 hereof, and elsewhere in each of
the Loan Documents, shall be true and complete on and as of the date of the
making of such Loan in all material respects (in the case of the
representations and warranties in Section 6.10 and Schedule 1, solely with
respect to Mortgage Loans included in the Borrowing Base) with the same force
and effect as if made on and as of such date (or, if any such representation or
warranty is expressly stated to have been made as of a specific date, as of
such specific date). The Lender shall have received an officer's certificate
signed by a Responsible Officer of each Borrower certifying as to the truth and
accuracy of the above, which certificate shall specifically include a statement
that such
-17-
22
Borrower is in compliance with all governmental licenses and
authorizations and is qualified to do business and in good standing in all
required jurisdictions.
(c) the aggregate outstanding principal amount of the Loans
shall not exceed the Borrowing Base;
(d) subject to the Lender's right to perform one or more Due
Diligence Reviews pursuant to Section 11.15 hereof, the Lender shall
have completed its due diligence review of the Mortgage Loan Documents
for each Loan and such other documents, records, agreements,
instruments, mortgaged properties or information relating to such Loans
as the Lender in its sole discretion deems appropriate to review and
such review shall be satisfactory to the Lender in its sole discretion;
(e) the Lender shall have received from the Custodian a Trust
Receipt with exceptions as are acceptable to the Lender in its sole
discretion in respect of Eligible Mortgage Loans to be pledged
hereunder on such Business Day and a Mortgage Loan Schedule and
Exception Report, in each case dated such Business Day and duly
completed;
(f) the Lender shall have received from the Borrower a
Warehouse Lender's Release Letter substantially in the form of Exhibit
E-2 hereto (or such other form acceptable to the Lender) or a Seller's
Release Letter substantially in the form of Exhibit E-1 hereto (or such
other form acceptable to the Lender) covering each Mortgage Loan to be
pledged to the Lender;
(g) none of the following shall have occurred and/or be
continuing:
(i) an event or events hall have occurred resulting in the
effective absence of a "repo market" or comparable "lending market" for
financing debt obligations secured by mortgage loans or securities for
a period of (or reasonably expected to be) at least 30 consecutive days
or an event or events shall have occurred resulting in the Lender not
being able to finance any Mortgage Loans through the "repo market" or
"lending market" with traditional counterparties at rates which would
have been reasonable prior to the occurrence of such event or events;
(ii) an event or events shall have occurred resulting in the
effective absence of a "securities market" for securities backed by
mortgage loans for a period of (or reasonably expected to be) at least
30 consecutive days or an event or events shall have occurred resulting
in the Lender not being able to sell securities backed by mortgage
loans at prices which would have been reasonable prior to such event
or events; or
(iii) the Lender shall have been downgraded to a rating of
"BB" or lower by either ▇▇▇▇▇'▇ Investors Service, Inc. or Standard & Poor's.
Each request for a borrowing by the Borrowers hereunder shall constitute a
certification by the Borrowers that all the conditions set forth in this
Section 5 (other than Sections 5(d) and 5(g)) have been satisfied (both as of
the date of such notice, request or confirmation and as of the date of such
borrowing).
Section 6. Representations and Warranties. The Borrowers
represent and warrant to the Lender that throughout the term of this Loan
Agreement:
-18-
23
6.01 Existence. Each Borrower (a) is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization, (b) has all requisite corporate or other power, and has all
governmental licenses, authorization, consents and approvals necessary to own
its assets and carry on its business as now being or as proposed to be
conducted, except where the lack of such licenses, authorizations, consents and
approvals would not be reasonably likely to have a material adverse effect on
its Property, business or financial condition or prospectus; and (c) is
qualified to do business and is in good standing in all other jurisdictions in
which the nature of the business conducted by it makes such qualification
necessary, except where failure so to qualify would not be reasonably likely
(either individually or in the aggregate) to have a material adverse effect on
its Property, business or financial condition or prospects.
6.02 Financial Condition. Each Borrower has heretofore furnished to the
Lender a copy of (a) its consolidated balance sheet for the first two quarterly
fiscal periods of the fiscal year of such Borrower ended December 31, 1997 and
the related consolidated statements of income and retained earnings and of cash
flows for such Borrower for such quarterly fiscal periods, setting forth in each
case in comparative form the figures for the previous year, (b) its consolidated
balance sheet for the 1996 fiscal year and the related consolidated statements
of income and retained earnings and of cash flows for such Borrower for such
fiscal year, setting forth in each case in comparative form the figures for the
previous year, with the opinion thereon of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP and (c) its
consolidated balance sheet for the quarterly fiscal period of such Borrower
ended March 31, 1997 and the related consolidated statements of income and
retained earnings and of cash flows for such Borrower for such quarterly fiscal
period, setting forth in each case in comparative form the figures for the
previous year. All such financial statements are complete and correct and fairly
present, in all material respects, the consolidated financial condition of each
Borrower and its Subsidiaries and the consolidated results of its operations as
at such dates and for such fiscal periods, all in accordance with GAAP applied
on a consistent basis. Since June 30, 1997, there has been no material adverse
change in the consolidated business, operations or financial condition of the
Borrowers from that set forth in said financial statements.
