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EXHIBIT 10.1
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INTERIM WAREHOUSE AND SECURITY AGREEMENT
by and among
PRUDENTIAL SECURITIES CREDIT
CORPORATION
as Lender
and
AMRESCO CAPITAL TRUST
and
AMREIT I, INC.
and
AMREIT II, INC.
as, individually and collectively, Borrower
Dated as of July 1, 1998
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TABLE OF CONTENTS
Page
Section I. The Loan............................................................................. 1
Section II. Loan Files and Custodian............................................................. 9
Section III. Representations, Warranties and Covenants............................................ 9
Section IV. Mandatory Partial Prepayment of Loan................................................. 13
Section V. Release of Loan Files Following Payment of Loan...................................... 15
Section VI. Servicing............................................................................ 15
Section VII. No Oral Modifications; Successors and Assigns; Assignment of
Collateral........................................................................... 16
Section VIII. Reports.............................................................................. 16
Section IX. Events of Default.................................................................... 18
Section X. Remedies Upon Default................................................................ 20
Section XI. Indemnification...................................................................... 20
Section XII. Periodic Due Diligence Review........................................................ 21
Section XIII. Power of Attorney.................................................................... 22
Section XIV. Choice of Law; Agreement Constitutes Security Agreement.............................. 22
Section XV. Lender May Act Through Affiliates.................................................... 22
Section XVI. Notices.............................................................................. 22
Section XVII. Severability......................................................................... 24
Section XVIII. Counterparts......................................................................... 24
Section XIX. Additional Borrowers................................................................. 24
Section XX. No Exclusivity....................................................................... 24
Section XXI. Joint and Several Liability.......................................................... 24
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Appendix I Certain Definitions
Appendix II Representations and Warranties
Exhibit A Form of Secured Note
Exhibit B Form of Opinion
Exhibit C Form of Credit Increase Confirmation and Note Amendment
Exhibit D Form of Funding Notice
Exhibit E Delivery Obligations Related to Wet-Ink Eligible Assets
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INTERIM WAREHOUSE AND SECURITY AGREEMENT
THIS INTERIM WAREHOUSE AND SECURITY AGREEMENT, dated as of July 1,
1998 (as amended or otherwise modified from time to time, this "Agreement") is
by and among PRUDENTIAL SECURITIES CREDIT CORPORATION, a Delaware corporation,
having an office at 1220 N. Market Street, Wilmington, Delaware 19801 (the
"Lender") and AMRESCO CAPITAL TRUST, a Texas real estate investment trust
("ACT"), AMREIT I, INC., a Delaware corporation ("AMREIT I") and AMREIT II,
INC., a Nevada corporation ("AMREIT II"), each having its principal office at
700 North Pearl Street, Suite 2400, Dallas, Texas 75201 (individually and
collectively, the "Borrower").
WHEREAS, the Lender intends to lend and the Borrower intends to borrow
up to $400,000,000 to provide interim warehouse financing of Eligible Assets
(as defined herein); and
WHEREAS, the Lender's affiliate, Prudential Securities Incorporated
("PSI") pursuant to the Securitization Agreement (as defined herein) will be
engaged as the placement agent or the underwriter, as the case may be (such
role, the "Manager Role"), for each initial securitization (each such initial
securitization is hereinafter referred to as the "First Securitization")
involving the public or private placement of securities relating to the Pledged
Eligible Assets (as defined herein) (the First Securitization and any
subsequent securitization a "Securitization") to be sponsored by the Borrower
(or by an Affiliate thereof) and collateralized by some or all of the Pledged
Eligible Assets.
Capitalized terms used herein and not otherwise specifically defined
herein are defined in Appendix I hereto.
NOW, THEREFORE, in consideration of the premises and for other good
and valuable consideration, the parties hereto hereby agree as follows:
Section I. The Loan.
Subject to the terms of this Agreement:
1. Maximum Loan Amount. The Lender agrees to lend to the Borrower up
to a maximum of $400,000,000 under this Agreement (such borrowing, the "Loan")
to be made in one or more advances (each, an "Advance"); provided, however,
that the aggregate outstanding Advances made in connection with one or more
Construction Loans shall not exceed $150,000,000 at any one time without the
prior written consent of the Lender. The Borrower agrees that the Loan shall be
used to warehouse certain commercial mortgage loans and commercial real estate
assets, including, but not limited to, Wet-Ink Eligible Assets, Mortgage Loans,
Construction Loans, Mezzanine Loans, Bridge Loans, Rehabilitation Loans,
Participating Loans, and Other Real Estate Assets as may be allowed hereunder
or as otherwise approved in writing by the Lender (all of the foregoing
described loans and other assets, collectively, "Eligible Assets"), provided
that all Eligible Assets have been originated in accordance with the
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Borrower's approved underwriting guidelines or otherwise have been approved by
the Lender and such Eligible Assets are eligible to be included in a
Securitization or other exit strategy, in each case as reasonably determined by
Lender. The Eligible Assets to be pledged to the Lender hereunder shall be
identified by the Borrower to the Lender in writing from time to time. Any
Eligible Asset for which an Advance is made hereunder is hereinafter referred
to as a "Pledged Eligible Asset."
2. Advances. (a) Each Advance shall be made, pursuant to the terms of
this Agreement on a date prior to the Maturity Date referred to below (each
such date, a "Funding Date"); provided that:
(i) not later than (A) five Business Days prior to the proposed
Funding Date for an Initial Advance, the Borrower shall deliver
to the Lender a written underwriting transmittal in form
satisfactory to Lender (an "Underwriting Transmittal") for each
Eligible Asset proposed to be pledged in connection with such
Initial Advance, and (B) two Business Days prior to the
proposed Funding Date for an Initial Advance, the Borrower
shall deliver to the Lender (i) a written notice (a "Funding
Notice") in the form of Exhibit D hereto and (ii) a schedule,
via facsimile, in a mutually satisfactory form to be agreed
upon between the Borrower and the Lender, detailing certain
specified characteristics of the Eligible Assets proposed to be
pledged in connection with such Initial Advance (each such
schedule, a "Commercial Loan/Asset Schedule");
(ii) the representations, warranties and covenants of the Borrower
set forth in this Agreement shall be true and correct on and as
of such Funding Date as if made on and as of such date;
(iii) no Event of Default shall have occurred and be continuing or
would exist after the making of the Advance on such Funding
Date;
(iv) the Lender shall have received (A) in connection with each
Initial Advance other than an Advance relating to a Wet-Ink
Eligible Asset, by no later than 12:00 noon (New York City
time) on the related Funding Date, a certificate from the
Custodian referred to below to the effect that it has reviewed
the loan files relating to the Eligible Assets being pledged in
connection with the Advance being made on such Funding Date and
has found no material deficiencies in such loan files (the
"Custodian's Certification") and (B) prior to the first Advance
under this Agreement relating to a Pledged Eligible Asset, one
or more legal opinion(s) from counsel (which may be in-house
counsel) to the Borrower in the form of Exhibit B attached
hereto and an executed copy of the Secured Note in the form of
Exhibit A attached hereto;
(v) for Eligible Assets other than Wet-Ink Eligible Assets, the
Borrower shall have delivered or caused to be delivered to the
Custodian all required documents with respect to the Eligible
Assets being pledged to the Lender hereunder on such
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Funding Date and for Wet-Ink Eligible Assets, the Borrower
shall deliver or cause to be delivered to the Custodian all
required documents with respect to such Wet- Ink Eligible
Assets in accordance with the time frames and as specified in
Exhibit E attached hereto;
(vi) for Wet-Ink Eligible Assets, the Borrower shall have delivered
facsimile copies of the following documents, each of which
shall have been deposited in escrow with the title company: the
certification that the Borrower has received all loan documents
described in the closing instruction letter to the title
company; the executed promissory note with an assignment of
such note from Borrower to Lender; an assignment of the
mortgage from Borrower to Lender; and a signed copy of the
closing instruction letter in a form mutually agreeable to
Borrower and Lender.
(vii) prior to the first Advance under this Agreement relating to a
Pledged Eligible Asset, the Lender shall have received a
complete and up-to-date copy of the Borrower's underwriting
guidelines and closing procedures and Lender shall have
approved such guidelines and closing procedures and, prior to
each Advance, the Lender shall have approved all changes or
modifications thereto, if any, that, in the reasonable judgment
of the Lender, may result in a material relaxation of the
standards or requirements contained in Borrower's underwriting
guidelines or the closing procedures;
(viii) prior to the first Advance under this Agreement relating to a
Pledged Eligible Asset, the Lender shall have received a
Secretary's Certificate of each Borrower, with copies of (A)
ACT's Declaration of Trust and as to AMREIT I and AMREIT II,
each such Borrower's respective certificate of incorporation,
(B) the Borrowers' by-laws, and (c) a good standing certificate
for each of the Borrowers (other than ACT);
(ix) with respect to each Eligible Asset other than Wet-Ink Eligible
Assets to be funded on each Funding Date, Lender shall have
given its prior approval to allow an Advance with respect to
such Eligible Asset and, to the extent not otherwise specified
in this Agreement, established an Advance Rate for such
Eligible Asset;
(x) with respect to any Advance relating to Pledged Eligible Assets
after the Initial Advance, Lender shall have received (a) a
Funding Notice at least two Business Days prior to the date
requested for funding such Advance, and (b) no change shall
have occurred with respect to any material fact contained in
the Underwriting Transmittal relating to the Pledged Eligible
Asset; and
(xi) to the extent described in Section IV(c) hereof, no notice
described in said Section IV(c) shall have been received by the
Lender.
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(b) On any Funding Date relating to a Wet-Ink Eligible Asset, Lender
will make an Advance for the amount requested by Borrower in a Funding Notice
that includes a representation and warranty that such Wet-Ink Eligible Asset
(i) has been underwritten in general accordance with Borrower's underwriting
guidelines or meets current market parameters for securitization of such
Wet-Ink Eligible Asset and (ii) is not a Construction Loan, provided, however,
that the Advance Rate with respect to any such Advance shall be (x) 70% for any
Wet-Ink Eligible Asset with a committed loan or investment amount of
$25,000,000 or less and (Y) 50% for any Wet-Ink Eligible Asset with a committed
loan or investment amount greater than $25,000,000 and provided, further, that
the maximum amount of Advances outstanding at any one time that the Lender has
either already funded or committed to fund without Lender's approval shall not
exceed $50,000,000.
(c) Lender agrees to approve or disapprove any Eligible Asset within
five Business Days of receipt by Lender of the Underwriting Transmittal and the
information and documents required in Section I(2); provided, however, that
Lender shall have no obligation to make the first Advance under this Agreement
in connection with any Funding Notice until Lender or Custodian, as applicable,
shall also have received the documents required in Sections I(2)(I), (iv)(B),
(vii) and (viii). Lender shall approve or disapprove such Eligible Asset within
five Business Days and shall promptly confirm in writing any such decision not
to finance such Eligible Loan. To the extent that an Advance has been made
under Section (I)(2)(b) with respect to a Wet-Ink Eligible Asset, Lender shall
fund the difference between an Advance for such Wet-Ink Eligible Asset
determined in accordance with the provisions of Section I(3)(c) and the amount
of the Advance previously made with respect to such Asset within two Business
Days of a request therefor from Borrower.
(d) Construction Loans and Other Real Estate Assets will be evaluated
on an individual basis, with no minimum Advance Rate or Advanced Amount being
committed to by Lender; provided, however, if approved by Lender for funding,
the Advance Rate applicable to any Construction Loan or Other Real Estate Asset
shall be not less than 50% of Budgeted Costs (as defined herein) (the "Minimum
Advance Rate"). Notwithstanding the amount advanced by Borrower to the
underlying mortgagor/borrower on a Construction Loan or Other Real Estate
Asset, the only portion thereof that will qualify for consideration of an
Advance by Lender is that portion representing the total construction budget
(including interest carry and budgeted soft costs, but excluding any developer
profit to the borrower or any affiliate of the borrower or the cost of any land
in excess of the purchase price thereof) of the project or other asset, as
applicable (collectively, "Budgeted Costs"), as further described in the
underwriting guidelines. The Maximum Advanced Amount on Construction Loans will
not exceed (i) 75% of Budgeted Costs where the underlying mortgagor/borrower is
funding 5% or more of Budgeted Costs or (ii) 71.25% of the Budgeted Costs where
the underlying mortgagor/borrower is funding less than 5% of Budgeted Costs.
Lender shall not be obligated to make an Advance relating to a Construction
Loan or Other Real Estate Assets more frequently than once in any calendar
month, nor to make any Advance prior to Borrower and/or the underlying
mortgagor/borrower having funded an amount which in the aggregate equals the
difference between (x) Budgeted Costs approved by Lender and (y) the approved
Advanced Amount.
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(e) For any Pledged Eligible Asset with a Debt Service Coverage Ratio
of less than 1.0, the Advance Rate for such Pledged Eligible Asset shall not
exceed 80% of the Market Value of the loan and shall be deemed to be under
Advance Rate Schedule A of Table I for purposes of determining the Applicable
Interest Rate Spread.
(f) In the event that Lender does not give its approval to any
Eligible Asset for which an Advance is requested hereunder, or the Lender
approves such Eligible Asset for an Advanced Amount or with an Advance Rate
less than that requested by Borrower, Lender will make a good faith effort to
review and discuss with Borrower the circumstances causing Lender to disapprove
the proposed Eligible Asset or reduce the Advanced Amount or Advance Rate in
order to try to resolve any differences between Lender and Borrower. The
provisions of this Section 2(f) shall not impose any affirmative obligation on
the part of Lender to resolve such differences.
3. Interest; Facilities Fee.
(a) The Loan shall accrue interest daily on its outstanding principal
amount, with interest calculated for the actual number of days elapsed based on
a 360-day year. The interest rate (the "Interest Rate") on the Loan shall be
(except as otherwise provided in Section X(D) hereof) the Applicable Interest
Rate Spread plus LIBOR as determined by Lender as of 11:00 a.m. New York time
on the Eurodollar Business Day immediately preceding each of (i) the related
Funding Date and (ii) the first day of each succeeding calendar month. Interest
which accrues during each calendar month shall be payable on the fifth Business
Day of the following month with any outstanding interest due and payable in its
entirety on the Maturity Date or, if extended, the Extended Maturity Date, or
if earlier, the date of termination of this Agreement. "LIBOR" means (i) the
rate (expressed as a percentage per annum) for one-month deposit in U.S.
dollars that appears on Telerate Page 3750 as of 11:00 a.m., New York City time
on the applicable Eurodollar Business Day for such period or (ii) if such rate
does not appear on Telerate Page 3750 as of 11:00 a.m. New York City time, on
the applicable Eurodollar Business Day, the rate (expressed as a percentage per
annum) for one-month deposit in U.S. dollars as reported by Morgan Guaranty
Trust Company of New York or its successor(or such other prime bank in the
London Interbank market as Lender shall designate). "Eurodollar Business Day"
means a Business Day in New York on which commercial banks are open for
international business (including dealings in deposits in U.S. dollars) in
London.
