1
Exhibit 10.4
[Executive Copy]
AMENDMENT NO. 2
TO
MASTER REPURCHASE AGREEMENT
THIS AMENDMENT NO. 2, made as of July 30, 1997 ("Amendment No. 2"), by and
among MERRILL LYNCH MORTGAGE CAPITAL INC. ("MLMCI") and ALLIED CAPITAL
COMMERCIAL CORPORATION ("ALCC") and BUSINESS MORTGAGE INVESTORS, INC. ("BMI").
R E C I T A L S
WHEREAS, MLMCI and the Obligors have previously entered into a Master
Repurchase Agreement (including the Supplemental Terms set forth in Annex I
thereto) dated as of March 22, 1996, as amended by Amendment No. 1 thereto dated
as of November 11, 1996 (collectively, the "Agreement"); and
WHEREAS, MLMCI and the Obligors desire to make certain modifications to the
Agreement as described herein and to confirm their understanding that
Transactions representing a portion of the maximum permitted outstanding
Purchase Price under the Agreement shall be at the sole discretion of MLMCI;
NOW, THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
Section 1. Definitions. a. Capitalized terms used herein and not otherwise
defined shall have the meanings assigned in the Agreement. Capitalized terms
used in the Agreement whose definitions are modified in Amendment No. 2 shall,
for all purposes of the Agreement, be deemed to have such modified definitions.
b. The definition of "Indebtedness" is hereby amended and restated as
follows:
"Indebtedness" as used herein, whether or not capitalized, shall mean, as
to any Person, all items of indebtedness which, in accordance with GAAP and
the practices thereof, would be included in determining liabilities as
shown on the liability side of a statement of condition of such Person as
of the date as of which indebtedness is to be determined, including,
without limitation, all obligations for money borrowed
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and capitalized lease obligations, and shall also include all indebtedness and
liabilities of others assumed or guaranteed by such Person or in respect of
which such Person is secondarily or contingently liable (other than by
endorsement of instruments in the course of collection) whether by reason of any
agreement to acquire such indebtedness or to supply or advance sums or
otherwise, but shall exclude any non-recourse indebtedness.
Section 2. Representations, Warranties and Covenants.
a. Paragraph 9(b) of the Supplemental Terms is hereby amended by adding the
following clause at the end thereof:
"(x) The Custodian is not controlled by, an affiliate of or under common
control with an Obligor."
b. Paragraph 9(d)(ix) of the Supplemental Terms is hereby amended by deleting
such clause in its entirety and substituting the following therefor:
"(ix) As of any date of determination, the aggregate outstanding Repurchase
Price attributable to Transactions involving Category IV Loans shall
not exceed the lesser of (1) 15% of the aggregate outstanding
Repurchase Price attributable to all Transactions involving Mortgage
Loans and (2) $10,000,000."
c. Paragraph 9(d) of the Supplemental Terms is hereby amended by adding the
following clause at the end thereof:
"(x) The Custodian shall not at any time be controlled by, an affiliate of
or under common control with an Obligor."
Section 3. Additional Events of Termination. Paragraph 11(i) of
the Supplemental Terms is hereby deleted in its entirety and replaced with the
following:
"(i) The ratio of (i) total Indebtedness of an Obligor to (ii) Book Net
Worth of such Obligor shall exceed 3 to 1;"
Section 4. Termination. Paragraph 20 of the Supplemental Terms is hereby
deleted in its entirety and replaced with the following:
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Notwithstanding any provisions of Paragraph 15 of the Master Repurchase
Agreement to the contrary, the Agreement, as amended hereby, and all
Transactions outstanding hereunder shall terminate automatically without
any requirement for notice on the date occurring eighteen (18) calendar
months after the date as of which Amendment No. 2 to the Agreement is
entered into; provided, however, that the Agreement, as amended hereby, and
any Transaction outstanding hereunder may be extended by mutual agreement
of MLMCI and the Obligors; and provided further, however, that neither
MLMCI nor the Obligors shall be obligated to agree to such an extension.
Section 5. Maximum Transaction Amount. Paragraph 21 of the Supplemental
Terms is hereby deleted in its entirety and replaced with the following:
21. MAXIMUM TRANSACTION AMOUNT. The aggregate outstanding Repurchase Price
for the Purchased Securities subject to this Agreement as of any date of
determination shall not exceed (i) $250,000,000 less (ii) all outstanding
indebtedness of ALCC under the ALCC Master Repurchase Agreement.
Section 6. Certain Transactions Optional.
a. Notwithstanding any agreement between an Obligor and MLMCI or among
the Obligors, MLMCI and any third party, whether written or oral,
MLMCI may reject any Mortgage Loan or any other asset from inclusion
in a Transaction hereunder if it reasonably believes that such
Mortgage Loan or other asset does not conform to the requirements for
financing set forth herein. Each Obligor shall provide any
documentation or other information requested by MLMCI in connection
with the evaluation of any Mortgage Loan or other asset promptly upon
request by MLMCI.
b. Notwithstanding any agreement between an Obligor and MLMCI or among
the Obligors, MLMCI and any third party, whether written or oral, and
any provision of the Agreement, as amended hereby, to the contrary
notwithstanding, the entering into any Transaction hereunder that
would cause the aggregate outstanding Purchase Price to be in excess
of $100,000,000 shall be discretionary on the part of MLMCI.
Section 7. Expenses. The Obligors shall be jointly and severally liable
for the payment of their own expenses and all reasonable out-of-pocket costs
and expenses (including fees and disbursements of counsel) of MLMCI: (1)
incident to the
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preparation and negotiation of the Agreement as amended hereby, the Custodial
Agreement and any documents relating thereto; (2) incident to the preparation
and negotiation of any amendments or waivers thereto, and the protection of the
rights of MLMCI thereunder; and (3) incident to the enforcement of payment of
amounts due under the Agreement as amended hereby or the Custodial Agreement,
whether by judicial proceedings or otherwise, including, without limitation, in
connection with bankruptcy, insolvency, liquidation, reorganization, moratorium
or other similar proceedings involving an Obligor. Notwithstanding any
provision hereof to the contrary, the obligations of the Obligors to pay
MLMCI's expenses as set forth herein shall be effective and enforceable whether
or not any Transaction remains outstanding and shall survive payment of all
other obligations owed by an Obligor to MLMCI.
Section 8. Controlling Law. This Amendment No. 2 shall be governed and
construed in accordance with the laws of the State of New York applicable to
agreements made and entirely performed therein.
Section 9. Interpretation. The provisions of the Agreement shall be read
so as to give effect to the provisions of this Amendment No. 2.
Section 10. Counterparts. This Amendment No. 2 may be executed in any
number of counterparts, each of which counterparts shall be deemed to be an
original, and such counterparts shall constitute but one and the same
instrument.
Section 11. Ratification and Confirmation. As amended by this Amendment
No. 2, the Agreement is hereby in all respects ratified and confirmed, and the
Agreement as amended by this Amendment No. 2 shall be read, taken and construed
as one and the same instrument.
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IN WITNESS WHEREOF, MLMCI and ALCC have caused their names to be signed
hereto by their respective officers thereunto duly authorized, all as of the
date first above written.
MERRILL LYNCH MORTGAGE CAPITAL INC.
By: /s/ Michael Blum
Name: Michael Blum
Title: Director
ALLIED CAPITAL COMMERCIAL CORPORATION
By: /s/ John Scheurer
Name: John Scheurer
Title: President
BUSINESS MORTGAGE INVESTORS, INC.
By: /s/ John Scheurer
Name: John Scheurer
Title: President
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[Merrill Lynch Letterhead]
As of July 30, 1997
Allied Capital Commercial Corporation
Business Mortgage Investors, Inc.
1666 K Street, N.W., Suite 901
Washington, DC 20006
Re: Amended and Restated Master Repurchase Agreement
among Merrill Lynch Mortgage Capital Inc.,
Allied Capital Commercial Corporation and
Business Mortgage Investors, Inc.
-----------------------------------------------
Gentlemen:
Reference is made to the letter agreement, dated March 11, 1995, as
supplemented and amended prior to the date hereof (the "Letter Agreement"),
among Merrill Lynch Mortgage Capital Inc. ("MLMCI"), Allied Capital Commercial
Corporation ("ALCC") and Business Mortgage Investors, Inc. ("BMI") (ALCC and
BMI collectively, the "Obligors"). MLMCI and the Obligors have entered into
Amended and Restated Master Repurchase Agreement to be dated as of March 22,
1996, as amended by Amendment No. 1 thereto, dated as of November 11, 1996,
and Amendment No. 2 thereto, dated as of July 30, 1997 (collectively, the
"Amended and Restated Master Repurchase Agreement"). Capitalized terms used
herein and not otherwise defined herein shall have the meanings ascribed in the
Amended and Restated Master Repurchase Agreement.
MLMCI hereby agrees that it will be obligated to enter into Transactions
with the Obligor under the Amended and Restated Master Repurchase Agreement
having a maximum aggregate Repurchase Price of $100,000,000 (the "Committed
Amount") at any one time for an eighteen month period commencing on July 30,
1997 so long as the terms and conditions of the Amended and Restated Master
Repurchase Agreement and the related Custody Agreement are fully satisfied and
no Event of Default or event of termination thereunder has occurred and upon
(i) the payment by the Obligors to MLMCI of a fee (the "Commitment Fee") in the
amount of $250,000.00 and (ii) the acceptance of this offer by the Obligors in
the manner contemplated below. Any provision of this letter agreement to the
contrary notwithstanding, no portion of the Committed Amount shall apply to
Category IV Loans and MLMCI is under no obligation to enter into Transactions
involving Category IV Loans.
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The Commitment Fee shall be in addition to any prior fee paid by the
Obligors to MLMCI for committed financing and will not be refunded for any
reason including, without limitation, the Obligors' election not to engage in
any Transactions under the Amended and Restated Master Repurchase Agreement.