6.03 Litigation. There are no actions, suits, arbitrations, investigations
or proceedings pending or, to its knowledge, threatened against the Borrowers or
any of its Subsidiaries or affecting any of the Property of any of them before
any Governmental Authority (i) as to which individually or in the aggregate
there is a reasonable likelihood of an adverse decision which would be
reasonably likely to have a material adverse effect on their Property, business
or financial condition or prospects or (ii) which questions the validity or
enforceability of any of the Loan Documents or any action to be taken in
connection with the transactions contemplated hereby.
6.04 No Breach. Neither (a) the execution and delivery of the Loan
Documents nor (b) the consummation of the transactions therein contemplated in
compliance with the terms and provisions thereof will conflict with or result in
a breach of the charter or by-laws of either Borrower, or any applicable law,
rule or regulation, or any order, writ, injunction or decree of any Governmental
Authority, or any Servicing Agreement or other material agreement or instrument
to which either Borrower is a party or by which either Borrower or any of its
Property is bound or to which it is subject, or constitute a default under any
such material agreement or instrument or result in the creation or imposition of
any Lien (except for the Liens created pursuant to this Loan Agreement) upon any
Property of the Borrower pursuant to the terms of any such agreement or
instrument.
6.05 Action. Each Borrower has all necessary corporate or other power,
authority and legal right to execute, deliver and perform its obligations under
each of the Loan Documents; the
-19-
24
execution, delivery and performance by such Borrower of each of the Loan
Documents have been duly authorized by all necessary corporate or other action
on its part; and each Loan Document has been duly and validly executed and
delivered by such Borrower and constitutes a legal, valid and binding obligation
of such Borrower, enforceable against such Borrower in accordance with its terms
subject to bankruptcy laws and other similar laws of general application
affecting rights of creditors and subject to the rules of equity including those
respecting the availability of specific performance.
6.06 Approvals. No authorizations, approvals or consents of, and no filings
or registrations with, any Governmental Authority or any securities exchange are
necessary for the execution, delivery or performance by either Borrower of the
Loan Documents or for the legality, validity or enforceability thereof, except
for filings and recordings in respect of the Liens created pursuant to this Loan
Agreement.
6.07 Margin Regulations. Neither the making of any Loan hereunder, nor the
use of the proceeds thereof, will violate or be inconsistent with the provisions
of Regulation G, T, U or X.
6.08 Taxes. Each Borrower has filed all Federal income tax returns and all
other material tax returns or necessary extensions that are required to be filed
by it and have paid all taxes due pursuant to such returns or pursuant to any
assessment received by it, except for any such taxes as are being appropriately
contested in good faith by appropriate proceedings diligently conducted and with
respect to which adequate reserves have been provided. The charges, accruals and
reserves on the books of each Borrower in respect of taxes and other
governmental charges are, in the opinion of such Borrower, adequate.
6.09 Investment Company Act. Neither Borrower nor any of its Subsidiaries
is an "investment company", or a company "controlled" by an "investment
company," within the meaning of the Investment Company Act of 1940, as amended.
6.10 Collateral; Collateral Security.
(a) Neither Borrower has assigned, pledged, or otherwise conveyed or
encumbered any Mortgage Loan to any other Person, and immediately prior to the
pledge of such Mortgage Loan to the Lender, each Borrower was the sole owner of
such Mortgage Loan and had good and marketable title thereto, free and clear of
all Liens, in each case except for Liens to be released simultaneously with the
Liens granted in favor of the Lender hereunder. No Mortgage Loan pledged to the
Lender hereunder was acquired by either Borrower from an Affiliate of such
Borrower, other than the acquisition of one or more Mortgage Loans by one
Borrower from the other Borrower, or such other acquisition approved in writing
by the Lender at the Lender's sole discretion.
(b) The provisions of this Loan Agreement are effective to create in favor
of the Lender a valid security interest in all right, title and interest of each
Borrower in, to and under the Collateral.
(c) Upon receipt by the Custodian of each Mortgage Note, endorsed in blank
by a duly authorized officer of each Borrower, the Lender shall have a fully
perfected first priority security interest therein, in the Mortgage Loan
evidenced thereby and in such Borrower's interest in the related Mortgaged
Property.
-20-
25
(d) Upon the filing of financing statements on Form UCC-1 naming the
Lender as "Secured Party" and each Borrower as "Debtor", and describing the
Collateral, in the jurisdictions and recording offices listed on Schedule 2
attached hereto, the security interests granted hereunder in the Collateral
will constitute fully perfected first priority security interests under the
Uniform Commercial Code in all right, title and interest of the Borrower in, to
and under such Collateral which can be perfected by filing under the Uniform
Commercial Code.
6.11 Chief Executive Office. Each Borrower's chief executive office on the
Effective Date is located at c/o Allied Capital Advisers, Inc., ▇▇▇▇ ▇ ▇▇▇▇▇▇,
▇.▇., ▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇.
6.12 Location of Books and Records. The location where each Borrower keeps
its books and records, including all computer tapes and records relating to the
Collateral is its chief executive office.
6.13 Hedging. Allied has entered into Interest Rate Protection Agreements
pursuant to Allied's variable rate debt having terms with respect to protection
against fluctuations in interest rates pursuant to Allied's policies and
procedures reasonably acceptable to the Lender.