(b) The Applicable Interest Rate Spread shall mean, as to each Pledged
Eligible Asset, the applicable basis point spread ("BPS") determined by taking
the LTV for the Eligible Asset and the Applicable Interest Rate Spread
corresponding to such LTV from the following Table I based upon the Advance
Rate Schedule selected by Borrower:
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TABLE I
APPLICABLE INTEREST RATE SPREAD
Basis Point Spread Basis Point Spread
Maximum LTV Advance Rate Schedule A Advance Rate Schedule B
----------- ----------------------- -----------------------
80% 100 BPS 100 BPS
85% 110 BPS 100 BPS
90% 125 BPS 100 BPS
95% 150 BPS 100 BPS
100% 150 BPS 100 BPS
Notwithstanding the foregoing, during any time that the cumulative
balance of all Advanced Amounts outstanding on Construction Loans exceeds
$60,000,000 ("Tranche B Floor"), the Applicable Interest Rate Spread shall mean
the following:
Advanced Amount Applicable Interest Rate Spread
--------------- -------------------------------
Tranche A = $0-$60,000,000 X = Determined in accordance with Table I above
Tranche B - In excess of Y = 200 BPS
$60,000,000
The initial Applicable Interest Rate Spread will be determined as to
an Advance related to a Construction Loan on the applicable Funding Date based
on the cumulative balance of all Advanced Amounts related to Construction Loans
as of such date, and will be adjusted, if mandated by the provisions below, on
the first day of each succeeding calendar month based on the cumulative balance
of all Advanced Amounts related to Construction Loans as of such date. For
example: On June 15, the cumulative balance of all Advanced Amounts related to
Construction Loans is $50,000,000. On June 16, an additional Advance of
$20,000,000 is made and the cumulative balance increases to $70,000,000. The
initial Applicable Interest Rate Spread on $10,000,000 of such Advance (Tranche
A) is X, and Y on the other $10,000,000 (Tranche B). If the cumulative balance
of all Advanced Amounts related to Construction Loans is $65,000,000 on July 1,
the Applicable Interest Rate Spread on $5,000,000 of the $10,000,000 Tranche B
portion of such Advance described above is adjusted to X, such that $15,000,000
of such Advance is then allocated to Tranche A, and the Applicable Interest
Rate Spread on the remaining $5,000,000 continues to be Y and that portion of
the Advance continues to be allocated to Tranche B. If on August 1, the
cumulative balance of all Advanced Amounts related to Construction Loans is
$30,000,000, the Applicable Interest Rate Spread on all related Advances will
be X.
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The amount of each Advance with respect to a Pledged Eligible Asset
(such amount, the "Advanced Amount") shall equal the amount agreed upon by
Lender and Borrower, provided, however that for Construction Loans and Other
Real Estate Assets, the Advance Amount shall not be less than the Minimum
Advance Rate. The obligation to fund any Advance Amount on Loans with more than
one Advance shall not arise until the borrower/mortgagor has funded the portion
of Budgeted Costs required to be funded by the borrower/mortgagor and the
Borrower has funded the difference between the Advanced Amount and the amount
of the Pledged Eligible Asset, provided, however, that the Advanced Amount,
when added to the sum of all prior Advances relating to such Pledged Eligible
Asset shall not exceed the lesser of (i) for Construction Loans, 75% of the
Budgeted Costs, or (ii) the product obtained by multiplying the Market Value
(or if less, the par amount of such Pledged Eligible Asset) by the Advance
Rate; or (iii) the Eligible Asset Value of such Pledged Eligible Asset.
(c) For purposes of this Agreement:
Advance Rate means, with respect to each Eligible Asset (excluding
Construction Loans and other Real Estate Assets and subject to the terms of the
immediately succeeding paragraph), the applicable rate determined in accordance
with the following Table II:
TABLE II
APPLICABLE ADVANCE RATE
Advance Rate Schedule A Advance Rate Schedule B
---------- ----------
Maximum LTV
80% 95% 95%
85% 93% 87%
90% 90% 80%
95% 85% 75%
100% 80% 70%
Notwithstanding the foregoing, for any Pledged Eligible Asset with a
Debt Service Coverage Ratio of less than 1.0, the Advance Rate for such Pledged
Eligible Asset shall not exceed 80% of the Market Value of the Pledged Eligible
Asset and shall be deemed to be under Advance Rate Schedule A of Table I for
purposes of determining the Applicable Interest Rate Spread.
4. Maturity and Prepayment. (a) The Loan evidenced hereby shall mature
on the Maturity Date (or if extended, the Extended Maturity Date) and all
amounts outstanding hereunder shall be due and payable on each Maturity Date or
Extended Maturity Date. If the
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Loan is not extended by means of a Credit Increase Confirmation and Note
Amendment, the Loan shall immediately and automatically become due and payable
without any further action by the Lender on the Maturity Date or any Extended
Maturity Date, and in the event of non-payment in full on such Maturity Date or
Extended Maturity Date the Lender may exercise all rights and remedies
available to it as the holder of a first perfected security interest under the
Uniform Commercial Code of the State of New York (the "New York UCC").
Notwithstanding the foregoing, unless otherwise extended in writing by Lender,
all Advances made with respect to any Pledged Eligible Asset and any accrued
and unpaid interest thereon are due and payable in full on or before the
earlier of this Maturity Date and the date which is 9 months after the Funding
of the Initial Advance with respect to such Pledged Eligible Asset, provided,
however, such period shall be 18 months for Advances made within 9 months of
the effective date of this Agreement, unless such date is extended by the
Lender, in its sole discretion.
(b) The Loan is pre-payable at any time without premium or penalty, in
whole or in part; provided, that in connection with any prepayment of the Loan
in part (other than any prepayment pursuant to Section I(4)(a), Section IV(A)
or (B) or any prepayment resulting from a payment in full of the Pledged
Eligible Asset by the underlying borrower, in which case such Pledged Eligible
Assets shall be released by the Lender upon payment in full of the related
Advance), Pledged Eligible Assets may not be removed from this facility with
the result that, in the Lender's sole discretion a Collateral Deficiency
Situation would then exist unless the Borrower cures such Collateral Deficiency
Situation in accordance with the provisions of Section IV(D). If the Borrower
intends to prepay the Loan in whole or in substantial part from a source other
than the proceeds of a Securitization, payment in full by the underlying
borrower, or as a result of some other exit strategy approved by Lender, the
Borrower shall give two Business Days' written notice to the Lender. Any
principal repayments received from any underlying borrower shall be paid
directly to the Lender in an amount that equals the Advance Rate applicable to
such Pledged Eligible Asset times the principal repayment; provided, however,
at the Borrower's written election and unless otherwise provided to the
contrary by Lender, any principal repayments received by the Borrower may be
applied against any unfunded Advance Amount applicable to a Pledged Eligible
Asset which the Lender is otherwise obligated to advance to Borrower in
accordance with this Agreement. Any written notice by the Borrower with respect
to such scheduled amortization payments shall specify which Pledged Eligible
Asset such prepayment is being applied towards. Any amounts pre-paid under this
Agreement prior to each Maturity Date may be re-borrowed, subject to the terms
and conditions of this Agreement, until such Maturity Date.
In the event that the Loan is extended beyond its then scheduled
Maturity Date by means of a Credit Increase Confirmation and Note Amendment,
the factors set forth in the definitions of "Advanced Amount," "Collateral
Deficiency Situation" and "Restoration Amount" may be revised by the Lender in
its sole and reasonable discretion.
5. Break-up Fee. Subject to the terms and conditions of the
Securitization Agreement, Lender may be entitled to a break-up fee with respect
to the disposition of Pledged Eligible Assets, including securitizations
involving such assets as well as the sale and transfer of such assets.
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6. Secured Note. The Loan shall be evidenced by the secured promissory
note of the Borrower in the form attached hereto as Exhibit A (the "Secured
Note").
Section II. Loan Files and Custodian. The Borrower shall deliver to
Bank One, Texas, N.A., as custodian on behalf of the Lender, or such other
custodian that may be mutually agreeable to the Lender and the Borrower from
time to time (the "Custodian"), with respect to each Pledged Eligible Asset,
the documents and instruments listed in Section 2 of that certain Custodial
Agreement, dated as of July 1, 1998 (as amended and modified from time to time,
the "Custodial Agreement"), among the Lender, the Borrower and the Custodian.
The Pledged Eligible Assets, the documents and instruments evidencing and
relating to the Pledged Eligible Assets (collectively, the "Commercial
Loan/Asset Files"), the collateral securing such Pledged Eligible Assets,
together with any proceeds thereof, are hereinafter referred to as the
"Collateral". The Borrower hereby pledges all of its right, title and interest
in and to the Collateral to the Lender to secure the repayment of principal of
and interest on the Loan and all other amounts owing by the Borrower to the
Lender hereunder or under any other agreement or arrangement now existing or
hereinafter entered into among such parties (collectively, the "Secured
Obligations").
Section III. Representations, Warranties and Covenants.
A. The Borrower represents and warrants to the Lender that, except as
otherwise disclosed and approved by Lender:
1. Each Borrower has been duly organized and is validly existing as
(i) with respect to ACT, a real estate investment trust duly organized under
the laws of the State of Texas, (ii) with respect to AMREIT I, a corporation
duly organized and in good standing under the laws of the State of Delaware,
and (iii) with respect to AMREIT II, a corporation duly organized and in good
standing under the laws of the State of Nevada.
2. Each Borrower is duly licensed or is otherwise qualified in each
state in which it transacts business to the extent required under applicable
law except where the failure to take such action would not (either individually
or in the aggregate) have a Material Adverse Effect and is not in default of
such state's applicable laws, rules and regulations. Each Borrower has the
requisite power and authority and legal right to own and grant a lien on all of
its right, title and interest in and to the Collateral, and to execute and
deliver, engage in the transactions contemplated by, and perform and observe
the terms and conditions of, this Agreement, the Custodial Agreement and the
Secured Note.
3. At all times after the Custodian has received a Pledged Eligible
Asset from the Borrower and until payment in full of the Loan, a Borrower will
not knowingly and intentionally commit any act in violation of applicable laws,
or regulations promulgated with respect thereto.
4. Each Borrower is solvent and no condition exists under any
mortgage, borrowing agreement or other instrument or agreement pertaining to
indebtedness for borrowed money to which any Borrower is a party which (either
individually or in the aggregate) has caused, or
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would be reasonably likely to cause, a Material Adverse Effect, and the
execution, delivery and performance by the Borrowers of this Agreement, the
Secured Note and the Custodial Agreement do not conflict with any term or
provision of the declaration of trust or certificate of incorporation, as
applicable, or by-laws of the Borrowers or any law, rule, regulation, order,
judgment, writ, injunction or decree applicable to the respective Borrowers of
any court, regulatory body, administrative agency or governmental body having
jurisdiction over the Borrowers and will not result in any violation of any
such mortgage, instrument or agreement.
5. All financial statements or certificates of any Borrower, any
Affiliate of the Borrowers or any of its officers furnished to the Lender are
true and complete in all material respects and do not omit to disclose any
material liabilities or other facts relevant to the Borrowers' or such
Affiliate's condition. All such financial statements (other than any financial
statements prepared to show Borrower's taxable income) have been prepared in
accordance with GAAP; provided, that interim financial statements shall not be
required to and may not include footnotes.
6. No consent, approval, authorization or order of, registration or
filing with, or notice to any governmental authority or court is required under
applicable law in connection with the execution, delivery and performance by
any Borrower of this Agreement, the Secured Note or the Custodial Agreement.
7. Except as otherwise disclosed to and approved by Lender prior to
the Initial Advance or disclosed to Lender for clause (C) below, there is no
action, proceeding or investigation pending with respect to which any Borrower
has received service of process or, to the best of any Borrower's knowledge,
threatened against it before any court, administrative agency or other tribunal
(A) asserting the invalidity of this Agreement, the Secured Note or the
Custodial Agreement, (B) seeking to prevent the consummation of any of the
transactions contemplated by this Agreement, the Secured Note or the Custodial
Agreement, or (C) which if determined against any Borrower would materially and
adversely affect the validity or collectability of the Pledged Eligible Assets
or the performance by the Borrower of its obligations under, or the validity or
enforceability of, this Agreement, the Secured Note or the Custodial Agreement.
8. Except as otherwise disclosed to and approved by Lender prior to
the Initial Advance, and, after the Initial Advance, as disclosed to Lender
from time to time (and subject to Lender's rights hereunder to declare a
Collateral Deficiency Situation), there is no action, proceeding or
investigation pending with respect to which any Borrower has received service
of process, or to the best of Borrower's knowledge, threatened against it
before any court, administrative agency or other tribunal challenging the
enforceability of any material mortgage loan document relating to a Pledged
Eligible Asset or raising a defense to the exercise of any remedies under such
mortgage loan documents.
9. Except as otherwise disclosed to and approved by Lender, no event
has occurred which has caused a Material Adverse Effect since the date set
forth in the financial statements supplied to the Lender.
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10. This Agreement, the Secured Note and the Custodial Agreement have
been duly authorized, executed and delivered by each Borrower, all requisite
trust or corporate action, as applicable, having been taken, and each is valid,
binding and enforceable against the respective Borrower in accordance with its
terms except as such enforcement may be affected by bankruptcy, insolvency,
moratorium, reorganization, fraudulent conveyance, redemption or other similar
laws affecting the enforcement of creditor's rights generally, or by general
principles of equity.
B. With respect to every Pledged Eligible Asset, the Borrower
represents and warrants to the Lender that except as otherwise disclosed to and
approved by Lender prior to the Initial Advance:
1. Such Pledged Eligible Asset and all accompanying collateral
documents obtained and required to be obtained in connection with the Pledged
Eligible Assets are complete and authentic and all signatures thereon are
genuine.
2. Such Pledged Eligible Asset arose from a bona fide loan or
contract, as applicable, complying in all material respects with all applicable
State and Federal laws and regulations, and is not subject to any valid
defense, set-off or counterclaim.
3. Except as set forth in Section III(B)(9) below, no default has
occurred in any provisions of such Pledged Eligible Asset.
4. With respect to such Pledged Eligible Asset, all amounts
represented to be payable on the related Promissory Note or other contract are,
in fact, payable pursuant to the provisions of such Promissory Note or other
contract.
5. To the best of the Borrower's knowledge, any property subject to
any security interest given in connection with such Pledged Eligible Asset is
not subject to any other encumbrances other than "permitted encumbrances" that
may be allowed under the Borrower's underwriting guidelines approved by the
Lender or as described in the Underwriting Transmittal.
6. The Borrower holds good and indefeasible title to, and is the sole
owner of, such Pledged Eligible Asset and as of the related Funding Date, such
Pledged Eligible Asset is not subject to any liens, charges, mortgages,
encumbrances or rights of any person other than Lender except (a) such liens
that are to be released simultaneously with the pledge to the Lender hereunder
or (b) as has otherwise been approved by the Lender in writing.
7. Each Pledged Eligible Asset conforms to the description thereof as
set forth on the related Commercial Loan/Asset Schedule delivered to the
Custodian and the Lender.
8. All applicable disclosures required by the Real Estate Settlement
Procedures Act, by Regulation X promulgated thereunder and by Regulation Z of
the Board of Governors of the Federal Reserve System promulgated pursuant to
the statute commonly known as the Truth-in-
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Lending Act and the Notice of the Right of Rescission required by said statute
and regulation have been properly made and given.
9. Except as otherwise disclosed in the Underwriting Transmittal, as
of the first Funding Date under this Agreement or any subsequent Funding Date,
such Pledged Eligible Asset is not 31 or more days delinquent as of the last
payment due date for such Pledged Eligible Asset and since inception such
Pledged Eligible Asset has not been 31 or more days delinquent on more than one
occasion.
10. The Pledged Eligible Assets do not have characteristics which are
materially worse than those of other similar Eligible Assets financed by the
Borrower during the twelve-month period preceding the first Funding Date under
this Agreement.