Payment of the Commitment Fee will be made by wire transfer in immediately
available funds to the following account:
Bankers NYC
Acct.: MLMCI Matched Book
Acct. No.: 00812914
ABA No.: 021 001 033
The parties hereto hereby confirm that the Pricing Rate at which the Price
Differential will be calculated will be a per annum percentage (i) in the case
of Category I Loans, 112.5 basis points in excess of LIBOR (or such lesser
number of basis points as MLMCI may determine in its sole discretion) and (ii)
in the case of Category II Loans and Category III Loans, 125 basis points in
excess of LIBOR (or such lesser number of basis points as MLMCI may determine in
its sole discretion). As used herein, "LIBOR" shall mean the London Interbank
Offered Rate for one-month United States Dollar deposits as set forth on page
8695 of Knight-Ridder as of 8:00 a.m., New York time, on the date of
determination. The Pricing Rate initially will be set on the Purchase Date for
each specific Transaction and will reset monthly on the last business day of
each calendar month. All calculations will be made on the basis of a 360-day
year and the actual number of days elapsed.
The parties hereto hereby confirm that for all Transactions involving
Mortgage Loans, the percentage used to calculate the Buyer's Margin Amount shall
reflect an advance rate of (i) ninety percent (90%) in the case of Category I
Loans or (ii) seventy-five percent (75%) in the case of Category II Loans and
Category III Loans.
The Obligors acknowledge that this confirmation letter, the Amended
and Restated Master Repurchase Agreement, the Custody Agreement, and all
documents relating thereto and transactions contemplated thereby are
confidential in nature and the Obligors agree that, unless otherwise directed
by a court of competent jurisdiction, each shall limit the distribution of such
documents and the discussion of such transactions to such of its officers,
employees, attorneys, accountants and agents as is required in order to fulfill
its obligations under such documents and with respect to such transactions.
Notwithstanding the foregoing, however, the Obligors may file such of the
aforementioned documents with the Securities and Exchange Commission as they
reasonably deem to be required by applicable law and may issue such press
releases concerning the matters contemplated hereby as MLMCI may approve in its
reasonable discretion; provided, however, that no such press release may refer
to the Pricing Rate, the Buyer's or Seller's Margin or the Commitment Fee. Any
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press release so approved may be repeated by the Obligors to any person or
entity making inquiry with respect thereto.
Please confirm our mutual agreement as set forth herein and acknowledge
receipt of this confirmation letter by executing the enclosed copy of this
letter and returning it to Merrill Lynch Mortgage Capital Inc., Merrill Lynch
World Headquarters, World Financial Center, North Tower, 8th Floor, New York,
New York 10281, Attention: Timothy M. Loughlin (telecopy number (212)
449-6673). If you have any questions concerning this matter, please contact the
undersigned at (212) 449-5939.
Very truly yours,
MERRILL LYNCH MORTGAGE CAPITAL INC.
By: /s/ Michael A. Blum
--------------------------------
Name: Michael A. Blum
------------------------------
Title: Director
-----------------------------
ACCEPTED, CONFIRMED AND ACKNOWLEDGED:
ALLIED CAPITAL COMMERCIAL CORPORATION
By: /s/ John Scheurer
----------------------------------
Name: John Scheurer
--------------------------------
Title: President
-------------------------------
Date as of: July 30, 1997
BUSINESS MORTGAGE INVESTORS, INC.
By: /s/ John Scheurer
----------------------------------
Name: John Scheurer
--------------------------------
Title: President
-------------------------------
Dated as of: JULY 30, 1997
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[Merrill Lynch Letterhead]
June 25, 1997
Allied Capital Commercial Corporation
Business Mortgage Investors, Inc.
1666 K Street, N.W., Suite 901
Washington, DC 20006
Re: Amended and Restated Master Repurchase Agreement
among Merrill Lynch Mortgage Capital Inc.,
Allied Capital Commercial Corporation and
Business Mortgage Investors, Inc.
and
Master Repurchase Agreement between
Merrill Lynch Mortgage Capital Inc. and
Allied Capital Commercial Corporation
------------------------------------------------
Gentlemen:
Reference is made to the Amended and Restated Master Repurchase
Agreement, dated as of March 22, 1996 the ("ACCC/BMI Agreement"), among Merrill
Lynch Mortgage Capital Inc. ("MLMCI"), Allied Capital Commercial Corporation
("ACCC") and Business Mortgage Investors, Inc. (together with ACCC, the
"Obligors") and the Master Repurchase Agreement, dated as of March 22, 1996
(the "ACCC Agreement"), between MLMCI and ACCC. Reference is further made to
the letter agreement, dated March 21, 1997, as amended by the letter agreements
dated April 25, 1997 and May 22, 1997, each among MLMCI and the Obligors
extending the terms of the ACCC/BMI Agreement and the ACCC Agreement until June
30, 1997 pursuant to the terms of such letter agreement.
This letter is to confirm that MLMCI and the Obligors have agreed to
extend the terms of the ACCC/BMI Agreement and the ACCC Agreement for a period
of approximately one month on an uncommitted basis such that the termination
date for each such agreement is extended to July 31, 1997. Any provision of the
ACCC/BMI Agreement or the ACCC Agreement or any other document relating thereto
to the contrary notwithstanding, MLMCI may in its discretion, but is not
required to, enter into Transactions
10
under the ACCC/BMI Agreement and the ACCC Agreement from the date hereof to the
Revised Termination date.
Please confirm our mutual agreement as set forth herein and
acknowledge receipt of this confirmation letter by executing the enclosed copy
of this letter and returning it to Merrill Lynch Mortgage Capital Inc., Merrill
Lynch Work Headquarters, World Financial Center, North Tower, 8th Floor, New
York, New York 10281, Attention: Timothy M. Loughlin (telecopy number (212)
449-6673). If you have any questions concerning this matter, please contact Mr.
Loughlin at (212) 449-5939.
Very truly yours,
MERRILL LYNCH MORTGAGE CAPITAL
INC.
By: /S/ Daniel G Kramer
Name: Daniel G. Kramer
Title: Managing Director
ACCEPTED, CONFIRMED AND ACKNOWLEDGED:
ALLIED CAPITAL COMMERCIAL CORPORATION
by: /s/ John Scheurer
Name: John Scheurer
Title: President
Dated: June 25, 1997
BUSINESS MORTGAGE INVESTORS, INC.
By: /s/ John Scheurer
Name: John Scheurer
Title: President
Dated: June 25, 1997
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[MERRILL LYNCH LETTERHEAD]
May 22, 1997
Allied Capital Commercial Corporation
Business Mortgage Investors, Inc.
1666 K Street, N.W., Suite 901
Washington, DC 20006
Re: Amended and Restated Master Repurchase Agreement
among Merrill Lynch Mortgage Capital Inc.,
Allied Capital Commercial Corporation and
Business Mortgage Investors,
Inc.
and
Master Repurchase Agreement between
Merrill Lynch Mortgage Capital Inc. and
Allied Capital Commercial Corporation
----------------------------------------------------------------------
Gentlemen:
Reference is made to the Amended and Restated Master Repurchase Agreement,
dated as of March 22, 1996 (the "ACCC/BMI Agreement"), among Merrill Lynch
Mortgage Capital Inc. ("MLMCI"), Allied Capital Commercial Corporation ("ACCC")
and Business Mortgage Investors, Inc. (together with ACCC, the "Obligors") and
the Master Repurchase Agreement, dated as of March 22, 1996 (the "ACCC
Agreement"), between MLMCI and ACCC. Reference is further made to the letter
agreement, dated March 21, 1997, as amended by the letter agreement dated April
25, 1997, each among MLMCI and the Obligors extending the terms of the ACCC/BMI
Agreement and the ACCC Agreement until May 31, 1997 pursuant to the terms of
such letter agreement.
This letter is to confirm that MLMCI and the Obligors have agreed to extend
the terms of the ACCC/BMI Agreement and the ACCC Agreement for a period of
approximately one month on an uncommitted basis such that the termination date
for each such agreement is extended to June 30, 1997. Any provision of the
ACCC/BMI Agreement or the ACCC Agreement or any other document relating thereto
to the contrary notwithstanding, MLMCI may in
12
its discretion, but is not required to, enter into Transactions under the
ACCC/BMI Agreement and the ACCC Agreement from the date hereof to the Revised
Termination date.
Please confirm our mutual agreement as set forth herein and acknowledge
receipt of this confirmation letter by executing the enclosed copy of this
letter and returning it to Merrill Lynch Mortgage Capital Inc., Merrill Lynch
Work Headquarters, World Financial Center, North Tower, 8th Floor, New York,
New York 10281, Attention: Timothy M. Loughlin (telecopy number (212)
449-6673). If you have any questions concerning this matter, please contact Mr.
Loughlin at (212) 449-5939.
Very truly yours,
MERRILL LYNCH MORTGAGE CAPITAL
INC.
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
ACCEPTED, CONFIRMED AND ACKNOWLEDGED:
ALLIED CAPITAL COMMERCIAL CORPORATION
By: /s/ John Scheurer
----------------------------------
Name: John Scheurer
--------------------------------
Title: President
-------------------------------
Dated: May 22, 1997
BUSINESS MORTGAGE INVESTORS, INC.
By: /s/ John Scheurer
----------------------------------
Name: John Scheurer
--------------------------------
Title: President
-------------------------------
Dated: May 22, 1997
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[Merrill Lynch Letterhead]
May 22, 1997
Allied Capital Commercial Corporation
Business Mortgage Investors, Inc.
1666 K Street, N.W., Suite 901
Washington, DC 20006
Re: Amended and Restated Master Repurchase Agreement
among Merrill Lynch Mortgage Capital Inc.,
Allied Capital Commercial Corporation and
Business Mortgage Investors, Inc.
and
Master Repurchase Agreement between
Merrill Lynch Mortgage Capital Inc. and
Allied Capital Commercial Corporation
------------------------------------------------
Gentlemen:
Reference is made to the Amended and Restated Master Repurchase
Agreement, dated as of March 22, 1996 (the "ACCC/BMI Agreement"), among Merrill
Lynch Mortgage Capital Inc. ("MLMCI"), Allied Capital Commercial Corporation
("ACCC") and Business Mortgage Investors, Inc. (together with ACCC, the
"Obligors") and the Master Repurchase Agreement, dated as of March 22, 1996 (the
"ACCC Agreement"), between MLMCI and ACCC. Reference is further made to the
letter agreement, dated March 21, 1997, as amended by the letter agreement dated
April 25, 1997, each among MLMCI and the Obligors extending the terms of the
ACCC/BMI Agreement and the ACCC Agreement until May 31, 1997 pursuant to the
terms of such letter agreement.