6.14 True and Complete Disclosure. All written information furnished after
the date hereof by or on behalf of each Borrower to the Lender in connection
with this Loan Agreement and the other Loan Documents and the transactions
contemplated hereby and thereby will be true, complete and accurate in every
material respect, or (in the case of projections) based on reasonable
estimates, on the date as of which such information is stated or certified.
There is no fact known to a Responsible Officer of either Borrower, after due
inquiry, that could reasonably be expected to have a Material Adverse Effect
that has not been disclosed herein, in the other Loan Documents or in a report,
financial statement, exhibit, schedule, disclosure letter or other writing
furnished to the Lender for use in connection with the transactions
contemplated hereby or thereby.
6.15 Tangible Net Worth. On the Effective Date, the Tangible Net Worth of
Allied is not less than $175,000,000.
Section 7. Covenants of the Borrower. Each Borrower covenants and agrees
with the Lender that, so long as any Loan is outstanding and until payment in
full of all Secured Obligations:
7.01 Financial Statements. The Borrowers shall deliver to the Lender:
(a) as soon as available and in any event within 45 days after the end of
each of the first three quarterly fiscal periods of each fiscal year of the
Borrowers, the unaudited consolidated balance sheets of each Borrower as at the
end of such period and the related unaudited consolidated statements of income
and retained earnings and of cash flows for such Borrower for such period and
the portion of the fiscal year through the end of such period,setting forth in
each case in comparative form the figures for the previous year, accompanied by
a certificate of a Responsible Officer of such Borrower, which certificate
shall state that said consolidated financial statements fairly present the
consolidated financial condition and results of operations of such Borrower in
accordance with GAAP, consistently applied, as at the end of, and for, such
period (subject to normal year-end audit adjustments);
(b) as soon as available and in any event within 120 days after the end of
each fiscal year of the Borrowers, the consolidated balance sheets of each
Borrower at the end of
21
26
such fiscal year and the related consolidated statements of income and
retained earnings and of cash flows for such Borrower for such year,
setting forth in each case in comparative form the figures for the
previous year, accompanied by an opinion thereon of independent
certified public accountants of recognized national standing, which
opinion shall not be qualified as to scope of audit or going concern
and shall state that said consolidated financial statements fairly
present the consolidated financial condition and results of operations
of such Borrower as at the end of, and for, such fiscal year in
accordance with GAAP;
(c) from time to time such other information regarding the
financial condition, operations, or business of the Borrowers as the
Lender may reasonably request; and
Each Borrower will furnish to the Lender, at the time it furnishes each set of
financial statements pursuant to paragraphs (a) and (b) above, a certificate of
a Responsible Officer of such Borrower to the effect that, to the best of such
Responsible Officer's knowledge, such Borrower during such fiscal period or
year has observed or performed all of its covenants and other agreements, and
satisfied every condition, contained in this Loan Agreement and the other Loan
Documents to be observed, performed or satisfied by it, and that such
Responsible Officer has obtained no knowledge of any Default or Event of
Default except as specified in such certificate (and, if any Default or Event
of Default has occurred and is continuing, describing the same in reasonable
detail and describing the action such Borrower has taken or proposes to take
with respect thereto).
7.02 Litigation. Each Borrower will, within 10 days after service
of process on any of the following, give to the Lender notice of all legal or
arbitrable proceedings affecting such Borrower or any of its Subsidiaries that
questions or challenges the validity or enforceability of any of the Loan
Documents or as to which there is a reasonable likelihood of adverse
determination which would result in a Material Adverse Effect.
7.03 Existence, etc. The Borrower will:
(a) preserve and maintain its legal existence and all of its
material rights, privileges, licenses and franchises (provided that
nothing in this Section 7.03(a) shall prohibit any transaction
expressly permitted under Section 7.04 hereof):
(b) comply with the requirements of all applicable laws, rules,
regulations and orders of Governmental Authorities (including, without
limitation, all environmental laws) if failure to comply with such
requirements would be reasonably likely (either individually or in the
aggregate) to have a material adverse effect on its Property, business
or financial condition, or prospects;
(c) keep adequate records and books of account, in which complete
entries will be made in accordance with GAAP consistently applied;
(d) not move its chief executive office from the address referred
to in Section 6.11 unless it shall have provided the Lender 30 days'
prior written notice of such change;
(e) pay and discharge all taxes, assessments and governmental
charges or levies imposed on it or on its income or profits or on any
of its Property prior to the date on which penalties attach thereto,
except for any such tax, assessment, charge or levy the payment of
22
27
which is being contested in good faith and by proper proceedings and
against which adequate reserves are being maintained; and
(f) permit representatives of the Lender, during normal business
hours and upon reasonable advance notice, to examine, copy and make
extracts from its books and records, to inspect any of its Properties, and
to discuss its business and affairs with its officers, all to the extent
reasonably requested by the Lender.
7.04 Prohibition of Fundamental Changes. Allied shall not enter into
any transaction of merger or consolidation or amalgamation, or liquidate, wind
up or dissolve itself (or suffer any liquidation, winding up or dissolution) or
sell all or substantially all of its assets; provided, that either Borrower may
merge or consolidate with (a) any wholly owned subsidiary of such Borrower, or
(b) any other Person if the Borrower is the surviving corporation; and provided
further, that if after giving effect thereto, no Default would exist hereunder.