11. To the extent applicable, the representations and warranties set
forth in Appendix II are true in all material respects as to the Pledged
Eligible Assets as of the date of closing of each such Pledged Eligible Asset
except as disclosed in the related Underwriting Transmittal prepared and
delivered by the Borrower.
12. Each Pledged Eligible Asset was originated pursuant to the
Borrower's written underwriting guidelines (including any amendments and
modifications thereto) heretofore provided to, and approved by, the Lender,
except for such material exceptions which have been disclosed to, and where
required hereunder pre-approved by, the Lender in the Underwriting Transmittal.
13. On the applicable Funding Date for any Advance funded pursuant to
Section I(2)(b) without the Lender's approval as provided in such section,
Borrower will have sufficient cash, cash-equivalent reserves or additional
borrowing capacity through an alternate borrowing facility to repay the amount
of such Advance if Lender determines in its reasonable judgment that such
Pledged Eligible Asset does not meet the Borrower's underwriting guidelines.
C. The Borrower covenants with the Lender that, during the term of
this facility:
1. Tangible Net Worth. ACT, on a consolidated basis, shall maintain
Tangible Net Worth and a schedule showing Tangible Net Worth (and shall deliver
prior to the first Advance under this Agreement, a schedule showing Tangible
Net Worth) in an amount not less than the sum of (i) $100 million, plus (ii)
seventy-five percent (75%) of the net cash proceeds of any equity subsequently
raised by Borrower in any public or private offering, as of the last day of any
calendar quarter.
2. REIT Status. ACT shall conduct its business so as to qualify as a
real estate investment trust ("REIT") as defined in Section 856 of the Code,
shall elect to be taxed as a REIT for its taxable year ending December 31,
1998. The Borrower does not know of any currently existing event or condition
which would cause or is reasonably likely to cause the Company to fail to
qualify as a REIT. If Borrower does, however, at any point decide to forego
qualification as a REIT under the Code, the Lender shall have no further
obligation to fund
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additional Advances, provided, however, that all Advances outstanding shall not
be accelerated solely for failure of this covenant.
3. Underwriter. Subject to the provisions of Section I(5), PSI shall
have the right to be engaged in the Manager Role during the term of this
Agreement as provided in the Securitization Agreement.
4. Licenses. With respect to each state in which the Borrower is not
licensed or otherwise qualified to do business, upon (i) meeting the
requirements which make it subject to such licensing or qualification in any
such state or (ii) the advice of counsel that the Borrower become licensed or
qualified, the Borrower shall either (x) become licensed or otherwise become
qualified to do business in each such state or (y) cease doing business in such
state relating to Pledged Eligible Assets subject to this Agreement except in
either instance described in (x) or (y) the failure to take such action would
not (either individually or in the aggregate) have a Material Adverse Effect.
5. Coverage Ratio. ACT, on a consolidated basis, shall not permit the
Coverage Ratio at the end of any calendar quarter to be less than 1.4 to 1.
6. Leverage Ratio. The Total Indebtedness of Borrower shall not
exceed, at the end of any calendar quarter, 400% of shareholders' equity, as
determined in accordance with GAAP.
7. Delivery of Documents. If requested by lender the Borrower will
deliver to Lender copies of each of the documents to be delivered to the
custodian under the Custodial Agreement and the Lender shall be entitled to
rely on each of the representations and warranties in favor of the Custodian
contained therein.
8. Standard Loan Documents. The Borrower will use, or cause to be
used, standard loan documents for each Pledged Eligible Asset, in form and
substance satisfactory to the Lender, modified, as necessary in the reasonable
opinion of Borrower and consistent with institutional lending documentation to
conform to terms of the transaction involved, provided that such loan documents
contain customary provisions in institutional loan documents protective of
Lender's interests under such loan documents and which are adequate for the
realization against the collateral securing the Mortgage Loan, subject to any
limitations imposed by (a) bankruptcy, reorganization, fraudulent conveyance,
moratorium, redemption or other similar laws affecting the enforcement of
creditor's rights generally and (b) general equity principles (regardless of
whether such enforcement is considered in a proceeding in equity or in law).
Section IV. Mandatory Partial Prepayment of Loan.
A. Upon discovery by the Borrower or the Lender of any breach of any
of the representations, warranties or covenants set forth in this Agreement,
the party discovering such breach shall promptly give notice of such discovery
to the other. The Lender has the right to require, in its unreviewable
discretion, the Borrower to repay the Loan in part with respect to
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any Pledged Eligible Asset (i) as to which there has been a material breach of
one or more of the representations, warranties or covenants listed in Section
III(B) preceding (notwithstanding any qualification therein as to the
Borrower's knowledge) or (ii) which is not a Construction Loan, Rehabilitation
Loan, a Mezzanine Loan or Other Real Estate Asset and is determined by the
Lender to be unacceptable for inclusion in any Securitization.
B. If any Pledged Eligible Asset, as indicated on any Supplemental
Commercial Loan/Asset Schedule delivered pursuant to Section VII(A) hereof or
otherwise, becomes 31 or more days delinquent, Lender may require the Borrower
to prepay the Loan in part with respect to such Pledged Eligible Asset, or,
with the Lender's consent, deliver a qualifying substitute Eligible Asset in
its place. Any such Pledged Eligible Asset which becomes 31 or more days
delinquent will be subject to an immediate re-determination of its Market
Value. At the request of the Borrower, upon delivery of a qualifying substitute
Eligible Asset or payment in full of all Advances related to such delinquent
Pledged Eligible Asset, the Lender agrees to cause to be released from the lien
hereof the Pledged Eligible Asset and the documents described as Mortgage
Documents in the Custodial Agreement.
C. If, on any date other than a Funding Date, the Lender determines
that a Collateral Deficiency Situation exists, the Lender shall so notify the
Borrower, and the Borrower, within ten Business Days (five (5) Business Days to
the extent the Collateral Deficiency Situation relates to a Pledged Eligible
Asset which was not subject to Lender's separate approval rights as provided in
Section I(2)(b)), shall either (i) pay to the Lender the Restoration Amount or
(ii) deliver to the Custodian on behalf of the Lender additional Eligible
Assets having an aggregate Market Value at least equal to the Restoration
Amount. In the event that the Lender determines that a Collateral Deficiency
Situation exists due to a reduction in the Market Value of one or more of the
Pledged Eligible Assets, Lender will make a good faith effort to review and
discuss with the Borrower the circumstances causing a Collateral Deficiency
Situation to exist (but only if such circumstances are related to issues other
than changes in interest rates, mortgage whole loan trading yield spreads, or
securitization issuance/trading yield spreads) and to attempt to resolve any
difference of opinion in such Market Value with Borrower within the period
specified above.
D. Additional Advances for Excess Collateral.
In the event that Borrower has a good faith belief that the Eligible
Asset Value of a Pledged Eligible Asset has increased as a result of an
increase in its DSCR or other means supportable by Borrower and agreed to by
Lender in its sole discretion, so long as no Default or Event of Default has
occurred and is continuing:
1. Borrower may prepare a Request for Additional Advance in a form
satisfactory to Lender ("Request for Additional Advance"), specifying (i) the
Pledged Eligible Asset(s) and Advance Amount for which an Advance is sought and
the requested Funding Date, (ii) the Borrower's determination of the new
Eligible Asset Value and DSCR with respect to such Pledged Eligible Asset, and
(iii) an Underwriting Transmittal supporting the increase in Eligible Asset
Value and DSCR.
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2. Borrower may transmit the Request for Additional Advance by
facsimile transmission to Lender. Upon review of the Request for Additional
Advance and confirmation that, after giving effect to the requested Additional
Advance, Lender determines that a Collateral Deficiency situation will not
exist the Lender may, in its sole discretion, decide to approve the Additional
Advance and countersign the Request for Additional Advance and may advance
funds in the amount set forth in such Request for Additional Advance. In the
event that the Lender's assessment of the Market Value of the Pledged Eligible
assets would alter the information set forth in any Request for Additional
Advance, the Lender shall promptly notify the Borrower in writing of such
assessment.
3. The Lender shall not be obligated to countersign a Request for
Additional Advance.
E. Hedging. Lender will advise PSI to recommend and provide quotes for
Interest Rate Protection Agreements in connection with Pledged Eligible Assets
and Eligible Assets in process. Any Interest Rate Protection Agreements shall
be priced "at market" and subject to a "check away" mechanism. In determining
whether a Collateral Deficiency Situation exists, Lender will offset any
increase in fair market value of any Interest Rate Protection Agreements in
which Lender has been granted a first-lien security interest against any
decrease in Market Value relating to the Pledged Eligible Assets, and Lender
shall offset any increase in Market Value of the Pledged Eligible Assets
against any Hedge Loss related to Interest Rate Protection Agreements in which
Lender has been granted a first-lien security interest.
Section V. Release of Loan Files Following Payment of Loan. The Lender
agrees to cause to be released from the lien hereof the Pledged Eligible Assets
and the documents described as Mortgage Documents in the Custodial Agreement at
the request of the Borrower upon payment in full of the Loan, or, if a partial
payment of the Loan occurs, the Pledged Eligible Assets and the related
documents held by the Custodian relating to the Advances being repaid
associated with such Pledged Eligible Assets; provided, that, with respect to
payments in full of any Pledged Eligible Asset, the Borrower agrees to (i)
provide the Lender with a copy of a report from the Borrower, as servicer, or a
subservicer of Borrower, or a certification indicating that such Pledged
Eligible Asset has been paid in full and (ii) pay to the Lender in full all
outstanding Advances with respect to such Pledged Eligible Asset (subject to
the Borrower's rights under Section I(4)(b)). The Lender agrees to release such
lien within one Business Day after receipt of both (i) and (ii) from the
immediately preceding sentence.
Section VI. Servicing. The Borrower shall service or cause the Pledged
Eligible Assets to be serviced (i) in accordance with the provisions of the
Management Agreement executed in connection with the servicing of the Eligible
Assets and (ii) with the degree of skill and care consistent with that which
the Borrower customarily exercises with respect to similar Eligible Assets
owned, managed, or serviced by it and all applicable industry standards. The
Borrower shall (i) comply with all applicable Federal and State laws and
regulations, (ii) maintain all State and Federal licenses, except where the
failure to take such action would not (either individually or in the aggregate)
have a Material Adverse Effect, necessary for it to perform its servicing
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responsibilities hereunder and (iii) not impair the rights of the Lender in any
Pledged Eligible Assets or any payment thereunder.
Section VII. No Oral Modifications; Successors and Assigns; Assignment
of Collateral. No provisions of this Agreement shall be waived or modified
except by a writing duly signed by the authorized agents of the Lender and the
Borrower. This Agreement shall be binding upon the successors and assigns of
the parties hereto. Borrower acknowledges and agrees that Lender may re-pledge,
enter into repurchase transactions, and otherwise re-hypothecate (including the
granting of participation interests therein, provided that any such
participation and re-hypothecation does not materially increase any obligation
of Borrower hereunder) the Collateral for the Loan; provided, that no such act
shall in any way affect the Borrower's rights to the Collateral.
Section VIII. Reports.
A. The Borrower shall provide the Lender with a report (a
"Supplemental Commercial Loan/Asset Schedule") (i) on the date any additional
or substitute Eligible Assets are delivered pursuant to Section IV(B) or
Section IV(D) hereof and at least (a) two Business Days before each Funding
Date for any Eligible Asset other than a Wet-Ink Eligible Asset and (b) the
15th day of the month, and (ii) within two Business Days following any request
by the Lender or any affiliate thereof for such a schedule. Such Supplemental
Commercial Loan/Asset Schedule will contain information concerning (a) the
Pledged Eligible Assets then held in this warehouse facility, (b) any Eligible
Assets proposed to be delivered to the facility on the next Funding Date or in
connection with the cure of a Collateral Deficiency Situation pursuant to
Section IV(B) or Section IV(D) hereof and (c) the portfolio performance data
with respect to all Pledged Eligible Assets, including, without limitation, any
outstanding delinquencies, prepayments in whole or in part and any repurchases
by the Borrower, and shall be in a format as may be agreed upon by the Borrower
and the Lender from time to time. The Borrower shall also provide to the Lender
every two weeks a pipeline report, indicating the status of pending
transactions, including transactions for which a term sheet or other proposal
has been submitted, the status of all deals in which commitments have been
granted, the expected closing/funding date, and which loans included on such
list the Borrower anticipates will become Pledged Eligible Assets, in a form
satisfactory to Lender. Each such report in this paragraph shall be transmitted
by the Borrower to the Lender via facsimile, except for each monthly report
which shall be transmitted by the Borrower to the Lender either via modem or on
a computer disk or tape.
B. The Borrower shall furnish to Lender (x) promptly, copies of any
material and adverse notices (including, without limitation, notices of
defaults, breaches, potential defaults or potential breaches) given to or
received from the Borrower's or any Affiliate's other lenders, (y) immediately,
notice of the occurrence of any "Event of Default" hereunder or of any
situation which the Borrower, with the passage of time, reasonably expects to
develop into an "Event of Default" hereunder and (z) the following:
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(i) consolidated audited financial statements of ACT within 120 days
of the end of each calendar year, together with a calculation showing Tangible
Net Worth;
(ii) unaudited financial statements of AMREIT II within 120 days of
such Borrower's fiscal year end, certified by such Borrower's Chief Financial
Officer or Controller, or the Chief Financial Officer, Treasurer of Controller
of AMREIT Managers, L.P. (the "Manager");
(iii) within 60 days after the end of each calendar quarter
consolidated unaudited financial statements of ACT, and unaudited financial
statements for AMREIT II, respectively, for each of such Borrower's first three
quarters of each fiscal year together with a calculation showing Tangible Net
Worth;
(iv) quarterly and annual consolidated and consolidating financial
statements of ACT within five Business Days of their release; and
(v) copies of all 10-Ks, registration statements and other "corporate
finance" SEC filings (other than 8-Ks) by the Borrower and its Affiliates,
within fifteen Business Days of their filing with the SEC; provided, that, ACT
will provide Lender with a copy of ACT's annual 10-K filed with the SEC no
later than 120 days after the end of the year.
All required financial statements, information and reports shall be
prepared in accordance with GAAP, or, if applicable to SEC filings, SEC
accounting regulations; provided, that interim financial statements do not need
to include footnotes.
C. In conjunction with the delivery of each of the financial
statements to be delivered by the Borrower pursuant to Sections VIII(B)(I)
through (v), the Borrower shall deliver to the Lender an officer's certificate
of the Borrower certifying that, as of the date of delivery of such financial
statements, the Borrower is in compliance with all the terms of this Agreement
including, without limitation, each of the covenants set forth in Section
III(C).