This letter is to confirm that MLMCI and the Obligors have agreed to
extend the terms of the ACCC/BMI Agreement and the ACCC Agreement for a period
of approximately one month on an uncommitted basis such that the termination
date for each such agreement is extended to June 30, 1997. Any provision of the
ACCC/BMI Agreement or the ACCC Agreement or any other document relating thereto
to the contrary notwithstanding, MLMCI may in
14
its discretion, but is not required to, enter into Transactions under the
ACCC/BMI Agreement and the ACCC Agreement from the date hereof to the Revised
Termination date.
Please confirm our mutual agreement as set forth herein and acknowledge
receipt of this confirmation letter by executing the enclosed copy of this
letter and returning it to Merrill Lynch Mortgage Capital Inc., Merrill Lynch
Work Headquarters, World Financial Center, North Tower, 8th Floor, New York,
New York 10281, Attention: Timothy M. Loughlin (telecopy number (212)
449-6673). If you have any questions concerning this matter, please contact Mr.
Loughlin at (212) 449-5939.
Very truly yours,
MERRILL LYNCH MORTGAGE CAPITAL
INC.
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
ACCEPTED, CONFIRMED AND ACKNOWLEDGED:
ALLIED CAPITAL COMMERCIAL CORPORATION
By: /s/ John Scheurer
----------------------------------
Name: John Scheurer
--------------------------------
Title: President
-------------------------------
Dated: May 22, 1997
BUSINESS MORTGAGE INVESTORS, INC.
By: /s/ John Scheurer
----------------------------------
Name: John Scheurer
--------------------------------
Title: President
-------------------------------
Dated: May 22, 1997
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April 25, 1997
Allied Capital Commercial Corporation
Business Mortgage Investors, Inc.
1666 K Street, N.W., Suite 901
Washington, DC 20006
Re: Amended and Restated Master Repurchase Agreement among Merrill Lynch
Mortgage Capital Inc., Allied Capital Commercial Corporation and
Business Mortgage Investors, Inc.
and
Master Repurchase Agreement between Merrill Lynch Mortgage Capital
Inc. and Allied Capital Commercial Corporation
----------------------------------------------------------------------
Gentlemen:
Reference is made to the Amended and Restated Master Repurchase Agreement,
dated as of March 22, 1996 the "ACCC/BMI Agreement"), among Merrill Lynch
Mortgage Capital Inc. ("MLMCI"), Allied Capital Commercial Corporation ("ACCC")
and Business Mortgage Investors, Inc. (together with ACCC, the "Obligors") and
the Master Repurchase Agreement, dated as of March 22, 1996 (the "ACCC
Agreement"), between MLMCI and ACCC. Reference is further made to the letter
agreement, dated March 21, 1997, among MLMCI and the Obligors extending the
terms of the ACCC/BMI Agreement and the ACCC Agreement until April 30, 1997
pursuant to the terms of such letter agreement.
This letter is to confirm that MLMCI and the Obligors have agreed to extend
the terms of the ACCC/BMI Agreement and the ACCC Agreement for a period of
approximately one month on an uncommitted basis such that the termination date
for each such agreement is extended to May 31, 1997. Any provision of the
ACCC/BMI Agreement or the ACCC Agreement or any other document relating thereto
to the contrary notwithstanding, MLMCI may in its discretion, but is not
required to, enter into Transactions under the ACCC/BMI Agreement and the ACCC
Agreement from the date hereof to the Revised Termination date.
16
Please confirm our mutual agreement as set forth herein and acknowledge
receipt of this confirmation letter by executing the enclosed copy of this
letter and returning it to Merrill Lynch Mortgage Capital Inc., Merrill Lynch
Work Headquarters, World Financial Center, North Tower, 8th Floor, New York,
New York 10281, Attention: Timothy M. Loughlin (telecopy number (212)
449-6673). If you have any questions concerning this matter, please contact Mr.
Loughlin at (212) 449-5939.
Very truly yours,
MERRILL LYNCH MORTGAGE CAPITAL
INC.
By: /s/ Michael Blum
----------------------------------
Name: Michael Blum
--------------------------------
Title: Director
-------------------------------
ACCEPTED, CONFIRMED AND ACKNOWLEDGED:
ALLIED CAPITAL COMMERCIAL CORPORATION
By: /s/ John Scheurer
----------------------------------
Name: John Scheurer
--------------------------------
Title: President
-------------------------------
Dated: April 25, 1997
BUSINESS MORTGAGE INVESTORS, INC.
By: /s/ John Scheurer
----------------------------------
Name: John Scheurer
--------------------------------
Title: President
-------------------------------
Dated: April 25, 1997
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March 21, 1997
Allied Capital Commercial Corporation
Business Mortgage Investors, Inc.
1666 K Street, N.W., Suite 901
Washington, DC 20006
Re: Amended and Restated Master Repurchase Agreement among Merrill Lynch
Mortgage Capital Inc., Allied Capital Commercial Corporation and
Business Mortgage Investors, Inc.
and
Master Repurchase Agreement between Merrill Lynch Mortgage Capital
Inc. and Allied Capital Commercial Corporation
----------------------------------------------------------------------
Gentlemen:
Reference is made to the Amended and Restated Master Repurchase Agreement,
dated as of March 22, 1996 the "ACCC/BMI Agreement"), among Merrill Lynch
Mortgage Capital Inc. ("MLMCI"), Allied Capital Commercial Corporation ("ACCC")
and Business Mortgage Investors, Inc. (together with ACCC, the "Obligors") and
the Master Repurchase Agreement, dated as of March 22, 1996 (the "ACCC
Agreement"), between MLMCI and ACCC.
This letter is to confirm that MLMCI and the Obligors have agreed to extend
the terms of the ACCC/BMI Agreement and the ACCC Agreement for a period of
approximately one month on an uncommitted basis such that the termination date
for each such agreement is extended to April 30, 1997. Any provision of the
ACCC/BMI Agreement or the ACCC Agreement or any other document relating thereto
to the contrary notwithstanding, MLMCI may in its discretion, but is not
required to, enter into Transactions under the ACCC/BMI Agreement and the ACCC
Agreement from the date hereof to the Revised Termination date.
Please confirm our mutual agreement as set forth herein and acknowledge
receipt of this confirmation letter by executing the enclosed copy of this
letter and returning it to Merrill
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Lynch Mortgage Capital Inc., Merrill Lynch Work Headquarters, World Financial
Center, North Tower, 8th Floor, New York, New York 10281, Attention: Timothy M.
Loughlin (telecopy number (212) 449-6673). If you have any questions concerning
this matter, please contact Mr. Loughlin at (212) 449-5939.
Very truly yours,
MERRILL LYNCH MORTGAGE CAPITAL
INC.
By: /s/ Daniel G. Kramer
----------------------------------
Name: Daniel G. Kramer
--------------------------------
Title: Vice President
-------------------------------
ACCEPTED, CONFIRMED AND ACKNOWLEDGED:
ALLIED CAPITAL COMMERCIAL CORPORATION
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
Dated: March 21, 1997
BUSINESS MORTGAGE INVESTORS, INC.
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
Dated: March 21, 1997
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Lynch Mortgage Capital Inc., Merrill Lynch Work Headquarters, World Financial
Center, North Tower, 8th Floor, New York, New York 10281, Attention: Timothy M.
Loughlin (telecopy number (212) 449-6673). If you have any questions concerning
this matter, please contact Mr. Loughlin at (212) 449-5939.
Very truly yours,
MERRILL LYNCH MORTGAGE CAPITAL
INC.
By:
-------------------------------
Name:
---------------------------
Title:
-------------------------
ACCEPTED, CONFIRMED AND ACKNOWLEDGED:
ALLIED CAPITAL COMMERCIAL CORPORATION
By: /s/ John Scheurer
----------------------------------
Name: John Scheurer
--------------------------------
Title: President
-------------------------------
Dated: March 21, 1997
BUSINESS MORTGAGE INVESTORS, INC.
By: /s/ John Scheurer
----------------------------------
Name: John Scheurer
--------------------------------
Title: President
-------------------------------
Dated: March 21, 1997
2
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November 11, 1996
Allied Capital Commercial Corporation
Business Mortgage Investors, Inc.
1666 K Street, N.W., Suite 901
Washington, DC 20006
Re: Amended and Restated Master Repurchase Agreement among Merrill Lynch
Mortgage Capital Inc., Allied Capital Commercial Corporation and
Business Mortgage Investors, Inc.
and
Master Repurchase Agreement between Merrill Lynch Mortgage Capital
Inc. and Allied Capital Commercial Corporation
----------------------------------------------------------------------
Gentlemen:
Reference is made to the letter agreement, dated January 11, 1995, among
Merrill Lynch Mortgage Capital Inc. ("MLMCI"), Allied Capital Commercial
Corporation ("ALCC") and Business Mortgage Investors, Inc. ("BMI") (ALCC and BMI
collectively, the "Obligors"), a copy of which is attached hereto as Exhibit A.
MLMCI and the Obligors intend to amend the Amended and Restated Master
Repurchase Agreement dated as of March 22, 1996, pursuant to Amendment No. 1
thereto dated as of November 11, 1996 (as so amended, the "Obligors Master
Repurchase Agreement"). Certain documents relating to the Mortgage Loans will
continue to be held for the beneficial owner thereof by the Riggs National Bank
of Washington D.C. ("Riggs Bank") in its capacity as bailee and custodian under
the Tri-Party Custody Agreement, dated as of January 11, 1995 (the "Obligors
Custody Agreement"), among ALCC, BMI, MLMCI and Riggs Bank as custodian. In
addition, MLMCI and ALCC intend to amend the Master Repurchase Agreement dated
as of March 22, 1996, pursuant to Amendment No. 1 thereto dated as of November
11, 1996 (as so amended, the "ALCC Master Repurchase Agreement") pursuant to
which ALCC, acting individually, will enter into repurchase transactions with
MLMCI whereby ALCC will from time to time sell to MLMCI, and simultaneously
agree to
21
repurchase on a specific date, certain Mortgage Loans described therein.