Notwithstanding anything to the contrary contained in this Section 7.04, Allied
may merge or consolidate with Allied Capital Lending Corporation, as
contemplated in that certain Allied Capital News Release dated August 14, 1997.
7.05 Borrowing Base Deficiency. If at any time there exists a
Borrowing Base Deficiency the Borrowers shall cure same in accordance with
Section 2.06 hereof.
7.06 Notices. The Borrowers shall give notice to the Lender:
(a) promptly upon receipt of notice or knowledge of the occurrence of
any Default or Event of Default;
(b) with respect to any Mortgage Loan pledged to the Lender
hereunder, within two Business Days upon receipt of any principal
prepayment other than scheduled payments (in full or partial) of such
pledged Mortgage Loan;
(c) with respect to any Mortgage Loan pledged to the Lender
hereunder, immediately upon receipt of notice or knowledge that the
underlying Mortgaged Property has been damaged by waste, fire, earthquake
or earth movement, windstorm, flood, tornado or other casualty, or
otherwise damaged so as to affect adversely the Collateral Value of such
pledged Mortgage Loan; and
(d) promptly upon receipt of notice or knowledge of (i) any default
related to any Collateral, (ii) any Lien or security interest (other than
security interests created hereby or by the other Loan Documents) on, or
claim asserted against, any of the Collateral or (iii) any event or change
in circumstances which could reasonably be expected to have a material
adverse effect on the Property, business or financial condition or
prospects of either Borrower.
Each notice pursuant to this Section shall be accompanied by a statement of a
Responsible Officer of such Borrower setting forth details of the occurrence
referred to therein and stating what action such Borrower has taken or proposes
to take with respect thereto.
7.07 Hedging. Allied shall at all times maintain Interest Rate
Protection Agreements, pursuant to Allied's variable rate debt having terms
with respect to protection against fluctuations in interest rates pursuant to
Allied's policies and procedures reasonably acceptable to the Lender. Allied
shall deliver to the Lender quarterly (unless requested more frequently by the
Lender), a written summary of the notional amount of all outstanding Interest
Rate Protection Agreements.
-23-
28
7.08 Reports. Each Borrower shall provide the Lender with a quarterly
report, which report shall include, among other items, a summary of such
Borrower's delinquency and loss experience with respect to mortgage loans
serviced by such Borrower, any Servicer or any designee of either, plus any
such additional reports as the Lender may reasonably request with respect to
such Borrower's or any Servicer's servicing portfolio or pending originations
of mortgage loans. Each Borrower shall provide the Lender with information,
promptly upon such Borrower's receipt, with respect to each Mortgaged Property
related to each Mortgage Loan pledged to the Lender hereunder, including
without limitation, the operating statements, rent roll (if applicable and
which may be provided on a quarterly basis if not available on a monthly basis)
and occupancy status of such Mortgaged Property and property level information.
7.09 Underwriting Guidelines. Without the prior written consent of
the Lender, neither Borrower shall amend materially or otherwise modify
materially the Underwriting Guidelines.
7.10 Transactions with Affiliates. Neither Borrower will enter into
any transaction, including without limitation any purchase, sale, lease or
exchange of property or the rendering of any service, with any Affiliate unless
such transaction is (a) otherwise permitted under this Loan Agreement, (b) in
the ordinary course of such Borrower's business and (c) upon fair and
reasonable terms no less favorable to such Borrower than it would obtain in a
comparable arm's length transaction with a Person which is not an Affiliate, or
make a payment that is not otherwise permitted by this Section 7.10 to any
Affiliate. In no event shall either Borrower pledge to the Lender hereunder any
Mortgage Loan acquired by such Borrower from an Affiliate of such Borrower
other than acquisitions by one Borrower from the other Borrower, or such other
acquisition approved in writing by the Lender at the Lender's sole discretion.
7.11 Limitation on Liens. Each Borrower will defend the Collateral
against, and will take such other action as is necessary to remove, any Lien,
security interest or claim on or to the Collateral, other than the security
interests created under this Loan Agreement, and each Borrower will defend the
right, title and interest of the Lender in and to any of the Collateral against
the claims and demands of all persons whomsoever.
7.12 Limitation on Distributions. After the occurrence and during the
continuation of any Event of Default, the Borrowers shall not make any payment
on account of, or set apart assets for a sinking or other analogous fund for
the purchase, redemption, defeasance, retirement or other acquisition of any
equity or partnership interest of the Borrower, whether now or hereafter
outstanding, or make any other distribution in respect thereof, either directly
or indirectly, whether in cash or property or in obligations of the Borrowers
except as, required by the Internal Revenue Code of 1986 (as amended from time
to time) to preserve the Borrowers' "REIT" status.
7.13 Maintenance of Tangible Net Worth. Allied shall not permit
Tangible Net Worth at any time to be less than $175,000,000.
7.14 Maintenance of Ratio of Total Indebtedness to Tangible Net
Worth. Allied shall not permit the ratio of Total Indebtedness with respect to
recourse obligations to Tangible Net Worth at any time to be greater than 3:1.
7.15 Maintenance of Profitability. The Borrowers shall not permit,
for any period of three consecutive fiscal quarters (each such period, a "Test
Period"), Net Income for such Test Period,
-24-
29
before income taxes for such Test Period and distributions made during such
Test Period, to be less than $1.00.