D. Lender covenants and agrees to preserve the confidentiality of any
financial data concerning Borrower, any Affiliate of Borrower, or any
Borrower's businesses or operations or any information with respect to which
Borrower or any Affiliate has (a) an obligation of confidentiality to a third
party (to the extent such obligation has been disclosed to Lender) or (b)
informed Lender of the confidential nature of the specific information, except
to the extent Lender is required to disclose such information pursuant to any
applicable law, rule, regulation or order of any governmental authority;
provided that (i) any information contained in any annual report, or any Form
10-K, Form 10-Q or Form 8-K reports (if any) which have been delivered to the
SEC, or any annual or quarterly reports to the stockholders of Borrower subject
to the reporting requirements of the Securities Exchange Act of 1934, as
amended, proxy material delivered to the stockholders of any Borrower or any
report delivered to the SEC, or any other information that is in the public
domain or has become publicly known, shall not in any event be deemed
confidential, and (ii) Lender may make any information received by it available
(A) to a transferee of or participant in any interest in the Secured Note,
provided that such transferee or participant agrees in writing to be bound by
the provisions of this Section
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VIII(D), (B) to any accountants or other professionals engaged by Lender,
provided that each such accountant or professional agrees to be bound by the
provisions of this Section VII(D), or (c) in connection with the enforcement of
this Agreement or any litigation in connection therewith. Further, Lender
agrees that, during the term of this Agreement it will not intentionally use
the information provided by Borrower and not otherwise generally known or
obtainable through sources other than Borrower to take any action to
personally, by telephone or mail, solicit any underlying borrower for any
purpose which is in conflict with the services and products which Borrower is
providing or can provide with Borrower's current products and services to such
underlying borrower, including to refinance loans made by Borrower to such
underlying borrower, without the prior written consent of Borrower.
Section IX. Events of Default. Each of the following shall constitute
an "Event of Default" hereunder:
A. Failure of the Borrower to (i) make any payment of interest or
principal which has become due, whether by acceleration or otherwise, under the
terms of the Secured Note, this Agreement, any other warehouse and security
agreement or any other document evidencing or securing indebtedness of the
Borrower to the Lender or to any affiliate of the Lender or any other lender,
unless in each instance the indebtedness was specifically non-recourse by its
terms and Borrower and the lender under such indebtedness are not in litigation
as a result of such loan default, (ii) pay or deliver any Restoration Amount
within the time period specified in Section (IV)(c), or (iii) make a payment of
any other amount payable under the terms of this Agreement or the Secured Note
and such default shall have remained unremedied for five Business Days after
notice thereof by Lender.
B. A final judgment or judgments for the payment of money in excess of
$5,000,000 in the aggregate shall be rendered against the Borrower or any of
its Qualified or Non-Qualified REIT Subsidiaries 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), bonded
or paid, or a stay of execution thereof shall not be procured, within 60 days
from the date of entry thereof, and the Borrower or any such Qualified REIT
Subsidiary and NonQualified REIT Subsidiary 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.
C. Assignment or attempted assignment by the Borrower of this
Agreement or any rights hereunder, without first obtaining the specific written
consent of Lender, or the granting by the Borrower of any security interest,
lien or other encumbrance on any Pledged Eligible Assets to any person other
than the Lender.
D. The filing by the Borrower of a petition for liquidation,
reorganization, arrangement or adjudication as a bankrupt or similar relief
under the bankruptcy, insolvency or similar laws of the United States or any
state or territory thereof or of any foreign jurisdiction; the failure of the
Borrower to secure dismissal of any such petition filed against it within 60
days of such filing; the making of any general assignment by the Borrower for
the benefit of
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creditors; the appointment of a receiver or trustee for the Borrower, or for
any part of the Borrower's; the institution by the Borrower of any other type
of insolvency proceeding (under the Bankruptcy Code or otherwise) or of any
formal or informal proceeding, for the dissolution or liquidation of,
settlement of claims against, or winding up of the affairs of, the Borrower;
the institution of any such proceeding against the Borrower if the Borrower
shall fail to secure dismissal thereof within 60 days thereafter; the consent
by the Borrower to any type of insolvency proceeding against the Borrower
(under the Bankruptcy Code or otherwise); the occurrence of any event or
existence of any condition which could be the ground, basis or cause for any
proceeding or petition described in this Section IX.
E. Any material adverse change in the financial condition of the
Borrower or the existence of any other condition which, in the Lender's sole
determination reasonably exercised, constitutes an impairment of the Borrower's
ability to perform its obligations under this Agreement or the Secured Note and
which condition is not remedied within ten (10) days after written notice to
the Borrower thereof or, if the conditions cannot be fully remedied within said
ten (10) days, substantial progress has not been made within said ten (10) days
toward remedy of the condition. For purposes of this Section IX(E), a breach of
any financial covenant set forth in Sections III(C)(1), (5) and (6) shall be
deemed to be a material adverse change in the financial condition of the
Borrower constituting an impairment of the Borrower's ability to perform its
obligations under this Agreement.
F. Failure by the Borrower to service the Pledged Eligible Assets in
substantial compliance with the servicing requirements set forth in Section VI
hereof and such failure continues unremedied for a period of thirty days after
notice thereof from Lender.
G. Except as set forth in Section IX(E), above, a material breach by
the Borrower of any representation, warranty or covenant set forth herein or in
any Funding Notice, in the form of Exhibit D attached hereto, delivered by the
Borrower to the Lender, and such breach relating to any other covenant herein
remains unremedied for a period of 30 days after notice thereof from Lender or,
if such breach is not reasonably susceptible to cure with such 30-day period,
such longer period as may be reasonably required (but in no event in excess of
120 days in the aggregate) to cure such breach as long as Borrower has
commenced such cure within the 30-day period and diligently prosecutes same to
the satisfaction of Lender, or a use by the Borrower of the proceeds of the
Loan for a purpose other than as set forth in Section I(1) hereof.
H. Except with respect to non-recourse obligations of Borrower as
provided in Section IX(A), any "event of default" under any agreement between
the Borrower and the Lender or any affiliate of the Lender, after the
expiration of any applicable grace or cure periods set forth in such agreement,
including, without limitation, defaults under the Securitization Agreement or
the Custodial Agreement.
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Section X. Remedies Upon Default.
A. Upon the happening of one or more Events of Default, the Lender may
(x) refuse to make further Advances hereunder and (y) immediately declare the
principal of the Secured Note then outstanding to be immediately due and
payable, together with all interest thereon and fees and expenses accruing
under this Agreement; provided, that upon the occurrence of the Event of
Default referred to in Section IX(D), such amounts shall immediately and
automatically become due and payable without any further action by any person
or entity. Upon such declaration or such automatic acceleration, the balance
then outstanding on the Secured Note shall become immediately due and payable
without presentation, demand or further notice of any kind to the Borrower.
B. Upon the happening of one or more Events of Default, the Lender
shall have the right to obtain physical possession, and to commence an action
to obtain physical possession, of all files of the Borrower relating to the
Collateral and all documents relating to the Collateral which are then or may
thereafter come in to the possession of the Borrower or any third party acting
for the Borrower. The Lender shall be entitled to specific performance of all
agreements of the Borrower contained in this Agreement. The Borrower and the
Lender hereby acknowledge that the Lender's right to obtain physical possession
of the Collateral is deemed for all purposes to be equivalent to the rights of
"seizure of property or maintenance or continuation of perfection of an
interest in property" as specified under Bankruptcy Code Sections 362(b) and
546(b)(2).
C. Upon the happening of one or more Events of Default, the Lender
shall have the right to direct all servicers and/or subservicers then servicing
any Pledged Eligible Assets to remit all collections on the Pledged Eligible
Assets to the Lender, and if any such payments are received by the Borrower,
the Borrower shall not commingle the amounts received with other funds of the
Borrower and shall promptly pay them over to the Lender. In addition, the
Lender shall have the right to dispose of the Collateral as provided herein, or
as provided in the other documents executed in connection herewith, or in any
commercially reasonable manner, or as provided by law. Such disposition may be
on either a servicing-released or a servicing-retained basis. The Lender shall
be entitled to place the Pledged Eligible Assets which it recovers after any
default in a pool for issuance of asset-backed securities at the
then-prevailing price for such securities and to sell such securities for such
prevailing price in the open market as a commercially reasonable disposition of
Collateral, subject to the applicable requirements of the New York UCC. The
Lender shall also be entitled to sell any or all of such Eligible Assets
individually for the prevailing price as a commercially reasonable disposition
of Collateral subject to the applicable requirements of the New York UCC. The
specification in this Section of manners of disposition of collateral as being
commercially reasonable shall not preclude the use of other commercially
reasonable methods (as contemplated by the New York UCC) at the option of the
Lender.
D. Following the occurrence and during the continuance of an Event of
Default, interest shall accrue on the Loan at a default interest rate of LIBOR
plus 5.00%.
Section XI. Indemnification. (a) The Borrower agrees to hold the
Lender harmless from and indemnifies the Lender against all liabilities,
losses, damages, judgments, costs and expenses
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of any kind which may be imposed on, incurred by, or asserted against the
Lender relating to or arising out of this Agreement, the Secured Note, the
Custodial Agreement or any transaction contemplated hereby or thereby resulting
from anything other than the Lender's gross negligence or willful misconduct
(b) The Borrower shall reimburse the Lender for any of the Lender's
reasonable out-of-pocket costs and expenses incurred in connection with the
negotiation, execution and enforcement of this Agreement, the Secured Note and
the Custodial Agreement, the Securitization Agreement and the transactions
contemplated hereby and thereby including, without limitation, due diligence
review costs, reasonable attorney's fees and, subject to Section XII below, any
other costs and expenses incurred by the Lender in determining the
acceptability to the Lender of (i) any Eligible Assets.
(c) The Borrower shall indemnify and hold Lender harmless against all
liabilities, losses, damages, judgments, costs and expenses of any kind which
may be imposed on, or asserted against the Lender and relating to arising out
of any Hedge Loss or other loss relating to any hedging instrument, except for
losses caused by the Lender's negligence or willful misconduct. The Borrower's
obligations under this Section XI(c) shall be secured by the Collateral.
(d) The Borrower's agreements in this Section shall survive the
payment in full of the Secured Note and the expiration or termination of this
Agreement. The Borrower hereby acknowledges that, notwithstanding the fact that
the Secured Note is secured by the Collateral, the obligations of the Borrower
under the Secured Note are recourse obligations of the Borrower.
Section XII. Periodic Due Diligence Review. Lender has the right to
perform continuing due diligence reviews with respect to the Pledged Eligible
Asset and for purposes of verifying compliance with the representations,
warranties and specifications made hereunder, or otherwise, and each of the
Borrowers agree that upon reasonable (but no less than one (1) Business Day's)
prior notice to the Borrower, the Lender or its authorized representatives will
be permitted during normal business hours to examine, inspect, and make copies
and extracts of, the Commercial Loan Asset Files and any and all documents,
records, agreements, instrument or information relating to such Pledged
Eligible Asset in the possession or under the control of any Borrower and/or
the Custodian. The Lender shall use reasonable efforts to perform each such due
diligence review within three Business Days. The Borrower shall also make
available to the Lender a knowledgeable financial or accounting officer for the
purpose of answering questions respecting the Commercial Loan Asset Files and
the Pledged Eligible Assets. Without limiting the generality of the foregoing,
the Borrowers acknowledge that the Lender may make Advances to the Borrower
based solely upon the information provided by the Borrower to the Lender in the
Underwriting Transmittal and/or the Commercial Loan/Asset Schedule 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 Pledged Eligible Assets
securing such Loan, including without limitation conducting a property site
inspection and otherwise regenerating the information used
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25
to originate such Mortgage Loan. The Borrower agrees to cooperate with the
Lender in connection with such underwriting, including, but not limited to,
providing the Lender with access to any and all documents, records, agreements,
instruments or information relating to such Pledged Eligible Assets in the
possession, or under the control, of the Borrower. Subject to any applicable
Due Diligence Cap, the Borrower further agrees that the Borrower 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 XII ("Due Diligence Costs"); and (ii) in the event that a Default or an
Event of Default shall have occurred, the Borrower shall reimburse the Lender
for all Due Diligence Costs and no such Due Diligence Cap (as herein defined)
shall apply. For Pledged Eligible Assets over $15,000,000, all Construction
Loans and all loans with a Debt Service Coverage Ratio below 1.0 to 1.0, the
due diligence cap shall be the actual cost, not to exceed $1,500 per real
property asset securing such Pledged Eligible Asset. For all other Pledged
Eligible Assets, the annual due diligence cap shall be the actual cost, not to
exceed $5,000 in the aggregate. The limitations on due diligence set forth in
this paragraph is referred to as the "Due Diligence Cap." Moreover, Borrower
shall provide any additional information in connection with each Pledged
Eligible Asset that Lender reasonably requests.
Section XIII. Power of Attorney. The Borrower hereby authorizes the
Lender, at the Borrower's expense, to file such financing statement or
statements relating to the Collateral without the Borrower's signature thereon
as the Lender at its option may deem appropriate, and appoints the Lender as
the Borrower's agent and attorney-in-fact to execute any such financing
statement or statements in the Borrower's name and to perform all other acts
which the Lender deems appropriate to perfect and continue the security
interest granted hereby and to protect, preserve and realize upon the
Collateral, including, but not limited to, the right to endorse notes, complete
blanks in documents, transfer servicing, and sign assignments on behalf of the
Borrower as its agent and attorney-in-fact. This power of attorney is coupled
with an interest and is irrevocable without the Lender's consent.
Notwithstanding the foregoing, the power of attorney hereby granted may be
exercised only during the occurrence and continuance of an Event of Default
hereunder.
Section XIV. Choice of Law; Agreement Constitutes Security Agreement.
This Agreement shall be governed by the laws of the State of New York (without
regard to choice of law principles thereof), and shall constitute a security
agreement within the meaning of the New York UCC. THE PARTIES HERETO AGREE THAT
ANY ACTION OR PROCEEDING BROUGHT TO ENFORCE OR ARISING OUT OF THIS AGREEMENT OR
THE SECURED NOTE SHALL BE COMMENCED IN THE SUPREME COURT OF THE STATE OF NEW
YORK, OR IN THE DISTRICT COURT OF THE UNITED STATES FOR THE SOUTHERN DISTRICT
OF NEW YORK.
Section XV. Lender May Act Through Affiliates. The Lender may, from
time to time, designate one or more affiliates for the purpose of performing
any action hereunder.
Section XVI. Notices. All demands, notices and communications relating
to this Agreement shall be in writing and shall be deemed to have been duly
given if mailed, by
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26
registered or certified mail, return receipt requested, or by overnight
courier, or, if by other means, when received by the other party or parties at
the address shown below, or such other address as may hereafter be furnished to
the other party or parties by like notice. Any such demand, notice or
communication hereunder shall be deemed to have been received on the date
delivered to or received at the premises of the addressee (as evidenced, in the
case of registered or certified mail, by the date noted on the return receipt).
If to the Borrower:
AMRESCO CAPITAL TRUST
700 North Pearl Street
Suite 2400
Dallas, Texas 75201
Attention: Michael L. McCoy, General Counsel
Phone Number: 214-953-7733
Fax Number: 214-953-7757
If to the Lender and/or Prudential Securities Credit Corporation:
Prudential Securities Incorporated
Investment Banking
One New York, 18th Floor
New York, New York 10292
Attention: Peter Riemenschneider
Phone Number: 212-778-4282
Fax Number: 212-778-5099
With copies to:
Prudential Securities Incorporated
One Seaport Plaza, 30th Floor
New York, New York 10292-2018
Attention: Frederick Robustelli, Esq.
Phone Number: 212 214-6813
Fax Number: 212-214-7938
and
Prudential Securities Incorporated
One Seaport Plaza, 27th Floor
New York, New York 10292
Attention: Elizabeth Castagna
Phone Number: 212-214-7775
Fax Number: 212-214-7572
and
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Prudential Securities Incorporated
One New York Plaza, 15th Floor
New York, New York 10292-2015
Attention: Jeff Theodorou
Phone Number: 212-778-7444
Fax Number: 212-778-3293
and
Peter T. Healy, Esq.