Certain documents relating to the Mortgage Loans will be held for the
beneficial owner thereof by Riggs Bank in its capacity as bailee and custodian
under the Tri-Party Custody Agreement, dated as of March 22, 1996 (the "ALCC
Custody Agreement"), among ALCC, MLMCI and Riggs Bank as custodian. Capitalized
terms used herein and not otherwise defined herein shall have the meanings
ascribed in the Obligors Master Repurchase Agreement and the ALCC Master
Repurchase Agreement, as applicable.
MLMCI hereby agrees that, upon the payment by ALCC and BMI to MLMCI of a
fee (the "Commitment Fee") in the amount of $510,000.00 (of which $500,000 has
been paid previously) and the acceptance of this offer by ALCC and BMI in the
manner contemplated below, it will be obligated to enter into Transactions (i)
with the Obligors Master Repurchase Agreement having at any one time a maximum
aggregate Repurchase Price equal to the excess of $150,000,000 over the sum of
all outstanding indebtedness of ALCC under the ALCC Master Repurchase Agreement
for the period form the date hereof to March 21, 1997 so long as the terms and
conditions of the Obligors Master Repurchase Agreement and the Obligors Custody
Agreement are fully satisfied and no Event of Default or event of termination
thereunder has occurred and (ii) with ALCC under the ALCC Master Repurchase
Agreement having at any one time a maximum aggregate Repurchase Price equal to
the excess of $150,000,000 over the sum of all outstanding indebtedness of the
Obligors under the Obligors Master Repurchase Agreement for the period form the
dated hereof to March 21, 1997 so long as the terms and conditions of the ALCC
Master Repurchase Agreement, the ALCC Custody Agreement, the Obligors Master
Repurchase Agreement and the Obligors Custody Agreement are fully satisfied and
no Event of Default or event of termination thereunder has occurred.
The Commitment Fee will not be refunded for any reason including, without
limitation, the election by ALCC or BMI not to engage in any Transactions under
the Obligors Master Repurchase Agreement or the ALCC Master Repurchase
Agreement, as applicable. Payment of the Commitment Fee will be made by wire
transfer in immediately available funds to the following account:
Bankers NYC
Acct.: MLMCI Matched Book
Acct. No.: 00812914
ABA No.: 021 001 033
The parties hereto hereby confirm that the Pricing Rate at which the Price
Differential will be calculated will be a per annum percentage (i) in the case
of Category I Loans, 112.5 basis points in excess of LIBOR (or such lesser
number of basis points as MLMCI may determine in its sole discretion, (ii) in
the case
2
22
of Category II Loans and Category III Loans, 125 basis points in excess of LIBOR
(or such lesser number of basis points as MLMCI may determine in its sole
discretion) and (iii) in the case of Category IV Loans, 150 basis points in
excess of LIBOR (or such lesser number of basis points in excess of LIBOR as
MLMCI may determine in its sole discretion). As used herein, "LIBOR" shall mean
the London Interbank Offered Rate for one-month United States Dollar deposits
as set forth on page 4833 of Telerate as of 8:00 a.m., New York time, on the
date of determination. The Pricing Rate initially will be set on the Purchase
Date for each Pricing Rate initially will be set on the Purchase Date for each
specific Transaction and will reset monthly on the last business day of each
calendar month. All calculations will be made on the basis of a 360-day year
and the actual number of days elapsed.
The parties hereto hereby confirm that for all Transactions involving
Mortgage Loans, the percentage used to calculate the Buyer's Margin Amount
shall be (i) in the case of Category I Loans, one hundred eighteen percent
(118%), reflecting an advance rate of 85% on the Market Value thereof, (ii) in
the case of Category II Loans and Category III Loans, one hundred thirty-three
percent (133%), reflecting and advance rate of approximately 75% on the Market
Value thereof, or (iii) in the case of Category IV, one hundred forty-three
percent (143%), reflecting an advance rate of approximately 70% on the Market
Value thereof.
The Obligors, with respect to the Obligors Master Repurchase Agreement, and
ALCC, with respect to the ALCC Master Repurchase Agreement, may, on or after
November 1, 1996, request in writing that MLMCI extend its obligations under
this confirmation letter from March 21, 1997 to March 21, 1998. MLMCI will use
its best efforts to respond within one month of receiving any such written
request. Such response will include whether or not MLMCI would be willing to so
extend its obligations hereunder, the terms of any such extension and the fees
payable in connection therewith. Nothing contained herein shall be deemed to
limit the right of MLMCI, in its sole discretion, to decline to enter into any
such extension or to agree to any such extension on terms different from those
set forth in this confirmation letter. Any such extension will be evidenced
only by a written agreement among the parties amending this confirmation letter.
ALCC and BMI acknowledge that this confirmation letter, the Obligors Master
Repurchase Agreement, the Obligors Custody Agreement, the ALCC Master Repurchase
Agreement, the ALCC Custody Agreement and all documents relating thereto and
transactions contemplated thereby are confidential in nature and ALCC and BMI
agree that, unless otherwise directed by a court of competent jurisdiction, each
shall limit the distribution of such documents and the discussion of such
transactions to such of its officers, employees, attorneys, accountants and
agents as is required in order to fulfill its obligations under such documents
and with respect to such transactions. Notwithstanding the foregoing,
3
23
however, ALCC and BMI may file such of the aforementioned documents with the
Securities and Exchange Commission as they reasonably deem to be required by
applicable law and may issue such press releases concerning the matters
contemplated hereby as MLMCI may approve in its reasonable discretion;
provided, however, that no such press release may refer to any Pricing Rate,
the Buyer's or Seller's Margin or the Commitment Fee. Any press releases so
approved may be repeated by ALCC and BMI to any person or entity making inquiry
with respect thereto.
Please confirm our mutual agreement as set forth herein and acknowledge
receipt of this confirmation letter by executing the enclosed copy of this
letter and returning it to Merrill Lynch Mortgage Capital Inc., Merrill Lynch
World Headquarters, World Financial Center, North Tower, 8th Floor, New York,
New York 10281, Attention: Timothy M. Loughlin (telecopy number (212) 449-6673).
If you have any questions concerning this matter, please contact the undersigned
at (212) 449-5939.
Very truly yours,
MERRILL LYNCH MORTGAGE CAPITAL
INC.
By: /s/ Michael Blum
-------------------------------
Name: Michael Blum
-----------------------------
Title: Director
----------------------------
ACCEPTED, CONFIRMED AND ACKNOWLEDGED:
ALLIED CAPITAL COMMERCIAL CORPORATION
By: /s/ John Scheurer
----------------------------------
Name: John Scheurer
--------------------------------
Title: President
-------------------------------
Dated: November 11, 1996
BUSINESS MORTGAGE INVESTORS, INC.
By: /s/ John Scheurer
----------------------------------
Name: John Scheurer
--------------------------------
Title: Executive Vice President
-------------------------------
Dated: November 11, 1996
4
24
Section 2. Maximum Transaction Amount. Paragraph 22 of the Supplemental
Terms is hereby deleted in its entirety and replaced as follows:
22. MAXIMUM TRANSACTION AMOUNT.
The aggregate outstanding Repurchase Price for the Purchased Securities
subject to this Agreement as of any date of determination shall not exceed
the excess of (i) $150,000,000 over (ii) the sum of all outstanding
indebtedness of ALCC under the ALCC Master Repurchase Agreement.
Section 3. Expenses. Each party hereto shall pay its own expenses in
connection with this Amendment No. 1.
Section 4. Controlling Law. This Amendment No. 1 shall be governed and
construed in accordance with the laws of the State of New York applicable to
agreements made and entirely performed therein.
Section 5. Interpretation. The provisions of the Agreement shall be read
so as to give effect to the provisions of this Amendment No. 1.
Section 6. Counterparts. This Amendment No. 1 may be executed in any
number of counterparts, each of which counterparts shall be deemed to be an
original, and such counterparts shall constitute but one and the same
instrument.
Section 7. Ratification and Confirmation. As amended by this Amendment No.
1, the Agreement is hereby in all respects ratified and confirmed, and the
Agreement as amended by this Amendment No. 1 shall be read, taken and construed
as one and the same instrument.
2
25
IN WITNESS WHEREOF, MLMCI, ALCC, and BMI have caused their names to be
signed hereto by their respective officers thereunto duly authorized, all as of
the date first above written.
MERRILL LYNCH MORTGAGE CAPITAL INC.
By: /s/ Michael Blum
---------------------------
Name: Michael Blum
-------------------------
Title: Director
------------------------
ALLIED CAPITAL COMMERCIAL CORPORATION
By: /s/ John Scheurer
---------------------------
Name: John Scheurer
-------------------------
Title: President
------------------------
BUSINESS MORTGAGE INVESTORS, INC.
By: /s/ John Scheurer
---------------------------
Name: John Scheurer
-------------------------
Title: Executive Vice President
------------------------
3
26
[EXECUTION]
AMENDMENT NO. 1
TO
MASTER REPURCHASE AGREEMENT
THIS AMENDMENT NO. 1, made as of November 11, 1996 ("Amendment No. 1"), by
and between MERRILL LYNCH MORTGAGE CAPITAL INC. ("MLMCI") and ALLIED CAPITAL
COMMERCIAL CORPORATION ("ALCC").
R E C I T A L S
- - - - - - - -
WHEREAS, MLMCI and the Obligor have previously entered into a Master
Repurchase Agreement (including the Supplemental Terms set forth in Annex I
thereto) dated as of March 22, 1996 (the "Agreement"); and
WHEREAS, MLMCI and the Obligor desire to make certain modifications to the
Agreement as described herein;
NOW, THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
Section 1. Definitions. (a) Capitalized terms used herein and not
otherwise defined shall have the meanings assigned in the Agreement.
Capitalized terms used in the Agreement whose definitions are modified in
Amendment No. 1 shall, for all purposes of the Agreement, be deemed to have
such modified definitions.
(b) The definition of "Category I Loan" is hereby amended and restated as
follows:
"Category I Loan" shall mean an Eligible Mortgage Loan that (i)(A) was
originated or purchased by the Obligor within the last sixty (60) days on
standardized loan documentation with standardized underwiting, (B) has a
debt service coverage ratio greater than 1.25:1 and (C) has a loan-to-value
ratio of less than 75% or (ii) that is otherwise acceptable to MLMCI for
inclusion herein as a "Category I Loan".