7.16 Servicing Tape. Each Borrower shall provide to the Lender on a
monthly basis a computer readable magnetic tape containing servicing
information, including without limitation those fields specified by the Lender
from time to time, on a loan-by-loan basis and in the aggregate, with respect
to the Mortgage Loans serviced hereunder by such Borrower or any Servicer.
7.17 Interest Rate Protection Agreements. The Borrower shall not
pledge, hypothecate, encumber or permit any Lien to exist on any Interest Rate
Protection Agreement.
Section 8. Events of Default. Each of the following events shall
constitute an event of default (an "Event of Default") hereunder:
(a) the Borrowers shall default in the payment of any principal of or
interest on any Loan when due (whether at stated maturity, upon
acceleration or at mandatory or optional prepayment); or
(b) the Borrowers shall default in the payment of any other amount
payable by it hereunder or under any other Loan Document after notification
by the Lender of such default, and such default shall have continued
unremedied for five Business Days; or
(c) any representation, warranty or certification made or deemed made
herein or in any other Loan Document by either Borrower or any certificate
furnished to the Lender pursuant to the provisions hereof or thereof shall
prove to have been false or misleading in any material respect as of the
time made or furnished (other than the representations and warranties set
forth in Schedule 1, which shall be considered solely for the purpose of
determining the Collateral Value of the Mortgage Loans; unless the
applicable Borrower shall have made any such representations and warranties
with knowledge that they were materially false or misleading at the time
made); or
(d) either Borrower shall fail to comply with the requirements of
Section 7.03(a), Section 7.04, Section 7.06, or Sections 7.09 through 7.16
hereof; or either Borrower shall default in the performance of its
obligations under Section 7.05 hereof and such default shall continue
unremedied for a period of one (1) Business Day; or the Borrower shall
otherwise fail to comply with the requirements of Section 7.03 hereof and
such default shall continue unremedied for a period of five Business Days;
or either Borrower shall fail to observe or perform any other covenant or
agreement contained in this Loan Agreement or any other Loan Document and
such failure to observe or perform shall continue unremedied for a period
of seven Business Days; or
(e) a final judgment or judgments for the payment of money in excess
of $20,000,000 in the aggregate shall be rendered against either Borrower
by one or more courts, administrative tribunals or other bodies having
jurisdiction and the same shall not be discharged (or provision shall not
be made for such discharge) or bonded, or a stay of execution thereof shall
not be procured, within 60 days from the date of entry thereof, and the
applicable Borrower shall not, within said period of 60 days, or such
longer period during which execution of the same shall have been stayed or
bonded, appeal therefrom and cause the execution thereof to be stayed
during such appeal; or
-25-
30
(f) either Borrower shall admit in writing its inability to pay its
debts as such debts become due; or
(g) either Borrower shall (i) apply for or consent to the
appointment of, or the taking of possession by, a receiver, custodian,
trustee, examiner or liquidator or the like of itself or of all or a
substantial part of its property, (ii) make a general assignment for the
benefit of its creditors, (iii) commence a voluntary case under the
Bankruptcy Code, (iv) file a petition seeking to take advantage of any
other law relating to bankruptcy, insolvency, reorganization, liquidation,
dissolution, arrangement or winding-up, or composition or readjustment of
debts, (v) fail to controvert in a timely and appropriate manner, or
acquiesce in writing to, any petition filed against it in an involuntary
case under the Bankruptcy Code or (vi) take any corporate or other action
for the purpose of effecting any of the foregoing; or
(h) a proceeding or case shall be commenced, without the
application or consent of either Borrower or any of its Subsidiaries, in
any court of competent jurisdiction, seeking (i) its reorganization,
liquidation, dissolution, arrangement or winding-up, or the composition or
readjustment of its debts, (ii) the appointment of, or the taking of
possession by, a receiver, custodian, trustee, examiner, liquidator or the
like of either Borrower or any such Subsidiary or of all or any
substantial part of its property, or (iii) similar relief in respect of
either Borrower or any such Subsidiary under any law relating to
bankruptcy, insolvency, reorganization, liquidation, dissolution,
arrangement or winding-up, or composition or adjustment of debts, and such
proceeding or case shall continue undismissed, or an order, judgment or
decree approving or ordering any of the foregoing shall be entered and
continue unstayed and in effect, for a period of 60 or more days; or an
order for relief against either Borrower or any such Subsidiary shall be
entered in an involuntary case under the Bankruptcy Code; or
(i) the Custodial Agreement or any Loan Document shall for whatever
reason by terminated or cease to be in full force and effect, or the
enforceability thereof shall be contested by either Borrower; or
(j) either Borrower shall grant, or suffer to exist, any Lien on
any Collateral except the Liens contemplated hereby; or the Liens
contemplated hereby shall cease to be first priority perfected Liens on
the Collateral in favor of the Lender or shall be Liens in favor of any
Person other than the Lender.
Section 9. Remedies Upon Default.
---------------------
(a) Upon the occurence of one or more Events of Default other than
those referred to in Section 8(g) or (h), the Lender may immediately declare
the principal amount of the Loans then outstanding under the Note to be
immediately due and payable, together with all interest thereon and fees and
expenses accruing under this Loan Agreement. Upon the occurrence of an Event of
Default referred to in Sections 8(g) or (h), such amounts shall immediately and
automatically become due and payable without any further action by any Person.