O'Melveny & Myers LLP
275 Battery Street, 26th Floor
San Francisco, California 94111
Phone Number: 415-984-8700
Fax Number: 415-984-8701
Section XVII. Severability. Any provision of this Agreement which is
prohibited, unenforceable or not authorized in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition,
unenforceability or non-authorization, without invalidating the remaining
provisions hereof or affecting the validity, enforceability or legality of such
provision in any other jurisdiction.
Section XVIII. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original, and all
such counterparts shall together constitute one and the same instrument.
Section XIX. Additional Borrowers. Lender acknowledges that from time
to time ACT may need to form additional Qualified REIT Subsidiaries and/or
Non-Qualified REIT Subsidiaries. Upon delivery of a written notice of formation
of subsidiaries and an explanation of the purpose for such subsidiaries, Lender
agrees to allow such subsidiaries to be added as a Borrower for purposes of
financing Eligible Assets.
Section XX. No Exclusivity. Lender acknowledges that this Agreement
may not be the exclusive source to Borrower for interim financing for Eligible
Assets and that Borrower may have other interim warehouse facilities. Lender's
rights with respect to any Securitization extends only to Pledged Eligible
Assets financed pursuant to this Agreement.
Section XXI. Joint and Several Liability. Any liability of a Borrower
under this Agreement or any certificate or other agreement delivered in
connection herewith shall be the joint and several liability of ACT, AMREIT I,
and AMREIT II and any other Subsidiary that is or becomes a Borrower.
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28
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
AMRESCO CAPITAL TRUST
By: /s/ THOMAS J. ANDRUS
----------------------------
Name: Thomas J. Andrus
--------------------------
Title: Executive Vice President
-----------------------------
and Chief Financial Officer
-----------------------------
AMREIT I, INC.
By: /s/ THOMAS J. ANDRUS
----------------------------
Name: Thomas J. Andrus
--------------------------
Title: Executive Vice President
----------------------------
and Chief Financial Officer
----------------------------
AMREIT II, INC.
By: /s/ THOMAS J. ANDRUS
----------------------------
Name: Thomas J. Andrus
--------------------------
Title: Executive Vice President
----------------------------
and Chief Financial Officer
----------------------------
PRUDENTIAL SECURITIES CREDIT
CORPORATION
By: /s/ JEFF K. FRENCH
----------------------------
Name: Jeff K. French
--------------------------
Title: Vice President
-------------------------
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29
Appendix I
Certain Definitions. The following capitalized terms are either
defined below or in the corresponding sections specified below:
"ACT" means AMRESCO Capital Trust.
"Advance" - Section I(1).
"Advanced Amount" - Section I(3)(b).
"Advance Rate" - Sections I(2)(b) and I(3)(c).
"Affiliate" means, when used with reference to a specified person, (i)
any person that directly or indirectly controls or is controlled by or is under
common control with the specified person, (ii) any person that is an officer
of, partner in or trustee of, or serves in a similar capacity with respect to,
the specified person or of which the specified person is an officer, partner or
trustee, or with respect to which the specified person serves in a similar
capacity, and (iii) any person that, directly or indirectly, is the beneficial
owner of 5% or more of any class of equity securities of the specified person
or which the specified person is directly or indirectly the owner of 5% or more
of any class of equity securities; provided, however, that ACT will not be
treated as an Affiliate of the Manager and its Affiliates and provided further
that with respect to Borrower, Affiliate shall not include any Non-Qualified
REIT Subsidiary, joint venture, partnership limited liability company, UPREIT,
DOWNREIT or structure unless such entity becomes Borrower hereunder.
"Agreement" - Introductory Clause.
"AMREIT I" means the wholly-owned Qualified REIT Subsidiary of ACT.
"AMREIT II" means the Non-Qualified REIT Subsidiary of ACT.
"AMREIT Managers, L.P." means the Manager of ACT.
"Applicable Interest Rate Spread" - Section I(3)(b).
"Borrower" means individually and collectively, ACT, AMREIT I and
AMREIT II.
"BPS" - Section I(3)(b).
"Bridge Loan" means a Mortgage Loan used for temporary financing.
"Budgeted Costs" - Section I(2)(a)
Appendix I-1
30
"Business Day" means any day other than (i) a Saturday or Sunday, or
(ii) a day on which banking institutions in the State of New York or State of
Texas or State of Georgia are authorized or obligated by law or executive order
to be closed.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collateral" - Section II.
"Collateral Deficiency Situation" shall be deemed to be existing as of
any day on which (a) the outstanding principal amount of the Loan as of such
day exceeds, by more than $250,000, (b) the sum of the applicable Advance Rate
for each Pledged Eligible Asset times the lesser of (i) the outstanding
principal balance of each such Pledged Eligible Asset and (ii) the Market Value
of each such Pledged Eligible Asset.
"Commercial Loan/Asset Files" - Section II.
"Commercial Loan/Asset Schedule" - Section I(2)(a)(I).
"Construction Loan" means a Mortgage Loan the proceeds of which are to
be used to finance the costs of the initial construction of real property.
"Coverage Ratio" means, with respect to Borrower, on a consolidated
basis, a ratio of Borrower's earnings before interest, taxes, depreciation and
amortization, to scheduled interest on Total Indebtedness.
"Custodial Agreement" - Section II.
"Custodian" - Section II.
"Custodian's Certification" - Section I(2)(iv).
"Debt Service Coverage Ratio" or "DSCR" means, with respect to any
Mortgage Loan, the number reflected on the Commercial Loan/Asset Schedule as
being the ratio of (i) any interest reserve funded or to be funded by Borrower
(up to a maximum of one year) in connection with a Mortgage Loan, plus net
operating income of the Mortgaged Property securing the Mortgage Loan, as
determined by Borrower in accordance with its underwriting guidelines, to (ii)
debt service at the current pay rate on the Mortgage Loan; provided, however,
that at the expiration of the period provided for in Borrower's Underwriting
Transmittal for the Mortgaged Property to achieve a stabilized occupancy, the
DSCR, to the extent necessary to calculate the Eligible Asset Value or for any
other purpose hereunder, will be based upon the actual net income of the
Mortgaged Property.
"Due Diligence Cap" - Section XII.
"Due Diligence Costs" - Section XII.
Appendix I-2
31
"Eligible Asset Value" means, with respect to any Eligible Asset, the
product of LTV for such Eligible Asset multiplied by the value of collateral
related to such Eligible Asset as determined by Borrower.
"Eligible Assets" - Section I(1).
"Event of Default" - Section IX.
"Eurodollar Business Day" - Section I(3)(a)
"Extended Maturity Date" means, one or more dates to which the
Maturity Date is extended as specified in a Credit Increase Confirmation and
Note Amendment.
"First Securitization" - Recitals.
"Funding Date" - Section I(2).
"Funding Notice" - Section I(2)(a)(I).
"GAAP" means, generally accepted accounting principles consistently
applied as in effect at the time of the application of the provisions of this
Agreement.
"Hedge Loss" shall mean, with respect to any Interest Rate Protection
Agreement entered into by the Borrower with the Lender or any Affiliate thereof
(in either case, the "Hedging Counterparty") the amount, if any, owed
thereunder by Borrower to the Hedging Counterparty as of any date of
determination, in the aggregate, minus the sum of (a) all Hedge Losses
previously paid by the Borrower to the Hedging Counterparty in connection with
such Interest Rate Protection Agreement, if any, and (b) any amount the
Borrower has received from the Hedging Counterparty with respect to such
Interest Rate Protection Agreements.
"Initial Advance" means the first Advance relating to a Pledged
Eligible Asset, such as a Construction Loan or Rehabilitation Loan, for which
more than one Advance may be made.
"Interest in Real Property" mean, among other things, an interest in
Mortgage Loans or land and improvements thereon, such as buildings or other
inherently permanent structures (including items that are structural components
of such buildings or structures), a leasehold of real property, and an option
to acquire real property (or a leasehold of real property). An "interest in
real property" also generally includes an interest in Mortgage Loans secured by
controlling equity interests in entities treated as partnerships for federal
income tax purposes that own real property, to the extent that the principal
balance of the mortgage does not exceed the fair market value of the real
property that is allocable to the equity interest.
"Interest Rate" - Section I(3)(a).
Appendix I-3
32
"Interest Rate Protection Agreement" shall mean, with respect to any
or all of the Mortgage Loans, any short sale of US Treasury Security, or
futures or forward contract, or mortgage related security, or Eurodollar
futures contract, or options related contract, or 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 the Borrower
and the Lender, PSI, an Affiliate of Lender or PSI, or a third party reasonably
acceptable to the Lender.
"Investment Grade" means securities rated AAA through BBB - (or
equivalent rating) by any of Standard & Poor's Rating Services, a division of
the McGraw-Hill Companies, Duff & Phelps Credit Rating Co. or Fitch IBCA, Inc.
"Lender" means Prudential Securities Credit Corporation
"LIBOR" - Section I(3)(a).
"Loan" - Section I(1).
"LTV" means the number specified in the Commercial Loan/Asset Schedule
as the percentage determined by dividing the maximum committed loan or
investment amount by the value of the collateral related to such loan or
investment as determined by Borrower.
"Management Agreement" means the Management Agreement dated as of May
12, 1998 by and between ACT and the Manager.
"Manager" means AMREIT Managers, L.P.
"Manager Role" - Recitals.
"Market Value" means, as of any date in respect of an Eligible Asset
or Pledged Eligible Asset, the price at which such Eligible Asset or Pledged
Eligible Asset (together with any Interest Rate Protection associated with such
asset) could be sold in an orderly manner, as determined in good faith by the
Lender in its sole and reasonable discretion.
"Maturity Date" means the earlier to occur of (a) July 1, 2000 and (b)
60 days following the termination of the Securitization Agreement by Borrower;
provided, that, in the Lender's sole discretion and upon the Borrower's written
request, the Lender may extend the term of this Agreement. Each Maturity Date
may be extended by the Lender, in the Lender's sole and unreviewable
discretion, on any date by the execution and delivery of a Credit Increase
Confirmation and Note Amendment in the form of Exhibit C hereto.
"Material Adverse Effect" shall mean a material adverse change
regarding (a) the Property, business, operations, financial condition or
prospects of the Borrower, (b) the ability of the 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
Appendix I-4
33
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.
"Mezzanine Loan" means a commercial real estate loan the repayment of
which is subordinated to a senior Mortgage Loan and which is secured either by
a second lien mortgage or a pledge of the ownership interests of the borrower
(such loans can also take the form of a joint venture interest in or equity
investment in the borrower).
"Minimum Advance Rate" - Section I(2)(d).
"Mortgage Loan" means a commercial loan secured by real property and a
Mezzanine Loan(s).
"Mortgaged Property" means the real property and improvements securing
a Mortgage Loan.
"Non-Qualified REIT Subsidiary" means any corporation in which ACT
owns 10% or less of the voting shares in such corporation.
"New York UCC" - Section I(4)(a).
"Other Real Estate Asset" means, with respect to any Pledged Eligible
Asset, a real estate asset of the Company which is not a Mortgage Loan,
Mezzanine Loan, Rehabilitation Loan, Construction Loan or Wet-Ink Eligible
Asset.
"Participating Loan" means a Mortgage Loan that entitles the lender to
the receipt of interest at a stated rate, plus a percentage of the pledged real
estate's revenues or cash flow, or a specified percentage or fixed amount of
the net proceeds from any sale of the property, which Participating Loan may be
a Mezzanine Loan, Construction Loan, Rehabilitation Loan, Bridge Loan or other
Mortgage Loan.
"Pledged Eligible Assets" means, as of any date of determination, any
Eligible Assets then held by the Custodian on behalf of the Lender to secure
the Loan.
"PSI" means Prudential Securities Incorporated.
"Qualified REIT Subsidiary" means any corporation if 100 percent of
the stock of such is held by ACT at all times during such corporation's
existence or otherwise satisfies Section 856(I)(2) of the Code.
"Rehabilitation Loan" means a Mortgage Loan, the proceeds of which are
used to finance the acquisition and renovation or rehabilitation of existing
real property.
"REIT" means a real estate investment trust, as defined under Section
856 of the Code.
Appendix I-5
34
"REMIC" means a real estate mortgage investment conduit.
"Request for Additional Advance" - Section IV(B)(1).
"Restoration Amount" means, as of any date of determination, the
amount, if any, by which (i) the outstanding principal amount of the Loan as of
such date (including accrued interest thereon) exceeds (ii) the sum of the
applicable Advance Rate for each Pledged Eligible Asset times the lesser of (1)
the Market Value of each Pledged Eligible Asset), and (2) the outstanding
principal balance of each such Pledged Eligible Asset.
"SEC" means the U.S. Securities and Exchange Commission.
"Secured Note" - Section I(6).
"Secured Obligations" - Section II.
"Securitization" - Recitals.
"Securitization Agreement" means the agreement executed as of even
date herewith between Borrower and PSI regarding the securitization of some of
the Pledged Eligible Assets.
"Supplemental Commercial Loan/Asset Schedule" - Section VIII(A).
"Tangible Net Worth" means, for any calendar quarter, total
shareholder's equity reflected in ACT's financial statements on a consolidated
basis prepared in accordance with GAAP less goodwill, patents, trademarks,
copyrights, franchises and any other items which would be treated as
intangibles under GAAP. A schedule of Tangible Net Worth shall be prepared by
Borrower within 60 days after the end of each calendar quarter and such
schedule shall be delivered to Lender. Lender shall have 10 days to disapprove
of such schedule by citing any specific defects in a written notice to
Borrower. Borrower shall then have 10 days to cure all such defects. If
Borrower cures such defects in Lender's reasonable discretion, such schedule
shall be deemed approved by Lender.
"Total Indebtedness" means, for any period, the aggregate indebtedness
of Borrower during such period computed in accordance with GAAP less (i) the
amount of any non-specific balance sheet reserves maintained in accordance with
GAAP, (ii) obligations under any Interest Rate Protection Agreement, (iii) loan
or investment commitments or loan take-out agreements issued by Borrower in the
ordinary course of its business, (iv) obligations to indemnify parties involved
in Securitization or the underwriting and placement (whether publicly or
privately) of ACT's shares of beneficial interest or other indemnities made in
the ordinary course of business, (v) endorsements for collection or deposit in
the ordinary course of Borrower's business, and (vi) obligations for which
Borrower is not the obligor but which are required to be included on Borrower's
financial statements by GAAP.
"Underwriting Transmittal" - Section I(2)(I).
Appendix I-6
35
"Wet-Ink Eligible Assets" means an Eligible Asset (other than a
Construction Loan or Other Real Estate Asset) which (a) is secured by a first
lien or second lien on, or partnership or limited liability company interests
in, multifamily or commercial real estate; (b) has a DSCR of 1.0 or greater;
(c) has a total committed loan or investment amount less than or equal to
$40,000,000; and (d) is pledged to the Lender simultaneously with the
origination or acquisition thereof by Borrower, which origination or
acquisition is financed in part or in whole with an Advance made directly to
Borrower or an approved settlement agent. A Mortgage Loan shall cease to be a
Wet-Ink Eligible Asset upon the Custodian's receipt and verification by the
Custodian of the related Commercial Loan/Asset File (including all related
mortgage loan documents) and Lender's subsequent approval thereof.