27
Section 2. Maximum Transaction Amount. Paragraph 21 of the Supplemental
Terms is hereby deleted in its entirety and replaced as follows:
21. MAXIMUM TRANSACTION AMOUNT. The aggregate outstanding Repurchase Price
for the Purchased Securities subject to this Agreement as of any date of
determination shall not exceed the excess of (i) $150,000,000 over (ii) all
outstanding indebtedness of the Obligor and Business Mortgage Investors,
Inc. under the ALCC/BMI Master Repurchase Agreement.
Section 3. Expenses. Each party hereto shall pay its own expenses in
connection with this Amendment No. 1.
Section 4. Controlling Law. This Amendment No. 1 shall be governed and
construed in accordance with the laws of the State of New York applicable to
agreements made and entirely performed therein.
Section 5. Interpretation. The provisions of the Agreement shall be read
so as to give effect to the provisions of this Amendment No. 1.
Section 6. Counterparts. This Amendment No. 1 may be executed in any
number of counterparts, each of which counterparts shall be deemed to be an
original, and such counterparts shall constitute but one and the same
instrument.
Section 7. Ratification and Confirmation. As amended by this Amendment No.
1, the Agreement is hereby in all respects ratified and confirmed, and the
Agreement as amended by this Amendment No. 1 shall be read, taken and construed
as one and the same instrument.
IN WITNESS WHEREOF, MLMCI and ALCC have caused their names to be signed
hereto by their respective officers thereunto duly authorized, all as of the
date first above written.
MERRILL LYNCH MORTGAGE CAPITAL INC.
By: /s/ Michael Blum
----------------------------------
Name: Michael Blum
--------------------------------
Title: Director
-------------------------------
ALLIED CAPITAL COMMERCIAL CORPORATION
By: /s/ John Scheurer
----------------------------------
Name: John Scheurer
--------------------------------
Title: President
-------------------------------
2
28
[MERRILL LYNCH LETTERHEAD]
March 22, 1996
Allied Capital Commercial Corporation
Business Mortgage Investors, Inc.
1666 K Street, N.W., Suite 901
Washington, DC 20006
Re: Amended and Restated Master Repurchase Agreement
among Merrill Lynch Mortgage Capital Inc.,
Allied Capital Commercial Corporation and
Business Mortgage Investors, Inc.
and
Master Repurchase Agreement between
Merrill Lynch Mortgage Capital Inc. and
Allied Capital Commercial Corporation
-------------------------------------------------
Gentlemen:
Reference is made to the letter Agreement dated January 11, 1995, among
Merrill Lynch Mortgage Capital Inc. ("MLMCI"), Allied Capital Commercial
Corporation ("ALCC") and Business Mortgage Investors, Inc. ("BMI") (ALCC and BMI
collectively, the "Obligors"), a copy of which is attached hereto as Exhibit A.
MLMCI and the Obligors intend to enter into an Amended and Restated Master
Repurchase Agreement to be dated as of March 22, 1996, pursuant to Amendment No.
1 thereto dated as of November 11, 1996 (the "Obligors Master Repurchase
Agreement"). Certain documents relating to the Mortgage Loans will continue to
be held for the beneficial owner thereof by the Riggs National Bank of
Washington, D.C. ("Riggs Bank") in its capacity as bailee and custodian under
the Tri-Party Custody Agreement, dated as of January 11, 1995 (the "Obligors
Custody Agreement"), among ALCC, BMI, MLMCI and Riggs Bank as custodian. In
addition, MLMCI and ALCC intend to enter into a Master Repurchase Agreement,
dated as of March 22, 1996, (the "ALCC Master Repurchase Agreement") pursuant to
which ALCC, acting individually, will enter into repurchase transactions with
MLMCI whereby ALCC will from time to time sell to MLMCI, and simultaneously
agree to repurchase on a specific date, certain Mortgage Loans described
therein. Certain documents relating to the Mortgage Loans will be held for
29
the beneficial owner thereof by Riggs Bank in its capacity as bailee and
custodian under the Tri-Party Custody Agreement, dated as of March 22, 1996 (the
"ALCC Custody Agreement"), among ALCC, MLMCI and Riggs Bank as custodian.
Capitalized terms used herein and not otherwise defined herein shall have the
meanings ascribed in the Obligors Master Repurchase Agreement and the ALCC
Master Repurchase Agreement, as applicable.
MLMCI hereby agrees that, upon the payment by ALCC and BMI to MLMCI of a
fee (the "Commitment Fee") in the amount of $500,000.00 and the acceptance of
this offer by ALCC and BMI in the manner contemplated below, it will be
obligated to enter into Transactions (i) with the Obligors under the Obligors
Master Repurchase Agreement having at any one time a maximum aggregate
Repurchase Price equal to the excess of $80,000,000 over the sum of all
outstanding indebtedness of ALCC under the ALCC Master Repurchase Agreement for
the period from the date hereof to March 21,1997 so long as the terms and
conditions of the Obligors Master Repurchase Agreement and the Obligors Custody
Agreement are fully satisfied and no Event of Default or event of termination
thereunder has occurred and (ii) with ALCC under the ALCC Master Repurchase
Agreement having at any one time a maximum aggregate Repurchase Price equal to
the excess of $80,000,000 over the sum of all outstanding indebtedness of the
Obligors under the Obligors Master Repurchase Agreement for the period from the
date hereof to March 21, 1997 so long as the terms and conditions of the ALCC
Master Repurchase Agreement, the ALCC Custody Agreement, the Obligors Master
Repurchase Agreement and the Obligors Custody Agreement are fully satisfied and
no Event of Default or event of termination thereunder has occurred.
The Commitment Fee will not be refunded for any reason including, without
limitation, the election by ALCC or BMI not to engage in any Transactions under
the Obligors Master Repurchase Agreement or the ALCC Master Repurchase
Agreement, as applicable. Payment of the Commitment Fee will be made by wire
transfer in immediately available funds to the following account:
Bankers NYC
Acct.: MLMCI Matched Book
Acct. No.: 00812914
ABA No.: 021 001 033
The parties hereto hereby confirm that the Pricing Rate at which the Price
Differential will be calculated will be a per annum percentage (i) in the case
of Category I Loans, Category II Loans, and Category III Loans, 170 basis points
in excess of LIBOR (or such lesser of basis points as MLMCI may determine in its
sole discretion) and (ii) in the case of Category IV Loans, 190 basis points in
excess of LIBOR (or such lesser number of basis points in excess of LIBOR as
MLMCI may determine in its sole discretion). As used herein, "LIBOR" shall mean
the London
2
30
Interbank Offered Rate for one-month United States Dollar deposits as set forth
on page 4833 of Telerate as of 8:00 a.m., New York time, on the date of
determination. The Pricing Rate initially will be set on the Purchase Date for
each specific Transaction and will reset monthly on the last business day of
each calendar month. All calculations will be made on the basis of a 360-day
year and the actual number of days elapsed.
The parties hereto hereby confirm that for all Transactions involving
Mortgage Loans, the percentage used to calculate the Buyer's Margin Amount
shall be (i) in the case of Category I Loans, one hundred twenty-five percent
(125%), reflecting an advance rate of 80% on the Market Value thereof, (ii) in
the case of Category II Loans and Category III Loans, one hundred thirty-three
percent (133%), reflecting and advance rate of approximately 75% on the Market
Value thereof, or (iii) in the case of Category IV, one hundred forty-three
percent (143%), reflecting an advance rate of approximately 70% on the Market
Value thereof.
The Obligors, with respect to the Obligors Master Repurchase Agreement, and
ALCC, with respect to the ALCC Master Repurchase Agreement, may, on or after
November 1, 1996, request in writing that MLMCI extend its obligations under
this confirmation letter from March 21, 1997 to March 21, 1998. MLMCI will use
its best efforts to respond within one month of receiving any such written
request. Such response will include whether or not MLMCI would be willing to so
extend its obligations hereunder, the terms of any such extension and the fees
payable in connection therewith. Nothing contained herein shall be deemed to
limit the right of MLMCI, in its sole discretion, to decline to enter into any
such extension or to agree to any such extension on terms different from those
set forth in this confirmation letter. Any such extension will be evidenced
only by a written agreement among the parties amending this confirmation letter.
ALCC and BMI acknowledge that this confirmation letter, the Obligors Master
Repurchase Agreement, the Obligors Custody Agreement, the ALCC Master Repurchase
Agreement, the ALCC Custody Agreement and all documents relating thereto and
transactions contemplated thereby are confidential in nature and ALCC and BMI
agree that, unless otherwise directed by a court of competent jurisdiction, each
shall limit the distribution of such documents and the discussion of such
transactions to such of its officers, employees, attorneys, accountants and
agents as is required in order to fulfill its obligations under such documents
and with respect to such transactions. Notwithstanding the foregoing, however,
ALCC and BMI may file such of the aforementioned documents with the Securities
and Exchange Commission as they reasonably deem to be required by applicable law
and may issue such press releases concerning the matters contemplated hereby as
MLMCI may approve in its reasonable discretion; provided, however, that no such
press release may refer to any Pricing
3
31
the Buyer's or Seller's Margin or the Commitment Fee. Any press
releases so approved may be repeated by ALCC and BMI to any person or entity
making inquiry with respect thereto.
Please confirm our mutual agreement as set forth herein and acknowledge
receipt of this confirmation letter by executing the enclosed copy of this
letter and returning it to Merrill Lynch Mortgage Capital Inc., Merrill Lynch
World Headquarters, World Financial Center, North Tower, 8th Floor, New York,
New York 10281, Attention: Timothy M. Loughlin (telecopy number (212)
449-6673). If you have any questions concerning this matter, please contact the
undersigned at (212) 449-5939.
Very truly yours,
MERRILL LYNCH MORTGAGE CAPITAL INC.
By: /s/ Timothy M. Loughlin
-------------------------------
Name: Timothy M. Loughlin
Title: Vice President
ACCEPTED, CONFIRMED AND ACKNOWLEDGED:
ALLIED CAPITAL COMMERCIAL CORPORATION
By: -----------------------------
Name: -----------------------------
Title: -----------------------------
Dated: March 22, 1996
BUSINESS MORTGAGE INVESTORS, INC.
By: -----------------------------
Name: -----------------------------
Title: -----------------------------
Dated: March 22, 1996
4
32
[PSA Letterhead]
[EXECUTION COPY]
MASTER REPURCHASE AGREEMENT
Dated as of March 22, 1996
Between:
Allied Capital Commercial Corporation
and
Merrill Lynch Mortgage Capital Inc.