Upon such declaration or such automatic acceleration, the balance then
outstanding on the Note shall become immediately due and payable, without
presentment, demand, protest or other formalities of any kind, all of which are
hereby expressly waived by the Borrowers.
(b) Upon the occurence of one or more Events of Default, the
Lender shall have the right to obtain physical possession of the Servicing
Records and all other files of the Borrower
-26-
31
relating to the Collateral and all documents relating to the Collateral which
are then or may thereafter come in to the possession of either Borrower or any
third party acting for either Borrower and either Borrower shall deliver to the
Lender such assignments as the Lender shall request. The Lender shall be
entitled to specific performance of all agreements of the Borrowers contained
in this Loan Agreement.
Section 10. No Duty of Lender. The powers conferred on the Lender
hereunder are solely to protect the Lender's interests in the Collateral and
shall not impose any duty upon it to exercise any such powers. The Lender shall
be accountable only for amounts that it actually receives as a result of the
exercise of such powers, and neither it nor any of its officers, directors,
employees or agents shall be responsible to the Borrowers for any act or
failure to act hereunder, except for its or their own gross negligence or
willful misconduct.
Section 11. Miscellaneous.
11.01 Waiver. No failure on the part of the Lender to exercise and
no delay in exercising, and no course of dealing with respect to, any right,
power or privilege under any Loan Document shall operate as a waiver thereof,
nor shall any single or partial exercise of any right, power or privilege under
any Loan Document preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The remedies provided herein
are cumulative and not exclusive of any remedies provided by law.
11.02 Notices. Except as otherwise expressly permitted by this Loan
Agreement, all notices, requests and other communications provided for herein
and under the Custodial Agreement (including without limitation any
modifications of, or waivers, requests or consents under, this Loan Agreement)
shall be given or made in writing (including without limitation by telex or
telecopy) delivered to the intended recipient at the "Address for Notices"
specified below its name on the signature pages hereof or thereof); or, as to
any party, at such other address as shall be designated by such party in a
written notice to each other party, by overnight courier, personal delivery,
telecopy or certified mail return receipt requested. All notices, requests and
other communications shall be deemed to have been duly given, upon receipt, in
each case given or addressed as aforesaid.
11.03 Indemnification and Expenses.
(a) Each Borrower agrees to hold the Lender harmless from and
indemnify the Lender against all liabilities, losses, damages, judgments, costs
and expenses of any kind which may be imposed on, incurred by or asserted
against the Lender (collectively, the "Costs") relating to or arising out of
this Loan Agreement, the Note, any other Loan Document or any transaction
contemplated hereby or thereby, or any amendment, supplement or modification
of, or any waiver or consent under or in respect of, this Loan Agreement, the
Note, any other Loan Document or any transaction contemplated hereby or
thereby, that, in each case, results from anything other than the Lender's
gross negligence or willful misconduct. Without limiting the generality of the
foregoing, the Borrowers agree to hold the Lender harmless from and indemnify
the Lender against all Costs with respect to (i) Wet-Ink Mortgage Loans
relating to or arising out of any breach, violation or alleged breach or
violation of any consumer credit laws, including without limitation the Truth
in Lending Act and/or the Real Estate Settlement Procedures Act and (ii) all
Mortgage Loans relating to or arising out of any violation or alleged
violation of any environmental law, rule or regulation that, in each case,
results from anything other than the Lender's gross negligence or willful
misconduct. In any suit, proceeding or action brought by the Lender in
connection with any Mortgage Loan for any sum owing thereunder, or to enforce
any provisions of any Mortgage Loan, the Borrowers will save, indemnify and
hold the
-27-
32
Lender harmless from and against all expense, loss or damage suffered by reason
of any defense, set-off, counterclaim, recoupment or reduction or liability
whatsoever of the account debtor or obligor thereunder, arising out of a breach
by either Borrower of any obligation thereunder or arising out of any other
agreement, indebtedness or liability at any time owing to or in favor of such
account debtor or obligor or its successors from the Borrowers. The Borrowers
also agree to reimburse the Lender as and when billed by the Lender for all the
Lender's costs and expenses incurred in connection with the enforcement or the
preservation of the Lender's rights under this Loan Agreement, the Note, any
other Loan Document or any transaction contemplated hereby or thereby,
including without limitation the reasonable fees and disbursements of its
counsel. The Borrowers hereby acknowledge that, notwithstanding the fact that
the Note is secured by the Collateral, the obligation of the Borrowers under
the Note is a recourse obligation of the Borrowers.
(b) The Borrower agrees to pay as and when billed by the Lender all
of the out-of-pocket costs and expenses incurred by the Lender in connection
with the development, preparation and execution of, and any amendment,
supplement or modification to, this Loan Agreement, the Note, any other Loan
Document or any other documents prepared in connection herewith or therewith
(up to the amount of $50,000).
11.04 Amendments. Except as otherwise expressly provided in this Loan
Agreement, any provision of this Loan Agreement may be modified or supplemented
only by an instrument in writing signed by each Borrower and the Lender and
any provision of this Loan Agreement may be waived by the Lender.