Appendix I-7
36
Appendix II
REPRESENTATIONS AND WARRANTIES REGARDING
ALL PLEDGED ELIGIBLE ASSETS
1. As to each Pledged Eligible Asset, Borrower hereby represents and warrants
to Lender that as of the related Closing Date; provided however, that any such
representation and warranty may be modified as set forth in, or an exception
thereto may be contained in, the executed Underwriting Transmittal in effect
for such Pledged Eligible Asset:
(a) Commercial Loan/Asset Schedule. The information set forth in the
related Commercial Loan/Asset Schedule is true, complete and correct in all
material respects.
(b) Origination. Such Pledged Eligible Asset complied, on the date
such asset was originated ("Closing Date"), in all material respects with all
terms conditions and requirements of the Borrower's underwriting and closing
guidelines as approved by Lender, (the "Guidelines") then in effect, except as
disclosed by Borrower in writing in the list of exceptions included in the
Underwriting Transmittal and approved by Lender.
(c) Disbursement of Proceeds. The closing of such Pledged Eligible
Asset was in compliance, in all material respects, with Borrower's Guidelines
then in effect except as disclosed in writing in the list of exceptions
included in the related Commercial Loan/Asset File or the Underwriting
Transmittal and thereby approved by Lender, and the proceeds, or the applicable
portion thereof, of such Pledged Eligible Asset have been disbursed in
accordance with the related loan documents ("Pledged Asset Documents"). Except
as disclosed in writing in the list of exceptions included in the related
Underwriting Transmittal, any and all requirements imposed by Borrower as to
the status of any on-site or off-site improvements related to the related real
property ("Property") and the disbursement of any escrow funds therefor have
been complied with as of the date of the Underwriting Transmittal. All costs,
fees and expenses incurred in connection with the origination and closing of
such Pledged Eligible Asset, including, without limitation, recording costs and
fees, have been paid to the appropriate Person or arrangements have been made
for their payment to the appropriate Person on a timely basis by the related
mortgagor or borrower, and the related mortgagor is not entitled to any refund
of any amounts paid or due under the related promissory note or contract or the
related mortgage, if any, except for a refund of a cost, fee or expense related
to the origination or closing of such Pledged Eligible Asset which borrower is
obligated to pay, and has made arrangements to pay, in full on a timely basis.
(d) Documents Valid. Each representation and warranty of Borrower set
forth in Section IIIB of this Agreement or this Appendix to this Agreement, to
the extent related to the enforceability of any instrument, agreement or other
document or as to offsets, defenses, counterclaims or rights of rescission
related to such enforceability is qualified to the extent that (i) enforcement
may be limited (A) by bankruptcy, insolvency, reorganization fraudulent
conveyance, redemption, moratorium or other similar laws affecting the
enforcement of creditors' rights generally, (B) by general principles of equity
(regardless of whether such
Appendix II-1
37
enforcement is considered in a proceeding in equity or at law), and (c) by any
applicable anti-deficiency law or statute, and (ii) such instrument, agreement
or other document contains certain provisions which may be unenforceable in
accordance with their terms, in whole or in part, but the unenforceability of
such provisions will not (A) cause the related note or contract or mortgage, if
any, to be void, (B) invalidate the related borrower's obligation to pay
interest on, and repay the principal of, the related Pledged Eligible Asset in
accordance with the payment terms of the related note or contract, the related
mortgage, if any, and other written agreements delivered to Borrower in
connection therewith, (c) invalidate the obligation of any related guarantor to
pay guaranteed obligations with respect to interest on, and the principal of,
the related Pledged Eligible Asset in accordance with the payment terms of such
guarantor's written guaranty, (D) impair the mortgagee's right to accelerate and
demand payment of the interest on, and principal of, the related Pledged
Eligible Asset upon the occurrence of a legally enforceable default, or (E)
impair the mortgagee's right to realize against the related Property, if any, by
judicial or, if applicable, nonjudicial foreclosure except as provided in any
subordination agreement and subject to applicable law.
(e) Pledge of Security Interest; Note or Contract Endorsement. The
related pledge of Lender's security interest in the related collateral
documents ("Security Documents") is in recordable or otherwise appropriate form
and constitutes Borrower's legal, valid and binding assignment to Lender of any
related mortgage, assignment of leases and rents and/or other collateral.
Borrower's endorsement and delivery of the related note or contract in
accordance with the terms of this Agreement constitutes Borrower's legal, valid
and binding assignment to Lender of such note or contract, and together with
the related assignment of Security Documents legally and validly conveys all
right, title and interest of Borrower in such Pledged Eligible Asset to Lender.
(f) No Modification, Release or Satisfaction. Neither the Security
Documents nor the related note or contract has been impaired, waived, modified,
altered, satisfied, canceled or subordinated or rescinded by Borrower, and the
related Property has not been released from the lien of such Security Documents
or the lien of the senior lender and the related mortgagor has not been
released by Borrower from its obligations under such Security Documents, in
whole or in any part, in each such event in a manner which materially
interferes with the benefits of the security intended to be provided by such
Security Documents except as provided in the loan documents or as set forth on
the respective Underwriting Transmittal. No instrument has been executed by
Borrower that would effect any such waiver, modification, alteration,
satisfaction, cancellation, subordination, rescission or release, with the
exception of the written instruments (i) which are a part of the related
Commercial Loan/Asset File, (ii) which have been recorded if necessary to
protect the interests of Lender, and (iii) the substance of which is included
in the list of exceptions in such Underwriting Transmittal.
(g) Escrow Deposits. All escrow deposits and other escrow payments
required under the related Pledged Asset Documents to be paid to Borrower prior
to the Funding Date have been paid to, and are in the possession of, or under
the control of, or have been applied in accordance with their intended purposes
by, Borrower or its agent.
Appendix II-2
38
(h) No Buydowns or Third Party Advances. Borrower has not, directly or
indirectly, advanced funds, induced or solicited any payment from a Person
other than the related obligor or, to the best of Borrower's knowledge,
received any payment from a Person other than such obligor, for the payment of
any amount required under the related note or contract or Security Documents,
except for (a) interest accruing from the date of such note or contract or date
of disbursement of the Pledged Eligible Asset proceeds, whichever is later, to
the date which precedes by 30 days the first due date under the related
promissory note or contract, (b) interest paid pursuant to any interest reserve
specified in the Underwriting Transmittal or (c) payments from any tax,
insurance or other reserves specified in the Underwriting Transmittal. The
Pledged Asset Documents contain no provisions pursuant to which monthly
payments are (x) paid or partially paid with funds deposited in any separate
account established by borrower, the related mortgagor or anyone on behalf of
such mortgagor, or (y) paid by any source other than such mortgagor (except
provisions pertaining to a related guarantor's obligations under the terms of
such guarantor's written guaranty) and contain no similar provision which may
constitute a "buydown" provision unless disclosed in the Underwriting
Transmittal.
(i) No Condemnation or Damages. To the best of Borrower's knowledge,
there are no proceedings pending or threatened for the total or partial
condemnation of the related Property as of the applicable closing date, except
for any proceedings as to partial condemnation which are disclosed in writing
in the list of exceptions included in such Underwriting Transmittal. To the
best of Borrower's knowledge, each Pledged Eligible Asset is being used for the
purpose(s) set forth in the Underwriting Transmittal and is in good repair and
free of any damage, waste or defective condition that would materially or
adversely affect the value of the property as security for a Pledged Eligible
Asset or for the use the property was intended at the time of the origination
of the Pledged Eligible Asset.
(j) Title Survey; Improvements. The related Commercial Loan/Asset File
includes an ALTA/ACSM Land Title Survey with respect to the related Property
or, if an ALTA/ACSM Land Title Survey is not available or as otherwise approved
in writing by Lender an as-built survey with respect to such Property which
satisfied the requirements of the title insurance company for its deletion of
the standard general exceptions for encroachments, boundary and other survey
matters and for easements not shown by the public records from the related
title insurance policy as required by the Guidelines. In either such event,
such survey has been certified by the surveyor to Borrower if a mortgagee, or
the owner of the Property if Borrower is not the mortgagee and the title
insurance company in accordance with the applicable requirements of the
Guidelines and satisfies the other applicable requirements set forth in the
Guidelines, except as disclosed in writing in the list of exceptions included
in such Underwriting Transmittal. In reliance on the survey and the Title
Policy (defined below), except for encroachments and similar matters which do
not materially and adversely affect such Property as security for such Pledged
Eligible Asset or which are disclosed in writing in the list of exceptions
included in such Underwriting Transmittal, (i) none of the improvements which
were included for the purpose of determining the value of such Property at the
time of the origination of such Pledged Eligible Asset lie outside the
boundaries and building restriction lines of such Property, (ii) no
improvements on adjoining properties materially encroach upon such Property,
Appendix II-3
39
and (iii) to the best of Borrower's knowledge (based upon a representation or
opinion obtained from the related mortgagor), no improvements located on or
forming a part of such Property are in violation of any applicable zoning and
building laws or ordinances.
(k) Compliance with Laws. To the best of Borrower's knowledge (based
upon a representation or opinion obtained from the related mortgagor), (i) the
related Property complies, in all material respects, with all laws and
regulations pertaining to the use and occupancy thereof, other than applicable
zoning and building laws and regulations (addressed in Section 1.(j) above) and
Environmental Laws (as defined and addressed in Sections (t) and (u) below) and
all applicable insurance requirements, and (ii) the related mortgagor has
obtained or will obtain all inspections, licenses, permits, authorizations and
certificates necessary for such compliance, including but not limited to,
certificates of occupancy and fire underwriter certificates. Borrower has not
received notification from any governmental authority that such Property is in
material non-compliance with such laws or regulations, is being used, operated
or occupied unlawfully or has failed to have or obtain such inspections,
licenses or certificates, as the case may be.
(l) Title Insurance. The related Property (excluding any related
personal property) is covered by an ALTA lender's or owner's title insurance
policy or, if an ALTA lender's or owner's title insurance policy is
unavailable, another state-approved form of lenders title insurance policy
issued by a qualified insurer, in an amount not less than the stated original
principal amount of such Pledged Eligible Asset (a "Title Policy") and, if the
Pledged Eligible Asset is a loan, insuring that the related mortgage is a valid
lien on such Property with a priority corresponding to the priority stated in
its Underwriting Transmittal, subject to the Permitted Exceptions described in
Subsection 2(a) below. Borrower has not taken, or omitted to take, any action,
and, to the best of Borrower's knowledge, no other Person has taken, or omitted
to take, any action, that would materially impair the coverage benefits of any
such title insurance policy. Such title policy does not include the general
exception for intervening liens which appeared in the commitment for such title
insurance.
(m) Hazard Insurance. The related Property is insured by a fire and
extended perils insurance policy, issued by a commercial insurer, providing
coverage against loss or damage sustained by reason of fire, lightning,
windstorm, hail, explosion, riot, riot attending a strike, civil commotion,
aircraft, vehicles and smoke and, to the extent required by Borrower consistent
with the Guidelines then in effect against earthquake and other risks insured
against for which Persons operating like properties in the locality of such
Property obtain insurance, in an amount not less than the lesser of (i) the
full replacement cost of all improvements to such Property, and (ii) the
outstanding principal balance of such Pledged Eligible Asset, but in any event
in an amount sufficient to avoid the operation of any co-insurance provisions
contained in such insurance policy. The related mortgage contains provisions
requiring the related mortgagor to maintain business interruption and/or rental
continuation coverage sufficient to protect against loss for such period as
shall be consistent with the requirements of the Guidelines under a policy
issued by a qualified insurer. If any improvement on such Property is located
in an area identified by the Federal Emergency Management Agency as having
special flood hazards under the National Flood Insurance Act of 1968, as
amended, such Property is insured by a flood
Appendix II-4
40
insurance policy, issued by a qualified insurer, meeting the current
requirements of the Federal Insurance Administration in an amount not less than
the lesser of (A) the stated principal amount of the related promissory note or
contract, and (B) the maximum amount of insurance available under the Flood
Disaster Protection Act of 1973, as amended. In the event Borrower is the
mortgagee, each such insurance policy includes a lender's loss payable
endorsement in favor of Borrower and requires the insurer to endeavor to
provide at least 30 days' prior written notice to Borrower of termination or
cancellation, and no such notice has been received by Borrower. To the best of
Borrower's knowledge, such insurance policies are in full force and effect. To
the best of Borrower's knowledge, all premiums due and payable on such
insurance policies prior to the Funding Date have been paid and nothing has
occurred that would materially impair the benefits of coverage thereunder. In
connection with the placement of any such insurance, no commission, fee or
other compensation has been or will be received by Borrower or, to the best of
Borrower's knowledge, any officer, director or employee of Borrower. The
related mortgage, if any, obligates the related mortgagor to maintain all such
insurance and, at such mortgagor's failure to do so, authorizes the mortgagee
to maintain such insurance at such mortgagor's cost and expense and to seek
reimbursement therefor from such mortgagor.
(n) Proceeds of Mortgage Loan. To the best of Borrower's knowledge,
the proceeds of such Pledged Eligible Asset have not been and shall not be
applied to satisfy, in whole or in part, any debt owing by the related
mortgagor to an affiliate of Borrower with respect to the origination of such
Pledged Eligible Asset whereby such affiliate has taken or will take (i) a
discounted pay-off of such debt in connection with such application, or (ii) a
subordinated lien on any property securing such debt or an equity interest in
the related mortgagor in connection with such application unless, in any such
case, such fact is disclosed in the list of exceptions included in the related
Commercial Loan/Asset File.
(o) Customary Provisions. The related promissory note or contract or
the related mortgage contains customary and enforceable provisions such as to
render the rights and remedies of the holder thereof adequate for the practical
realization against the related Property of the benefits of the security.
(p) Pledged Eligible Asset Terms. The interest rate on such promissory
note constituting a Mortgage Loan Document or contract is as set forth in the
Commercial Loan/Asset Schedule; provided, however, that if such promissory note
or contract relates to an adjustable rate note, the mechanism by which the
interest rate is adjusted shall be set forth in the Commercial Loan/Asset
Schedule. Except as specified in the Underwriting Transmittal relating to an
accrual rate of interest in excess of a required pay rate of interest, the
related Mortgage Loan Documents do not provide for any negative amortization.
The related mortgage, if any, provides for the appointment of a receiver for
rents, or the mortgagee's entry into possession of the related Property to
collect rents, in connection with an event of default or acceleration.
(q) Inspection. Consistent with the provisions of the Guidelines,
Borrower has inspected or has caused the related Property to be inspected in
connection with the origination of such Pledged Eligible Asset no earlier than
six months prior to the initial Funding Date.
Appendix II-5
41
(r) No Notice of Bankruptcy. Borrower has no knowledge nor has it
received any notice that the related Mortgagor is a debtor in any state or
federal bankruptcy or insolvency proceeding.
(s) Access Routes. Based upon the information provided Borrower in the
Pledged Asset Documents, at the Closing Date of such Pledged Eligible Asset,
(i) the underlying borrower had sufficient rights with respect to amenities,
ingress and egress and similar matters to support the intended use described in
the Underwriting Transmittal, and (ii) to the best of Borrower's knowledge,
such Property was receiving or has access to adequate services from public or
private water, sewer and other utilities.