1. Applicability
From time to time the parties hereto may enter into transactions in which
one party ("Seller") agrees to transfer to the other ("Buyer") securities or
financial instruments ("Securities") against the transfer of funds by Buyer,
with a simultaneous agreement by Buyer to transfer to Seller such Securities at
a date certain or on demand, against the transfer of funds by Seller. Each such
transaction shall be referred to herein as a "Transaction" and shall be governed
by this Agreement, including any supplemental terms or conditions contained in
Annex I hereto, unless otherwise agreed in writing.
2. Definitions
(a) "Act of Insolvency", with respect to any party, (i) the commencement by
such party as debtor of any case or proceeding under any bankruptcy, Insolvency,
reorganization, liquidation, dissolution or similar law, or such party seeking
the appointment of a receiver, trustee, custodian or similar official for such
party or any substantial party of its property, or (ii) the commencement of any
such case or proceeding against such party, or another seeking such an
appointment, or the filing against a party of an application for a protective
decree under the provisions of the Securities Investor Protection Act of 1970,
which (A) in consented to or not timely contested by such party, (B) results in
the entry of an order for relief, such an appointment, the issuance of such a
protective decree or the entry of an order-having a similar effect, or (C) is
not dismissed within 15 days,(iii) the making by a party of a general assignment
for the benefit of creditors, or (iv) the admission in writing by a party of
such party's inability to pay such party's debts as they become due;
(b) "Additional Purchased Securities", Securities provided by Seller to
Buyer pursuant to Paragraph 4(a) hereof:
(c) "Buyer's Margin Amount", with respect to any Transaction as of any
date, the amount obtained by application of percentage (which may be equal to
the percentage that is agreed to as the Seller's Margin Amount under
subparagraph (q) of this Paragraph), agreed to by Buyer and Seller prior to
entering into the Transaction, to the Repurchase Price for such Transaction as
of such date:
(d) "Confirmation", the meaning specified in Paragraph 3(b) hereof:
(e) "Income", with respect to any Security at any time, any principal
thereof then payable and all interest, dividends or other distributions
thereon;
(f) "Margin Deficit" , the meaning specified in Paragraph 4(a) hereof;
(g) "Margin Excess", the meaning specified in Paragraph 4(b) hereof;
(h) "Market Value", with respect to any Securities as of any date, the
price for such Securities on such date obtained from a generally recognized
source agreed to by the parties or the most recent closing bid quotation from
such a source, plus accrued income to the extent not included therein (other
than any income credited or transferred to, or applied to the obligations of,
Seller pursuant to Paragraph 5 hereof) as of such date (unless contrary to
market practice for such Securities):
(i) "Price Differential", with respect to any Transaction hereunder as of
any date, the aggregate amount obtained by daily application of the Pricing
Rate for such Transaction to the Purchase Price for such Transaction on a 360
day per year basis for the actual number of days during the period commencing
on (and including) the Purchase Date for such Transaction and ending on (but
excluding) the date of determination (reduced by any amount of such Price
Differential previously paid by Seller to Buyer with respect to such
Transaction);
33
(j) "Pricing Rate", the per annum percentage rate for determination of the
Price Differential;
(k) "Prime Rate", the prime rate of U.S. money center commercial banks as
published in The Wall Street Journal;
(l) "Purchase Date", the date on which Purchased Securities are
transferred by Seller to Buyer;
(m) "Purchase Price", (i) on the Purchase Date, the price at which
Purchased Securities are transferred by Seller to Buyer, and (ii) thereafter,
such price increased by the amount of any cash transferred by Buyer to Seller
pursuant to Paragraph 4(b) hereof and decreased by the amount of any cash
transferred by Seller to Buyer pursuant to Paragraph 4(a) hereof or applied to
reduce Seller's obligations under clause (ii) of Paragraph 5 hereof;
(n) "Purchased Securities", the Securities transferred by Seller to Buyer
in a Transaction hereunder, and any Securities substituted therefor in
accordance with Paragraph 9 hereof. The term "Purchased Securities" with
respect to any Transaction at any time also shall include Additional Purchased
Securities delivered pursuant to Paragraph 4(a) and shall exclude Securities
returned pursuant to Paragraph 4(b);
(o) "Repurchase Date", the date on which Seller is to repurchase the
Purchased Securities from Buyer, including any date determined by application
of the provisions of Paragraphs 3(c) or 11 hereof;
(p) "Repurchase Price", the price at which Purchased Securities are to be
transferred from Buyer to Seller upon termination of a Transaction, which will
be determined in each case (including Transactions terminable upon demand) as
the sum of the Purchase Price and the Price Differential as of the date of such
determination, increased by any amount determined by the application of the
provisions of Paragraph 11 hereof;
(q) "Seller's Margin Amount", with respect to any Transaction as of any
date, the amount obtained by application of a percentage (which may be equal to
the percentage that is agreed to as the Buyer's Margin Amount under
subparagraph (c) of this Paragraph), agreed to by Buyer and Seller prior to
entering into the Transaction, to the Repurchase Price for such Transaction as
of such date.
3. Initiation; Confirmation; Termination
(a) An agreement to enter into a Transaction may be made orally or in
writing at the initiation of either Buyer or Seller. On the Purchase Date for
the Transaction, the Purchased Securities shall be transferred to Buyer or its
agent against the transfer of the Purchase Price to an account of Seller.
(b) Upon agreeing to enter into a Transaction hereunder, Buyer or Seller
(or both), as shall be agreed, shall promptly deliver to the other party a
written confirmation of each Transaction (a "Confirmation"). The Confirmation
shall describe the Purchased Securities (including CUSIP number, if any),
Identify Buyer and Seller and set forth (i) the Purchase Date, (ii) the
Purchase Price, (iii) the Repurchase Date, unless the Transaction is to be
terminable on demand, (iv) the Pricing Rate or Repurchase Price applicable to
the Transaction, and (v) any additional terms or conditions of the Transaction
no inconsistent with this Agreement. The Confirmation, together with this
Agreement, shall constitute conclusive evidence of the terms agreed between
Buyer and Seller with respect to the Transaction to which the Confirmation
relates, unless with respect to the Confirmation specific objection is made
promptly after receipt thereof. In the event of any conflict between the terms
of such Confirmation and this Agreement, this Agreement shall prevail.
(c) In the case of Transactions terminable upon demand, such demand shall
be made by Buyer or Seller, no later than such time as is customary in
accordance with market practice, by telephone or otherwise on or prior to the
business day on which such termination will be effective. On the date specified
in such demand, or on the date fixed for termination in the case of Transactions
having a fixed term, termination of the Transaction will be effected by
transfer to Seller or its agent of the Purchased Securities and any Income in
respect thereof received by Buyer (and not previously credited or transferred
to, or applied to the obligations of, Seller pursuant to Paragraph 5 hereof)
against the transfer of the Repurchase Price to an account of Buyer.
4. Margin Maintenance
(a)) If at any time the aggregate Market Value of all Purchased Securities
subject to all Transactions in which a particular party hereto is acting as
Buyer is less than the aggregate Buyer's Margin Amount for all such Transactions
(a "Margin Deficit"), then Buyer may by notice to Seller require Seller in such
Transactions, at Seller's option, to transfer to Buyer cash or additional
Securities reasonably acceptable to Buyer ("Additional Purchased Securities"),
so that the cash and aggregate Market Value of the Purchased Securities,
including any such Additional Purchased Securities, will thereupon equal or
exceed such aggregate Buyer's Margin Amount (decreased by the amount of any
Margin Deficit as of such date arising from any Transactions in which such Buyer
is acting as Seller).
(b) If at any time the aggregate Market Value of all Purchased Securities
subject to all Transactions in which a particular party hereto is acting as
Seller exceeds the aggregate Seller's Margin Amount for all such Transactions at
such time (a "Margin Excess"), then Seller may by notice to Buyer require Buyer
in such Transactions, at Buyer's option, to transfer cash or Purchased
Securities to Seller, so that the aggregate Market Value of the Purchased
Securities, after deduction of any such cash or any Purchased Securities so
transferred, will thereupon not exceed such aggregate Seller's Margin Amount
(increased by the amount of any Margin Excess as of such date arising from any
Transactions in which such Seller is acting as Buyer).
(c) Any cash transferred pursuant to this Paragraph shall be attributed
to such Transactions as shall be approved by Buyer and Seller.
34
(d) Seller and Buyer may agree, with respect to any or all
Transactions hereunder, that the respective rights of Buyer or Seller (or both)
under subparagraphs (a) and (b) of this Paragraph may be exercised only where a
Margin Deficit or Margin Excess exceeds a specified dollar amount or a specified
percentage of the Repurchase Prices for such Transactions (which amount or
percentage shall be agreed to by Buyer and Seller prior to entering into any
such Transactions).
(e) Seller and Buyer may agree, with respect to any or all
Transactions hereunder, that the respective rights of Buyer and Seller under
subparagraphs (a) and (b) of this Paragraph to require the elimination of a
Margin Deficit or a Margin Excess, as the case may be, may be exercised whenever
such a Margin Deficit or Margin Excess exists with respect to any single
Transaction hereunder (calculated without regard to any other Transaction
outstanding under this Agreement).
5. Income Payments
Where a particular Transaction's term extends over an Income payment
date on the Securities subject to that Transaction, Buyer shall, as the parties
may agree with respect to such Transaction (or, in the absence of any
agreement, as Buyer shall reasonably determine in its discretion), on the date
such Income is payable either (i) transfer to or credit to the account of
Seller an amount equal to such Income payment or payments with respect to any
Purchased Securities subject to such Transaction or (ii) apply the Income
payment or payments to reduce the amount to be transferred to Buyer by Seller
upon termination of the Transaction. Buyer shall not be obligated to take any
action pursuant to the preceding sentence to the extent that such action would
result in the creation of a Margin Deficit, unless prior thereto or
simultaneously therewith Seller transfers to Buyer cash or Additional Purchased
Securities sufficient to eliminate such Margin Deficit.
6. Security Interest
Although the parties intend that all Transactions hereunder be sales
and purchases and not loans, in the event any such Transactions are deemed to
be loans, Seller shall be deemed to have pledged to Buyer as security for the
performance by Seller of its obligations under each such Transaction, and shall
be deemed to have granted to Buyer a security interest in, all of the Purchased
Securities with respect to all Transactions hereunder and all proceeds thereof.