11.05 Successors and Assigns. This Loan Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
11.06 Survival. The obligations of each Borrower under Section 11.03
hereof shall survive the repayment of the Loans and the termination of this
Loan Agreement. In addition, each representation and warranty made or deemed to
be made by a request for a borrowing, herein or pursuant hereto shall survive
the making of such representation and warranty, and the Lender shall not be
deemed to have waived, by reason of making any Loan, any Default that may arise
because any such representation or warranty shall have proved to be false or
misleading, notwithstanding that the Lender may have had notice or knowledge or
reason to believe that such representation or warranty was false or misleading
at the time such Loan was made.
11.07 Captions. The table of contents and captions and section
headings appearing herein are included solely for convenience of reference and
are not intended to affect the interpretation of any provision of this Loan
Agreement.
11.08 Counterparts. This Loan Agreement may be executed in any number
of counterparts, all of which taken together shall constitute one and the same
instrument, and any of the parties hereto may execute this Loan Agreement by
signing any such counterpart.
11.09 Loan Agreement Constitutes Security Agreement; Governing Law.
This Loan Agreement shall be governed by New York law without reference to
choice of law doctrine, and shall constitute a security agreement within the
meaning of the Uniform Commercial Code.
11.10 SUBMISSION TO JURISDICTION; WAIVERS. LENDER AND EACH BORROWER
HEREBY IRREVOCABLY AND UNCONDITIONALLY:
-28-
33
(A) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS LOAN AGREEMENT, THE NOTE AND THE OTHER LOAN
DOCUMENTS, OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT
THEREOF, TO THE NONEXCLUSIVE GENERAL JURISDICTION OF THE COURTS OF THE
STATE OF NEW YORK, THE FEDERAL COURTS OF THE UNITED STATES OF AMERICA FOR
THE SOUTHERN DISTRICT OF NEW YORK, AND APPELLATE COURTS FROM ANY THEREOF;
(B) CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN SUCH
COURTS AND, TO THE EXTENT PERMITTED BY LAW, WAIVES ANY OBJECTION THAT IT
MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING IN
ANY SUCH COURT OR THAT SUCH ACTION OR PROCEEDING WAS BROUGHT IN AN
INCONVENIENT COURT AND AGREES NOT TO PLEAD OR CLAIM THE SAME;
(C) AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDING
MAY BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL
(OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO ITS
ADDRESS SET FORTH UNDER ITS SIGNATURE BELOW OR AT SUCH OTHER ADDRESS OF
WHICH THE LENDER SHALL HAVE BEEN NOTIFIED; AND
(D) AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO EFFECT
SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE
RIGHT TO ▇▇▇ IN ANY OTHER JURISDICTION.
11.11 WAIVER OF JURY TRIAL. EACH OF THE BORROWER AND THE LENDER HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND
ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO
THIS LOAN AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY.
11.12 Acknowledgments. Each Borrower hereby acknowledges that:
(a) it has been advised by counsel in the negotiation, execution and
delivery of this Loan Agreement, the Note and the other Loan Documents;
(b) the Lender has no fiduciary relationship to the Borrowers, and the
relationship between the Borrowers and the Lender is solely that of debtor
and creditor; and
(c) no joint venture exists between the Lender and the Borrowers.
11.13 Hypothecation or Pledge of Loans. The Lender shall have free
and unrestricted use of all Collateral and nothing in this Loan Agreement shall
preclude the Lender form engaging in repurchase transactions with the Collateral
or otherwise pledging, repledging, transferring, hypothecating, or
rehypothecating the Collateral. Nothing contained in this Loan Agreement shall
obligate the Lender to segregate any Collateral delivered to the Lender by the
Borrowers, however the
- 29 -
34
Lender shall be obligated to deliver the Collateral back to the Borrowers in
accordance with, and subject to, the provisions of this Loan Agreement.
11.14 Servicing.
---------
(a) Each Borrower covenants to maintain or cause the servicing of the
Mortgage Loans to be maintained in conformity with accepted and prudent
servicing practices in the industry for the same type of mortgage loans as the
Mortgage Loans and in a manner at least equal in quality to the servicing such
Borrower provides for mortgage loans which it owns. In the event that the
preceding language is interpreted as constituting one or more servicing
contracts, each such servicing contract shall terminate automatically upon the
earliest of (i) an Event of Default, (ii) the date on which all the Secured
Obligations have been paid in full or (iii) the transfer of servicing approved
by the Borrower.
(b) If the Mortgage Loans are serviced by either Borrower, (i) such
Borrower agrees that the Lender is the collateral assignee of all servicing
records, including but not limited to any and all servicing agreements, files,
documents, records, data bases, computer tapes, copies of computer tapes, proof
of insurance coverage, insurance policies, appraisals, other closing
documentation, payment history records, and any other records relating to or
evidencing the servicing of Mortgage Loans (the "Servicing Records"), and
(ii) such Borrower grants the Lender a security interest in all servicing fees
and rights relating to the Mortgage Loans and all Servicing Records to secure
the obligation of such Borrower or its designee to service in conformity with
this Section and any other obligation of such Borrower to the Lender. Each
Borrower covenants to safeguard such Servicing Records and to deliver them
promptly to the Lender or its designee (including the Custodian) at the
Lender's request.