(t) Environmental Assessment. In connection with the origination of
such Pledged Eligible Asset, a Phase I environmental assessment and report and,
if recommended by the Phase I report, a Phase II environmental assessment and
report with respect to the related Mortgage Property were obtained from an
independent environmental engineer or consultant; and such report(s) did not
indicate the existence of conditions or circumstances respecting such Property
that would (i) constitute or result in a material violation of any applicable
Environmental Law, (ii) impose any material constraint on the operation of such
Property or require material change in the use thereof, or (iii) require
clean-up, remedial action or other response with respect to Hazardous Materials
on or affecting such Property under any applicable Environmental Law, with the
exception of conditions or circumstances (A) which such report(s) indicated
could be cleaned up, remediated or brought into compliance with applicable
Environmental Law by the taking of certain actions, and (B) either (1) for
which a hold-back or other escrow of funds, if any, not less than the costs of
taking such clean-up, remediation or compliance actions as estimated in such
report(s) has been created to be held by Borrower or an escrow agent until such
clean-up, remediation or compliance actions have been taken, (2) for which an
environmental insurance policy in an amount satisfactory to Borrower has been
obtained by the related mortgagor or an indemnity for such costs has been
obtained from a potentially culpable party, or (3) such clean-up, remediation
or compliance actions in compliance with applicable Environmental Law have been
completed prior to the related Funding Date, or (4) for which other
arrangements disclosed to Lender have been made. For purposes of this
Agreement, the term "Hazardous Materials" shall include, without limitation,
gasoline, petroleum products, explosives, radioactive materials,
polychlorinated biphenyls or related or similar materials, asbestos or any
material containing asbestos, and any other substance or material as may be
defined as a hazardous or toxic substance under any applicable Environmental
Law; and the term "Environmental Law" shall mean any environmental law
ordinance, rule, regulation or order of a federal, state or local governmental
authority including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended (42 U.S.C. 9601 et
seq), the Hazardous Material Transportation Act, as amended (49 U.S.C. 1801 et
seq,), the Resource Conservation and Recovery Act, as amended (42 U.S.C. 6901
et seq,), the Federal Water Pollution Control Act, as amended (33 U.S.C. 12S1
et seq.,), the Clean Air Act (42 U.S.C. 7401 et seq.), as amended, and the
regulations promulgated pursuant thereto.
Appendix II-6
42
(u) Notice of Environmental Problem. Except for the notices, if any,
described in the list of exceptions included in the related Underwriting
Transmittal and furnished to the environmental engineer or consultant in
connection with its assessment(s) described in Section (t) above (and addressed
by such engineer or consultant in such assessments), Borrower has not received
actual notice from: (i) any federal, state or other governmental authority of
(A) any failure of the related Property to comply with any applicable
Environmental Laws, or (B) any known or threatened release of Hazardous
Materials on or from such Property in violation of Environmental Laws; or (ii)
the related mortgagor that (A) such mortgagor has received any such notice from
any such governmental authority, (B) such Property fails to comply with
Environmental Laws, or (C) there is any known or threatened release of
Hazardous Materials on or from such Property in violation of Environmental
Laws.
(v) No Untrue Information. No statement, report or other document
furnished by or on behalf of Borrower or any affiliate thereof in writing
(including writings in electronic form) pursuant to this Agreement relating to
such Pledged Eligible Asset contains any untrue statement by Borrower or any
affiliate thereof of any material fact or an omission by Borrower or any
Affiliate thereof of a material fact necessary to make the statements contained
therein not misleading. Based upon its review of its files and such inquiry as
is customary by a prudent commercial mortgage lender, Borrower does not know or
have reason to know that any such statement, report or other document furnished
by or on behalf of Borrower or any Affiliate thereof in writing (including
writings in electronic form) pursuant to this Agreement relating to such
Pledged Eligible Asset incorporating any statement, report or other document
furnished to Borrower by any underlying borrower or any other Person contains
any untrue statement by any other Person of any material fact or an omission of
a material fact necessary to make the statements contained therein not
misleading.
2. As to each Pledged Eligible Asset which constitutes a Mortgage Loan or other
Pledged Eligible Asset, if applicable, and is secured by an interest in real
property, Borrower hereby represents and warrants to Lender that as of the
related Funding Date; provided however, that any such representation and
warranty maybe modified as set forth in, or an exception thereto may be
contained in, the executed Underwriting Transmittal in effect for such Pledged
Eligible Asset:
(a) Lien Position. The related mortgage is a valid, subsisting and
enforceable lien on the related Property (including all buildings and
improvements on such Property and all installations and mechanical, electrical,
plumbing, heating and air conditioning systems located in or annexed to such
buildings, and all additions, alterations and replacements made at any time
prior to the related Funding Date with respect to the foregoing, but excluding
any related personal property), which Property is free and clear of all
encumbrances and liens having priority over the lien of such Mortgage, except
for (i) any liens of a prior lender described in the Title Policy and
Underwriting Transmittal, (ii) liens for real estate taxes and special
assessments not yet due and payable, (iii) covenants, conditions and
restrictions, rights of way, easements and other matters of public record as of
the date of recording of such mortgage which do not materially and adversely
(1) affect the value of such Property, and (2) interfere with the related
mortgagor's use of such Property for the intended purposes therefor, (iv)
leases and
Appendix II-7
43
subleases pertaining to such Property which Borrower, in accordance with the
Guidelines, did not require to be subordinated to the lien of such mortgage,
and (iv) other matters to which like properties are commonly subject which do
not, individually or in the aggregate, materially interfere with the benefits
of the security intended to be provided by such Mortgage ("Permitted
Exceptions"). Any security agreement, chattel mortgage or equivalent document
related to and delivered in connection with the related Pledged Eligible Asset
establishes and creates a valid, subsisting and enforceable lien on and a
security interest in the property described therein, and Borrower has full
right to sell and assign the same to Lender.
(b) No Taxes or Assessments. All taxes and governmental assessments
which became due and owing prior to the Funding Date in respect of the related
Property (excluding any related personal property) and which, if left unpaid,
would be or might become, a lien on such Property having priority over the
related mortgage, have been paid or an escrow of funds in an amount sufficient
to cover such taxes and assessments has been established.
(c) No Mechanics Liens. In reliance on the related Title Policy and to
the best of Borrower's knowledge, the related Property (excluding any related
personal property) is free and clear of any mechanics' and materialmen's liens
or liens in the nature thereof, and no rights are outstanding that, under law,
could give rise to any such liens, any of which liens are or may be prior to,
or equal with, the lien of the related mortgage, except those which are insured
against by the Title Policy.
(d) UCC Financing Statements. One or more Uniform Commercial Code
financing statements covering all furniture, fixtures, equipment and other
personal property in which Mortgagor has an interest (i) which are collateral
under the related Security Documents executed and delivered in connection with
such Pledged Eligible Asset, and (ii) in which a security interest can be
perfected by the filing of Uniform Commercial Code financial statement(s) under
applicable law have been filed or recorded (or have been sent for filing or
recording) in all Uniform Commercial Code filing offices necessary to the
perfection of a security interest in such furniture, fixtures, equipment and
other personal property under applicable law.
(e) Property Leased to Tenants. As to each Pledged Eligible Asset
other than a multifamily property secured by a Property which is subject to one
or more leases that are relied on for purposes of determining the DSCR of such
loan, Borrower has obtained estoppel certificates from tenants (or, at a
minimum, tenants occupying 90% of the net leased area relied on in determining
the DSCR, but specifically including any such tenant who leases 25% or more of
the net leasable are of the Mortgage Property), and other information with
respect to the leases ("Leases") relating to such Property in which the
underlying borrower is the landlord or lessor thereunder (including copies
thereof) and the tenants with such Leases as required by the Guidelines, and
based upon such investigation by Borrower:
(i) To the best of Borrower's knowledge, the related mortgagor is
complying, in all material respects, with each lease pertaining to the
Property except as
Appendix II-8
44
disclosed in writing in the list of exceptions included in the related
Underlying Transmittal.
(ii) Except as disclosed in writing in the list of exceptions
included in the related Underwriting Transmittal, no Lease with respect to
10% or more of the net leasable area of such Property requires the
landlord to rebuild or repair any damages or destruction to the leased
premises or to compensate the tenant for any condemnation affecting the
leased premises.
(iii) Except as disclosed in writing in the list of exceptions
included in the related Underwriting Transmittal, to the best of
Borrower's knowledge, (A) no Lease with respect to 10% or more of the net
leasable area of such Property contains an option to purchase or any right
of a tenant to terminate the Lease or vacate the leased premises prior to
expiration of the lease term, (B) each Lease is in full force and effect,
(C) each tenant is current in the payment of rent due under each Lease of
10% or more of the net leasable area of such Property and has not paid the
remaining rents more than one month in advance, and (D) such Commercial
Loan/Asset File contains true and complete copies of each Lease, as
amended.
(f) Mortgage Loans Secured by Ground Lease. With respect to each
Pledged Eligible Asset that is secured in whole or in part by the interest of a
related mortgagor as a lessee under a ground lease of the related Property (a
"Ground Lease"), either (i) the ground lessor's related fee interest in such
Property (the "Fee Interest") is subject to or subordinate to the lien of the
related mortgage as set forth in the Commercial Loan/Asset Schedule, or (ii):
(A) such Ground Lease is in full force and effect and such Ground
Lease or a memorandum thereof has been duly recorded; such Ground Lease
does not prohibit the interest of the related lessee thereunder from being
encumbered by the related mortgage; and there have been no material
changes in the terms of any such Ground Lease except as set forth in
written instruments which are part of the related Commercial Loan/Asset
File;
(B) except as may be indicated in the related Title Policy
referred to in Section 1.(l) above, such Ground Lease is not subject to
any liens or encumbrances superior to, or of equal priority with, the
related mortgage, other than the related Fee Interest;
(C) the related lessee's interest in such Ground Lease may be
transferred to Lender and its successors and assigns through foreclosure
of the related Mortgage or conveyance in lieu of foreclosure and,
thereafter, may be transferred to another Person by Lender and its
successors and assigns upon notice to, but without the consent of, the
related lessor (or, if any such consent is required, either (1) it has
been obtained prior to the Funding Date, or (2) it will not to be
unreasonably withheld);
Appendix II-9
45
(D) the related lessor is required to give notice of any default
under such Ground Lease by the related lessee to the Borrower either under
the terms of such Ground Lease (the related lessor having received notice
of the related mortgage) or under the terms of a separate written
agreement binding upon the related lessor;
(E) except as disclosed in writing in the list of exceptions
included in the related Underwriting Transmittal, before the related
lessor may terminate such Ground Lease because of a default thereunder by
the related lessee, Borrower is entitled, under the terms of such Ground
Lease or a separate written agreement binding upon the related lessor, to
receive notice of such default and to cure or, alternatively, to commence
proceedings to foreclose the related mortgage plus a reasonable
opportunity to cure such default after foreclosure or a conveyance in lieu
of foreclosure if Borrower pursues foreclosure in good faith and with due
diligence;
(F) except as expressly approved by Lender in writing, the
currently effective term of such Ground Lease (excluding any extension or
renewal which is not binding on the lessor thereunder) extends not less
than ten years beyond the maturity date of the related Pledged Eligible
Asset;
(G) except as expressly approved by Lender in writing, under the
terms of such Ground Lease and the related Mortgage, taken together, any
related property insurance proceeds other than in respect of a total or
substantially total loss or taking, would be applied either (1) to the
repair or restoration of the damaged portion of the related Property, with
the mortgagee or a trustee or escrow agent appointed by it having the
right to hold and disburse such proceeds as the repair or restoration
progresses (except where such mortgage provides that the related mortgagor
or its agent may hold and disburse such proceeds), or (2) to the payment
of the outstanding principal balance of such Pledged Eligible Asset
together with any accrued interest thereon;
(H) such Ground Lease does not impose any restrictions on
subletting which Borrower considered to be commercially unreasonable at
the time of origination of such Pledged Eligible Asset; and
(I) Borrower has not received any notice and otherwise has no
knowledge that (1) the lessor under such Ground Lease is asserting a
default by the lessee or an event of default thereunder, or (2) any event
has occurred which, with the passage of time, the giving of notice, or
both (other than rental or other payments being due, but not yet
delinquent), would result in a default or an event of default under the
terms of such Ground Lease.
(g) Deed of Trust. With respect to each related mortgage that is a
deed of trust or trust deed, a trustee, duly qualified under applicable law to
serve as such, has either been properly designated and currently so serves or
may be substituted in accordance with applicable law. Except in connection with
a trustee's sale after default by the related mortgagor
Appendix II-10
46
or in connection with the release of the related Property following the payment
of such Pledged Eligible Asset in full, no fees or expenses are payable by
Lender to such trustee.
(h) Type of Property. The related Property consists of an estate in
fee simple or leasehold estate in real property and improvements thereon as set
forth in the Commercial Loan/Asset Schedule.
(i) Mortgage Acceleration Provisions. The related mortgage contains a
provision for the acceleration of the payment of the unpaid principal balance
of such Pledged Eligible Asset in the event that the related Property is sold
or transferred without the prior written consent of the mortgagee thereunder,
except as provided in any subordination agreement contained in the Commercial
Loan/Asset File.
(j) No Additional Collateral. The related promissory note or contract
is not, and has not been, secured by any collateral except the lien of the
related mortgage and the Security interest of any related Security Documents
assigned pursuant to the related assignment to Lender. Except for any
cross-collateralizations described in the Underwriting Transmittal, such
mortgage was not given as collateral or security for the performance of
obligations of any Person other than the related mortgagor.
(k) Assignment of Leases and Rents. Any related assignment of leases
and rents incorporated within the related mortgage or set forth in a separate
document creates a valid assignment of, or security interest in, the right to
receive all payments due under the related Leases, if any, with a priority
corresponding to the priority stated in the Underwriting Transmittal and
subject to the effect of bankruptcy, insolvency, reorganization, receivership,
moratorium or other laws relating to or affecting the rights of creditors
generally and general principles of equity (regardless of whether considered in
a proceeding in equity or at law); and no Person other than the related
mortgagor owns any interest in the right to receive any payments due under such
Leases that is superior to or of equal priority with the mortgagee's interest
therein.
(l) Default, Breach and Acceleration. There is no monetary default,
breach, violation or event of acceleration existing under the related Pledged
Eligible Asset or the related documents to such Pledged Eligible Asset and no
event (other than a failure to make payments due but not yet delinquent) which,
with the passage of time or with notice and the expiration of any grace or cure
period, would constitute a monetary default, breach, violation or event of
acceleration. In addition, to the best of Borrower's knowledge there is no
non-monetary default, breach, violation or event of acceleration.
Appendix II-11
47
Exhibit A
SECURED NOTE
Dated as of ___________________, 1998
FOR VALUE RECEIVED, the undersigned, AMRESCO CAPITAL TRUST, a real
estate investment trust organized under the laws of the State of Texas, AMREIT
I, INC., a Delaware corporation, and AMREIT II, INC., a Delaware corporation,
each having an address at 700 North Pearl Street, Suite 2400, Dallas, Texas
75201 (individually and collectively, the "Borrower"), jointly and severally,
promise to pay to the order of PRUDENTIAL SECURITIES CREDIT CORPORATION, a
Delaware corporation, whose address is One New York Plaza, New York, New York
10292 (the "Lender"), on or before each Maturity Date the amount then
outstanding (including accrued interest at the rate(s) set forth in the
Agreement) under that certain Interim Warehouse and Security Agreement, dated
as of July 1, 1998, between the Borrower and the Lender (as amended from time
to time, the "Agreement"). Initially, the maximum principal amount which may be
outstanding is $400,000,000 (subject to certain limitations as set forth
therein). Capitalized terms used herein and not defined herein shall have their
respective meanings as set forth in the Agreement.