7. Payment and Transfer
Unless otherwise mutually agreed, all transfers of funds hereunder
shall be in immediately available funds. All Securities transferred by one
party hereto to the other party (i) shall be in suitable form for transfer or
shall be accompanied by duly executed instruments of transfer or assignment in
blank and such other documentation as the party receiving possession may
reasonably request, (ii) shall be transferred on the book-entry system of a
Federal Reserve Bank, or (iii) shall be transferred by any other method
mutually acceptable to Seller and Buyer. As used herein with respect to
Securities, "transfer" is intended to have the same meaning as when used in
Section 8-313 of the New York Uniform Commercial Code or, where applicable, in
any federal regulation governing transfers of the Securities.
8. Segregation of Purchased Securities
To the extent required by applicable law, all Purchased Securities in
the possession of Seller shall be segregated from other securities in its
possession and shall be identified as subject to this Agreement. Segregation
may be accomplished by appropriate identification on the books and records of
the holder, including a financial intermediary or a clearing corporation. Title
to all Purchased Securities shall pass to Buyer and, unless otherwise agreed by
Buyer and Seller, nothing in this Agreement shall preclude Buyer from engaging
in repurchase transactions with the Purchased Securities or otherwise pledging
or hypothecating the Purchased Securities, but no such transaction shall
relieve Buyer of its obligations to transfer Purchased Securities to Seller
pursuant to Paragraphs 3, 4 or 11 hereof, or of Buyer's obligation to credit or
pay Income to, or apply Income to the obligations of, Seller pursuant to
Paragraph 5 hereof.
- - - - - - - - - - - - - --------------------------------------------------------------------------------
Required Disclosure for Transactions in Which the Seller Retains
Custody of the Purchased Securities
Seller is not permitted to substitute other securities for those
subject to this Agreement and therefore must keep Buyer's securities
segregated at all times, unless in this Agreement Buyer grants Seller
the right to substitute other securities. If Buyer grants the right to
substitute, this means that Buyer's securities will likely be
commingled with Seller's own securities during the trading day. Buyer
is advised that, during any trading day that Buyer's securities are
commingled with Seller's securities, they [will]* [may]** be subject
to liens granted by Seller to [its clearing bank]* [third parties]**
and may be used by Seller for deliveries on other securities
transactions. Whenever the securities are commingled, Seller's ability
to resegregate substitute securities for Buyer will be subject to
Seller's ability to satisfy [the clearing]* [any]** lien or to obtain
substitute securities.
- - - - - - - - - - - - - --------------------------------------------------------------------------------
* Language to be used under 17 C.F.R. Section 403.4(e) if Seller is a
government securities broker or dealer other than a financial institution.
** Language to be used under 17 C.F.R. Section 403.5(d) if Seller is a
financial institution.
35
9. Substitution
(a) Seller may, subject to agreement with and acceptance by Buyer,
substitute other Securities for any Purchased Securities. Such substitution
shall be made by transfer to Buyer of such other Securities and transfer to
Seller of such Purchased Securities. After substitution, the substituted
Securities shall be deemed to be Purchased Securities.
(b) In Transactions in which the Seller retains custody of Purchased
Securities, the parties expressly agree that Buyer shall be deemed, for purposes
of subparagraph (a) of this Paragraph, to have agreed to and accepted in this
Agreement substitution by Seller of other Securities for Purchased Securities;
provided, however, that such other Securities shall have a Market Value at least
equal to the Market Value of the Purchased Securities for which they are
substituted.
10. Representations
Each of Buyer and Seller represents and warrants to the other that (i) it
is duly authorized to execute and deliver this Agreement, to enter into the
Transactions contemplated hereunder and to perform its obligations hereunder and
has taken all necessary action to authorize such execution, delivery and
performance, (ii) it will engage in such Transactions as principal (or, if
agreed in writing in advance of any Transaction by the other party hereto, as
agent for a disclosed principal), (iii) the person signing this Agreement on its
behalf is duly authorized to do so on its behalf (or on behalf of any such
disclosed principal), (iv) it has obtained all authorizations of any
governmental body required in connection with this Agreement and the
Transactions hereunder and such authorizations are in full force and effect and
(v) the execution, delivery and performance of this Agreement and the
Transactions hereunder will not violate any law, ordinance, charter, by-law or
rule applicable to it or any agreement by which it is bound or by which any of
its assets are affected. On the Purchase Date for any Transaction Buyer and
Seller shall each be deemed to repeat all the foregoing representations made by
it.
11. Events of Default
In the event that (i) Seller fails to repurchase or Buyer fails to transfer
Purchased Securities upon the applicable Repurchase Date, (ii) Seller or Buyer
fails, after one business day's notice, to comply with Paragraph 4 hereof, (iii)
Buyer fails to comply with Paragraph 5 hereof, (iv) an Act of Insolvency occurs
with respect to Seller or Buyer, (v) any representation made by Seller or Buyer
shall have been incorrect or untrue in any material respect when made or
repeated or deemed to have been made or repeated, or (vi) Seller or Buyer shall
admit to the other its inability to, or its intention not to, perform any of its
obligations hereunder (each an "Event of Default"):
(a) At the option of the nondefaulting party, exercised by written notice
to the defaulting party (which option shall be deemed to have been exercised,
even if no notice is given, immediately upon the occurrence of an Act of
Insolvency), the Repurchase Date for each Transaction hereunder shall be deemed
immediately to occur.
(b) In all Transactions in which the defaulting party is acting as Seller,
if the nondefaulting party exercises or is deemed to have exercised the option
referred to in subparagraph (a) of this Paragraph, (i) the defaulting party's
obligations hereunder to repurchase all Purchased Securities in such
Transactions shall thereupon become immediately due and payable, (ii) to the
extent permitted by applicable law, the Repurchase Price with respect to each
such Transaction shall be increased by the aggregate amount obtained by daily
application of (x) the greater of the Pricing Rate for such Transaction or the
Prime Rate to (y) the Repurchase Price for such Transaction as of the
Repurchase Date as determined pursuant to subparagraph (a) of this Paragraph
(decreased as of any day by (A) any amounts retained by the nondefaulting party
with respect to such Repurchase Price pursuant to clause (iii) of this
subparagraph, (B) any proceeds from the sale of Purchased Securities pursuant to
subparagraph (d)(i) of this Paragraph, and (C) any amounts credited to the
account of the defaulting party pursuant to subparagraph (e) of this Paragraph)
on a 360 day per year basis for the actual number of days during the period
from and including the date of the Event of Default giving rise to such option
to but excluding the date of payment of the Repurchase Price as so increased,
(iii) all Income paid after such exercise or deemed exercise shall be retained
by the nondefaulting party and applied to the aggregate unpaid Repurchase
Prices owned by the defaulting party, and (iv) the defaulting party shall
immediately deliver to the nondefaulting party any Purchased Securities
subject to such Transactions then in the defaulting party's possession.
(c) In all Transactions in which the defaulting party is acting as Buyer,
upon tender by the nondefaulting party of payment of the aggregate Repurchase
Prices for all such Transactions, the defaulting party's right, title and
interest in all Purchased Securities subject to such Transactions shall be
deemed transferred to the nondefaulting party, and the defaulting party
shall deliver all such Purchased Securities to the nondefaulting party.
(d) After one business day's notice to the defaulting party (which notice
need not be given if an Act of Insolvency shall have occurred, and which may be
the notice given under subparagraph (a) of this Paragraph or the notice
referred to in clause (ii) of the first sentence of this Paragraph), the
nondefaulting party may:
(i) as to Transactions in which the defaulting party is acting as
Seller, (A) immediately sell, in a recognized market at such price or
prices as the nondefaulting party may reasonably deem satisfactory, any or
all Purchased Securities subject to such Transactions and apply the
proceeds thereof to the aggregate unpaid Repurchase Prices and any other
amounts owing by the defaulting party hereunder
36
or (B) in its sole discretion, elect, in lieu of selling all or a portion
of such Purchased Securities, to give the defaulting party credit for such
Purchased Securities in an amount equal to the price therefor on such date,
obtained from a generally recognized source or the most recent closing bid
quotation from such a source, against the aggregate unpaid Repurchase
Prices and any other amounts owing by the defaulting party hereunder; and
(ii) as to Transactions in which the defaulting party is acting as
Buyer, (A) purchase securities ("Replacement Securities") of the same class
and amount as any Purchased Securities that are not delivered by the
defaulting party to the nondefaulting party as required hereunder or (B) in
its sole discretion elect, in lieu of purchasing Replacement Securities, to
be deemed to have purchased Replacement Securities at the price therefor on
such date, obtained from a generally recognized source or the most recent
closing bid quotation from such a source.
(e) As to Transactions in which the defaulting party is acting as Buyer;
the defaulting party shall be liable to the nondefaulting party (i) with respect
to Purchased Securities (other than Additional Purchased Securities), for any
excess of the price paid (or deemed paid) by the nondefaulting party for
Replacement Securities therefor over the Repurchase Price for such Purchased
Securities and (ii) with respect to Additional Purchased Securities, for the
price paid (or deemed paid) by the nondefaulting party for the Replacement
Securities therefor. In addition, the defaulting party shall be liable to the
nondefaulting party for interest on such remaining liability with respect to
each such purchase (or deemed purchase) of Replacement Securities from the date
of such purchase (or deemed purchase) until paid in full by Buyer. Such interest
shall be at a rate equal to the greater of the Pricing Rate for such Transaction
or the Prime Rate.
(f) For purposes of this Paragraph 11, the Repurchase Price for each
Transaction hereunder in respect of which the defaulting party is acting as
Buyer shall not increase above the amount of such Repurchase Price for such
Transaction determined as of the date of the exercise or deemed exercise by the
nondefaulting party of its option under subparagraph (a) of this Paragraph.
(g) The defaulting party shall be liable to the nondefaulting party for the
amount of all reasonable legal or other expenses incurred by the nondefaulting
party in connection with or as a consequence of an Event of Default, together
with interest thereon at a rate equal to the greater of the Pricing Rate for the
relevant Transaction or the Prime Rate.