(c) If the Mortgage Loans are serviced by a third party servicer (such
third party servicer, the "Servicer"), such Borrower (i) shall provide a copy
of the servicing agreement to the Lender, which shall be in form and substance
acceptable to the Lender (the "Servicing Agreement"); and (ii) hereby
irrevocably assigns to the Lender and the Lender's successors and assigns all
right, title, interest of such Borrower in, to and under, and the benefits of,
any Servicing Agreement with respect to the Mortgage Loans.
(d) If the servicer of the Mortgage Loans is either Borrower or the
Servicer is an Affiliate of such Borrower, such Borrower shall provide to the
Lender a letter from such Borrower or the Servicer, as the case may be, to the
effect that upon the occurrence of an Event of Default and acceleration of the
debt outstanding pursuant to Section 9 hereof, the Lender may terminate any
Servicing Agreement and transfer servicing to its designee, at no cost or
expense to the Lender, it being agreed that such Borrower will pay any and all
fees required to terminate the Servicing Agreement and to effectuate the
transfer of servicing to the designee of the Lender.
(e) After the Funding Date, until the pledge of any Mortgage Loan is
relinquished by the Custodian, the Borrowers will have no right to modify or
alter the terms of such Mortgage Loan and the Borrowers will have no obligation
or right to repossess such Mortgage Loan or substitute another Mortgage Loan,
except as provided in the Custodial Agreement.
(f) In the event either Borrower or its Affiliate is servicing the
Mortgage Loans, such Borrower shall permit the Lender to inspect such
Borrower's or its Affiliate's servicing facilities, as the case may be, for the
purpose of satisfying the Lender that such Borrower or its Affiliate, as the
case may be, has the ability to service the Mortgage Loans as provided in this
Loan Agreement.
-30-
35
11.15 Periodic Due Diligence Review. Each Borrower acknowledges that the
Lender has the right to perform continuing due diligence reviews with respect to
the Mortgage Loans, for purposes of verifying compliance with the
representations, warranties and specifications made hereunder, or otherwise, and
each Borrower agrees that upon reasonable (but no less than five Business Days
prior notice, unless a Default shall have occurred, in which case no notice
shall be required) to either Borrower, the Lender or its authorized
representatives will be permitted during normal business hours to examine,
inspect, and make copies and extracts of, the Mortgage Files and any and all
documents, records, agreements, instruments or information relating to such
Mortgage Loans in the possession or under the control of the Borrower and/or the
Custodian. The Borrowers also shall make available to the Lender, on a
reasonable basis, a knowledgeable financial or accounting officer for the
purpose of answering questions respecting the Mortgage Files and the Mortgage
Loans. Without limiting the generality of the foregoing, each Borrower
acknowledges that the Lender may make Loans to such Borrower based solely upon
the information provided by such Borrower to the Lender in the Mortgage Loan
Tape and the representations, warranties and covenants contained herein, and
that the Lender, at its option, has the right at any time to conduct a partial
or complete due diligence review on some or all of the Mortgage Loans securing
such Loan, including without limitation ordering new credit reports and new
appraisals on the related Mortgaged Properties and otherwise re-generating the
information used to originate such Mortgage Loans. The Lender may underwrite
such Mortgage Loans itself or engage a mutually agreed upon third party
underwriter to perform such underwriting. Each Borrower agrees to cooperate with
the Lender and any third party underwriter in connection with such underwriting,
including, but not limited to, providing the Lender and any third party
underwriter with access to any and all documents, records, agreements,
instruments or information relating to such Mortgage Loans in the possession,or
under the control, of such Borrower. Each Borrower further agrees that if a
Default shall have occurred, the Borrowers shall reimburse the Lender for any
and all out-of-pocket costs and expenses incurred by the Lender in connection
with the Lender's activities pursuant to this Section 11.15 performed following
such Default.
11.16 Intent. The parties recognize that each Loan is a "securities
contract" as that term is defined in Section 741 of Title 11 of the United
States Code, as amended.
11.17 Joint and Several Liability. Allied hereby acknowledges and agrees
that it shall be jointly and severally liable for all representations,
warranties, covenants, obligations and indemnities of the Borrowers hereunder.
Business Mortgage Investors, Inc. hereby acknowledges and agrees that it shall
be liable for all representations, warranties, covenants, obligations and
indemnities of the Borrowers hereunder only to the extent of its pro rata
portion of the Secured Obligations.
[SIGNATURE PAGE FOLLOWS]
-31-
36
IN WITNESS WHEREOF, the parties hereto have caused this Loan Agreement to
be duly executed and delivered as of the day and year first above written.
BORROWERS
ALLIED CAPITAL COMMERCIAL CORPORATION
By /s/ ▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chief Financial Officer
Address for Notices:
▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇.▇.
▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No: (▇▇▇) ▇▇▇-▇▇▇▇
BUSINESS MORTGAGE INVESTORS, INC.
By /s/ ▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chief Financial Officer
Address for Notices:
▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇.▇.
▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No: (▇▇▇) ▇▇▇-▇▇▇▇
37
LENDER
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ MORTGAGE CAPITAL INC.
By /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇
Title: Vice President
Address for Notices:
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇ ▇▇▇▇▇
Telecopier No.: ▇▇▇-▇▇▇-▇▇▇▇
Telephone No.: ▇▇▇-▇▇▇-▇▇▇▇