The holder of this Note is authorized to record the date and amount of
each Advance and the date and amount of each repayment of principal thereof on
the schedule to be maintained by the Lender (which schedule may be obtained
upon Borrower's request), and any such recordation shall constitute prima facie
evidence of the accuracy of the amount so recorded; provided that the failure
of the holder hereof to make such recordation (or any error in such
recordation) shall not affect the obligations of the Borrower hereunder or
under the Agreement.
MAXIMUM RATE OF INTEREST: It is intended that the rate of interest
herein shall never exceed the maximum rate, if any, which may be legally
charged on the Loan evidenced by this Note ("Maximum Rate"), and if the
provisions for interest contained in this Note would result in a rate higher
than the Maximum Rate, interest shall nevertheless be limited to the Maximum
Rate and any amounts which may be paid toward interest in excess of the Maximum
Rate shall be applied to the reduction of principal, or, at the option of the
Lender, returned to the Borrower.
DUE DATE: The Loan evidenced hereby not paid before each Maturity Date
shall be due and payable on each Maturity Date.
PLACE OF PAYMENT: All payments hereon shall be made, and all notices
to the Lender required or authorized hereby shall be given, at the office of
the Lender at the address designated in the heading of this Note, or to such
other place as the Lender may from time to time direct by written notice to the
Borrower.
PAYMENT AND EXPENSES OF COLLECTION: All amounts payable hereunder are
payable by wire transfer in immediately available funds to the account number
specified by the
Exhibit A-1
48
Lender, in lawful money of the United States. Payments remitted by the Borrower
via wire transfer initiated after 1:00 p.m. New York City time shall be deemed
to be received on the next Business Day. The Borrower agrees to pay all costs
of collection when incurred, including, without limiting the generality of the
foregoing, reasonable attorneys' fees through appellate proceedings, and to
perform and comply with each of the covenants, conditions, provisions and
agreements contained in every instrument now evidencing or securing said
indebtedness.
SECURITY: This Note is issued pursuant to the Agreement and is secured
by a pledge of the Collateral described therein. Notwithstanding the pledge of
the Collateral, the Borrower hereby acknowledges, admits and agrees that the
Borrower's obligations under this Note are recourse obligations of the Borrower
to which the Borrower pledges its full faith and credit.
DEFAULTS: Upon the happening of an Event of Default (as defined in the
Agreement), the Lender shall have all rights and remedies set forth in the
Agreement.
The failure to exercise any of the rights and remedies set forth in
the Agreement shall not constitute a waiver of the right to exercise the same
or any other option at any subsequent time in respect of the same event or any
other event. The acceptance by the Lender of any payment hereunder which is
less than payment in full of all amounts due and payable at the time of such
payment shall not constitute a waiver of the right to exercise any of the
foregoing rights and remedies at that time or at any subsequent time or nullify
any prior exercise of any such rights and remedies without the express consent
of Lender, except as and to the extent otherwise provided by law.
WAIVERS: The Borrower waives diligence, presentment, protest and
demand and also notice of protest, demand, dishonor and nonpayments of this
Note, and expressly agree that this Note, or any payment hereunder, may be
extended from time to time, and consent to the acceptance of further
collateral, the release of any collateral for this Note, the release of any
party primarily or secondarily liable hereon, and that it will not be necessary
for the Lender, in order to enforce payment of this Note, to first institute or
exhaust Lender's remedies against the Borrower or any other party liable hereon
or against any collateral for this Note. None of the foregoing shall affect the
liability of the Borrower. No extension of time for the payment of this Note,
or an installment hereof, made by agreement by the Lender with any person now
or hereafter liable for the payment of this Note, shall affect the liability
under this Note of the Borrower, even if the Borrower is not a party to such
agreement; provided, however, the Lender and the Borrower, by written agreement
between them, may affect the liability of the Borrower.
TERMINOLOGY: If more than one party joins in the execution of this
Note, the covenants and agreements herein contained shall be the joint and
several obligation of each and all of them and of their respective heirs,
executors, administrators, successors and assigns, and relative words herein
shall be read as if written in the plural when appropriate. Any reference
herein to the Lender shall be deemed to include and apply to every subsequent
holder of this Note. Words of masculine or neuter import shall be read as if
written in the neuter or masculine or feminine when appropriate.
Exhibit A-2
49
AGREEMENT: Reference is made to the Agreement for provisions as to
Advances, rates of interest, mandatory principal repayments, collateral and
acceleration. If there is any conflict between the terms of this Note and the
terms of the Agreement, the terms of the Agreement shall control.
APPLICABLE LAW: THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED UNDER THE
LAWS OF THE STATE OF NEW YORK, THE LAWS OF WHICH THE BORROWER HEREBY EXPRESSLY
ELECTS TO APPLY TO THIS NOTE. THE BORROWER AGREES THAT ANY ACTION OR PROCEEDING
BROUGHT TO ENFORCE OR ARISING OUT OF THIS NOTE MAY BE COMMENCED IN THE SUPREME
COURT OF THE STATE OF NEW YORK, OR IN THE DISTRICT COURT OF THE UNITED STATES
FOR THE SOUTHERN DISTRICT OF NEW YORK.
Exhibit A-3
50
AMRESCO CAPITAL TRUST
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
AMREIT I, INC.
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
AMREIT II, INC.
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
Exhibit A-4
51
Exhibit B
______, 1998
[Custodian]
- -------------------------
- -------------------------
- -------------------------
Re: Interim Funding Arrangement for Eligible Assets
Gentlemen:
I am the counsel to AMRESCO Capital Trust, a Texas real estate
investment trust, AMREIT I, Inc., a Nevada corporation and AMREIT II, a
Delaware corporation (individually and collectively, the "Borrower"). I have
represented the Borrower in connection with the execution and delivery of the
following documents:
(i) Interim Warehouse and Security Agreement, dated as of
___________________, 1998 (the "Interim Warehouse and Security
Agreement"), by and between the Borrower and Prudential Securities
Credit Corporation (the "Lender");
(ii) Secured Note executed as of ___________________, 1998 by the
Borrower in favor of the Lender (the "Note");
(iii) Custodial Agreement, dated as of ___________________, 1998
(the "Custodial Agreement"), among the Lender, the Borrower and
____________ (the "Custodian"); and
(iv) Securitization Agreement, dated as of ______, 1998 by and
between the Borrower and Prudential Securities Incorporated.
Capitalized terms used herein, but not defined herein, shall have the
meanings assigned to them in the Interim Warehouse and Security Agreement.
I have examined executed copies of the Interim Warehouse and Security
Agreement, the Note, and the Custodial Agreement. I have also examined
originals or photostatic or certified copies of all such corporate records of
the Borrower and such certificates of public officials, certificates of
corporate officers, and other documents, and such questions of law, as I have
deemed appropriate and necessary as a basis for the opinions hereinafter
expressed. In making my examination and rendering the opinions herein
expressed, I have made the following assumptions: I) each party to each of the
Interim Warehouse and Security Agreement and the Custodial Agreement (other
than the Borrower) has the power to enter into and perform all of its
obligations thereunder, (ii) the due authorization, execution and delivery of
each of the
Exhibit B-1
52
Interim Warehouse and Security Agreement and the Custodial Agreement by all
parties thereto (other than the Borrower), and (iii) the validity and binding
effect on all parties thereto (other than the Borrower) of each of the Interim
Warehouse and Security Agreement and the Custodial Agreement.
The opinions expressed below with respect to enforceability are
subject to the following additional qualifications:
(a) The effect of insolvency, reorganization, moratorium,
conservatorship, receivership, or other similar laws relating to or affecting
the rights of creditors generally in the event of insolvency, reorganization,
moratorium or receivership.
(b) The application of general principles of equity, including, but
not limited to, the right of specific performance (regardless of whether
enforceability is considered in a proceeding in equity or at law).
(c) The unenforceability of provisions to the effect that failure to
exercise or delay in exercising rights or remedies will not operate as a waiver
of any such rights or remedies, or to the effect that provisions therein may
only be waived in writing to the extent that an oral agreement has been entered
into modifying such provisions.
I am licensed to practice law in the State of Texas. For purposes of
this opinion, I have assumed the laws of the State of Texas are substantially
similar to the laws of the State of New York and the laws of the State of
Texas. Subject to such assumption, each opinion hereinafter set forth is an
opinion concerning only the law of the State of Texas and New York, the
corporate laws of Texas, Nevada and Delaware and applicable federal law. All
opinions expressed herein are based on laws, regulations and policy guidelines
currently enforced and may be affected by future changes in law. Furthermore,
no opinion is expressed herein regarding the applicable federal securities,
state Blue Sky, legal investment or real estate syndication laws.
Based upon the foregoing, and subject to the last paragraph hereof, I
am of the opinion that:
1. The Interim Warehouse and Security Agreement, the Note, and the
Custodial Agreement and the Securitization Agreement each constitutes the
valid, legal and binding agreement of the Borrower, and each is enforceable
against the Borrower in accordance with its terms.
2. No consent, approval, authorization or order of, registration or
filing with, or notice to, any governmental authority or court is required
under federal laws or the laws of the States of Texas or New York for the
execution, delivery and performance of the Interim Warehouse and Security
Agreement, the Note, the Custodial Agreement or the Securitization Agreement,
as applicable, by the Borrower, except such of which as have been obtained.
Exhibit B-2
53
3. The execution, delivery and performance by the Borrower of the
Interim Warehouse and Security Agreement, the Note, the Custodial Agreement and
the Securitization Agreement, does not conflict with or result in a breach of,
or constitute a default under any law, rule or regulation of the federal
government or of the States of Texas or New York.
4. The execution, delivery and performance of the Interim Warehouse
and Security Agreement, the Note and the Custodial Agreement and the
Securitization Agreement by the Borrower will not result in a default under any
mortgage, borrowing agreement, or other instrument or agreement pertaining to
indebtedness for borrowed money to which the Borrower is a party.
5. Upon the execution of the Interim Warehouse and Security Agreement,
a valid security interest in the Eligible Assets and the proceeds thereof is
granted to the Lender, which security interest would be a valid,
first-priority, perfected security interest with respect to such Eligible
Assets and the proceeds thereof upon the delivery of the Commercial Loan/Asset
Files to the Custodian.
6. Attached as Exhibit "A" and incorporated by reference herein is a
listing of states in which the Borrower is licensed as a mortgage lender or
maintains a comparable license. Attached as Exhibit "B" and incorporated by
reference herein is a listing of states in which the Borrower has qualified to
do business.
This Opinion is furnished by me as counsel to the Borrower and is
solely for the benefit of the addressees hereof; except that this Opinion may
be relied upon by any holder in due course of the Note.
Yours truly,
Exhibit B-3
54
Exhibit C
CREDIT INCREASE CONFIRMATION AND
NOTE AMENDMENT
Dated ________________
Reference is made to (x) the Interim Warehouse and Security Agreement,
dated as of ___________________, 1998 (the "Interim Warehouse Agreement"), by
and between Prudential Securities Credit Corporation (the "Lender"), and
AMRESCO Capital Trust, AMREIT I, Inc. and AMREIT II, Inc. (collectively, the
"Borrower") and (y) the Secured Note, dated as of ___________________, 1998
(the "Note"), from the Borrower to the Lender. Capitalized terms used and not
otherwise defined herein shall have the meaning ascribed to such terms in the
Interim Warehouse Agreement.
Section 1.
(a) The "Maturity Date" referenced in the Interim Warehouse Agreement
and in the Note shall be ___________________________.
(b) [Any other changes.]
Section 2.
As amended by Section 1 hereof all provisions of the Interim Warehouse
Agreement and of the Note are reconfirmed as of the date hereof. The Borrower
hereby reconfirms and remakes as of the date hereof each and every of its
representations, warranties and covenants set forth in the Interim Warehouse
Agreement and the Note.
Exhibit C-1
55
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
day and year first above written.
AMRESCO CAPITAL TRUST
By:
-----------------------------------------
Name:
---------------------------------------
Title:
-------------------------------------
AMREIT I, INC.
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
AMREIT II, INC.
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
PRUDENTIAL SECURITIES CREDIT
CORPORATION
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
Exhibit C-2
56
Approval as to Legality
I, , counsel to the Borrower hereby confirm that:
I delivered, on ___________________, 1998, the opinion letter, a copy
of which is attached hereto (the "Opinion Letter") relating to the Interim
Warehouse Agreement and the Note.
I have represented the Borrower in connection with its execution and
delivery of the Credit Increase Confirmation and Note Amendment (the
"Confirmation") to which this Approval as to Legality is attached.
I hereby extend, as of the date hereof, the opinions set forth in the
Opinion Letter to cover both the Confirmation itself as well as the
transactions described on the Confirmation and confirm, as of the date hereof,
and subject to any and all assumptions and qualifications set forth therein,
the opinions set forth in the Opinion Letter.
Yours truly,
----------------------------------------
Dated:
-------------------------
Exhibit C-3
57
Exhibit D
FUNDING NOTICE
_________ __, 199_
Prudential Securities Credit
Corporation
One New York Plaza
New York, NY 10292
Re: Interim Warehouse and Security Agreement dated as of
___________________, 1998 ("Agreement")
Gentlemen:
Reference is made to the Agreement for defined terms used herein.
Pursuant to Section I(2)(I) of the Agreement, this letter constitutes notice
that the undersigned desires to obtain an Advance in the principal amount of
$____________, with respect to the Eligible Assets shown on the attached
Commercial Loan/Asset Schedule. Attached as Schedule I hereto is the
calculation of the Advanced Amount in accordance with the Agreement including a
breakdown of each calculation required to determine such Advanced Amount.
The Borrower further represents, warrants and certifies that: (1) the
undersigned has no notice or knowledge of any Event of Default; (2) the
representations, warranties and covenants in the Agreement relating to the
Eligible Assets shown on the attached Commercial Loan/Asset Schedule are true
and correct as of the date hereof and shall be true and correct on the date of
the Advance requested herein, before and after giving effect thereto; and (3)
each of the conditions precedent to an Advance listed in Section I(2) of the
Agreement has been satisfied as of the date hereof.
[Insert for Wet-Ink Fundings: Additionally, borrower represents,
warrants and certifies that (i) none of the Eligible Assets are Construction
Loans or Other Real Estate Assets, (ii) the Eligible Assets have been
underwritten in general accordance with Borrower's underwriting guidelines or
meet current market accordance with Borrower's underwriting guidelines or meet
current market parameters for Securitization of such Eligible Assets), (ii) the
eligible Assets meet the definition of a Wet-Ink Eligible Asset; and (iv) the
aggregate advances for all Wet-Ink Eligible Assets that have not been
subsequently approved by Lender does not exceed $50,000,000.]
[Insert Appropriate Borrower Name]
Exhibit D - 1
58
AMRESCO CAPITAL TRUST
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
AMREIT I, INC.
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
AMREIT II, INC.
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
Exhibit D - 2
59
Exhibit E
Delivery Obligation Related to Wet-Ink Eligible Assets
1. Phase I Environmental Report meeting current ASTM specifications.
2. Phase II Environment Report (if recommended by the Phase I Report)
3. An engineering and structural report (unless waived by Lender).
Each study, report or review will be based on a statement of work mutually
acceptable to Lender and the Borrower, to the extent practical.
4. Comprehensive underwriting memorandum, including, at a minimum, the
following: a property description; an analysis of the historical and
projected property operating performance; rent roll; maps; photographs; lease
and sale comparables; and borrower organization and financial information.
Exhibit E-1