(h) The nondefaulting party shall have, in addition to its rights
hereunder, any rights otherwise available to it under any other agreement or
applicable law.
12. Single Agreement
Buyer and Seller acknowledge that, and have entered hereinto and will enter
into such Transaction hereunder in consideration of and in reliance upon the
fact that, all Transactions hereunder constitute a single business and
contractual relationship and have been made in consideration of each other.
Accordingly, each of Buyer and Seller agrees (i) to perform all of its
obligations in respect of each Transaction hereunder, and that a default in the
performance of any such obligations shall constitute a default by it in respect
of all Transactions hereunder, (ii) that each of them shall be entitled to set
off claims and apply property held by them in respect of any Transaction
against obligations owing to them in respect of any other Transactions hereunder
and (iii) that payments, deliveries and other transfers made by either of them
in respect of any Transaction shall be deemed to have been made in
consideration of payments, deliveries and other transfers in respect of any
other Transactions hereunder, and the obligations to make any such payments,
deliveries and other transfers may be applied against each other and netted.
13. Notices and Other Communications
Unless another address is specified in writing by the respective party to
whom any notice or other communication is to be given hereunder, all such
notices or communications shall be in writing or confirmed in writing and
delivered at the respective addresses set forth in Annex II attached hereto.
14. Entire Agreement; Severability
This Agreement shall supersede any existing agreements between the parties
containing general terms and conditions for repurchase transactions. Each
provision and agreement herein shall be treated as separate and independent
from any other provision or agreement herein and shall be enforceable
notwithstanding the unenforceability of any such other provision or agreement.
15. Non-Assignability; Termination
The rights and obligations of the parties under this Agreement and under
any Transaction shall not be assigned by either party without the prior written
consent of the other party. Subject to the foregoing, this Agreement and any
Transactions shall be binding upon and shall inure to the benefit of the
parties and their respective successors and assigns. This Agreement may be
cancelled by either party upon giving written notice to the other, except that
this Agreement shall, notwithstanding such notice, remain applicable to any
Transactions then outstanding.
37
16. Governing Law
This Agreement shall be governed by the State of New York without giving
effect to the conflict of law principles thereof.
17. No Waivers, Etc.
No express or implied waiver of any Event of Default by either party shall
constitute a waiver of any other Event of Default and no exercise of any remedy
hereunder by any party shall constitute a waiver of its right to exercise any
other remedy hereunder. No modification or waiver of any provision of this
Agreement and no consent by any party to a departure herefrom shall be
effective unless and until such shall be in writing and duly executed by both
of the parties hereto. Without limitation on any of the foregoing, the failure
to give a notice pursuant to subparagraphs 4(a) or 4(b) hereof will not
constitute a waiver of any right to do so at a later date.
18. Use of Employee Plan Assets
(a) If assets of an employee benefit plan subject to any provision of the
Employee Retirement Income Security Act of 1974 ("ERISA") are intended to be
used by either party hereto (the "Plan Party") in a Transaction, the Plan Party
shall so notify the other party prior to the Transaction. The Plan Party shall
represent in writing to the other party that the Transaction does not
constitute a prohibited transaction under ERISA or is otherwise exempt
therefrom, and the other party may proceed in reliance thereon but shall not
be required so to proceed.
(b) Subject to the last sentence of subparagraph (a) of this Paragraph any
such Transaction shall proceed only if Seller furnishes or has furnished to
Buyer its most recent available audited statement of its financial condition
and its most recent subsequent unaudited statement of its financial condition.
(c) By entering into a Transaction pursuant to this Paragraph, Seller
shall be deemed (i) to represent to Buyer that since the date of Seller's
latest such financial statements, there has been no material adverse change in
Seller's financial condition which Seller has not disclosed to Buyer, and (ii)
to agree to provide Buyer with future audited and unaudited statements of its
financial condition as they are issued, so long as it is a Seller in any
outstanding Transaction involving a Plan Party.
19. Intent
(a) The parties recognize that each Transaction is a "repurchase
agreement" as that term is defined in Section 101 of Title 11 of the United
States Code, as amended (except insofar as the type of Securities subject to
such Transaction or the term of such Transaction would render such definition
inapplicable), and a "securities contract" as that term is defined in Section
741 of Title 11 of the United States Code, as amended.
(b) It is understood that either party's right to liquidate Securities
delivered to it in connection with Transactions hereunder or to exercise any
other remedies pursuant to Paragraph 11 hereof, is a contractual right to
liquidate such Transaction as described in Sections 555 and 559 of Title 11 of
the United States Code, as amended.
20. Disclosure Relating to Certain Federal Protections
The parties acknowledge that they have been advised that:
(a) in the case of Transactions in which one of the parties is a
broker or dealer registered with the Securities and Exchange Commission
("SEC") under Section 15 of the Securities Exchange Act of 1934 ("1934
Act"), the Securities Investor Protection Corporation has taken the
position that the provisions of the Securities Investor Protection Act of
1970 ("SIPA") do not protect the other party with respect to any
Transaction hereunder;
(b) in the case of Transactions in which one of the parties is a
government securities broker or a government securities dealer registered
with the SEC under Section 15C of the 1934 Act, SIPA will not provide
protection to the other party with respect to any Transaction hereunder;
and
(c) in the case of Transactions in which one of the parties is a
financial institution, funds held by the financial institution pursuant to
a Transaction hereunder are not a deposit and therefore are not insured by
the Federal Deposit Insurance Corporation, the Federal Savings and Loan
Insurance Corporation or the National Credit Union Share Insurance Fund, as
applicable.
Merrill Lynch Mortgage Capital Inc. Allied Capital Commercial Corporation
By_________________________________ By___________________________________
Title______________________________ Title________________________________
Date_______________________________ Date_________________________________
6
38
EXHIBIT 10.4
[ALLIED CAPITAL LETTERHEAD]
November 6, 1997
Mr. Timothy M. Loughlin
Merrill Lynch Mortgage Capital Inc.
World Financial Center
North Tower, 8th Floor
New York, NY 10281
Re: Amended and Restated Master Repurchase Agreement among Merrill Lynch
Mortgage Capital Inc., Allied Capital Commercial Corporation and
Business Mortgage Investors, Inc.
And
Master Repurchase Agreement between Merrill Lynch Mortgage Capital
Inc. and Allied Capital Commercial Corporation
Dear Tim:
As we discussed, the boards of directors of each of the publicly traded Allied
Capital entities have agreed to merge together. Set forth in the following
paragraphs is a brief summary of the proposed consolidation (the "Merger") of
the Allied Capital entities.
The entities involved in the proposed Merger transaction include Allied Capital
Corporation ("Allied I"), and its three wholly-owned subsidiaries, Allied
Investment Corporation, Allied Capital Financial Corporation and Allied
Development Corporation; Allied Capital Corporation II ("Allied II"), and its
two wholly-owned subsidiaries, Allied Investment Corporation II and Allied
Financial Corporation II; Allied Capital Lending Corporation ("Allied
Lending"), and its two wholly-owned subsidiaries, Allied Capital SBLC
Corporation and Allied Capital Credit Corporation; Allied Capital Commercial
Corporation ("Allied Commercial"), and its three qualified REIT subsidiaries,
ALCC Acceptance Corporation, ALCC Holdings, Inc. and ALCC Equity, Inc.; and
Allied Capital Advisers, Inc. ("Advisers"), and its one wholly owned
subsidiary, Allied Capital Property Corporation.
If the Merger is consummated, each of Allied I, Allied II, Allied Commercial
and Advisers would merge with and into Allied Lending to form an internally
managed investment fund that would operate as a business development company.
It is intended that the Merger will be treated as a tax-free reorganization
under Section 368 (a)(1)(C) of the Internal Revenue Code of 1986, as amended
(the "Code"). Following the Merger, all of the officers and employees of
Advisers will become officers and employees, respectively, of Allied Lending.
39
[ALLIED CAPITAL LETTERHEAD]
November 6, 1997
Page 2
The Merger would be effected through a conversion of the respective shares of
Allied I, Allied II, Allied Commercial and Advisers into shares of Allied
Lending and would be structured as a "statutory merger" pursuant to Section
3-102 of the General Corporation law of the State of Maryland and the Merger is
contemplated to close on December 31, 1997 for a number of tax and financial
disclosure reasons. The name of the surviving corporation would be changed to
Allied Capital Corporation ("ACC"). Allied Investment Corporation and Allied
Capital Financial Corporation would be wholly-owned subsidiaries of ACC.
Pursuant to Item 11.(e) of ANNEX I - SUPPLEMENTAL TERMS AND CONDITIONS TO MASTER
REPURCHASE AGREEMENT, DATED AS OF MARCH 22,1996, BY AND BETWEEN ALLIED CAPITAL
COMMERCIAL CORPORATION AND MERRILL LYNCH MORTGAGE CAPITAL INC. and the
documents referred to above, the Obligor (Allied Capital Commerical
Corporation) and Co-Obligor (Business Mortgage Investors, Inc.) cannot merge or
consolidate into any entity unless the surviving or resulting entity shell be
acceptable to Merrill Lynch Mortgage Capital Inc. Allied Capital Commerical
Corporation hereby requests that Merrill Lynch Mortgage Capital Inc. consent to
Allied Capital Commercial Corporation merge into Allied Capital Lending
Corporation, and allow Allied Capital Lending Corporation to assume the
performance of all of the Obligor's duties and obligations. Business Mortgage
Investors, Inc. is not merging and will continue to be operated as a
stand-alone company.
The merged entity on a pro forma basis would have approximately $802 million in
total assets and approximately $422 million in shareholders' equity. The pro
forma debt to equity ratio equals 0.85:1; however, this ratio would equal
approximately 0.20:1 by the end of January 31, 1998 due to a planned
securitization of certain commercial mortgages.
I have enclosed a copy of the joint prospectus that has been filed with the
Securities and Exchange Commission for you review that describes the proposed
Merger transaction in detail. If you have any questions on the proposed merger
or our requests, please call me at (202) 331-2430.
Sincerely,
/s/ JON A. DELUCA
Jon A. DeLuca
Principal & Chief Financial Officer
Enclosure
JAD/jvt
Approved: /s/ TIMOTHY M. LOUGHLIN, JR.
----------------------------------------------
TIMOTHY M. LOUGHLIN, JR.
VICE PRESIDENT