Exhibit 99.6
MORTGAGE LOAN PURCHASE AGREEMENT
This Mortgage Loan Purchase Agreement (this "Agreement"), is dated
and effective as of December 18, 2001, between Allied Capital Corporation
("Allied"), a Maryland corporation, as seller (in such capacity, together with
its successors and permitted assigns hereunder, the "Seller"), and Salomon
Brothers Mortgage Securities VII, Inc., a Delaware corporation ("SBMS VII"), as
purchaser (in such capacity, together with its successors and permitted assigns
hereunder, the "Purchaser").
RECITALS
Allied desires to sell, assign, transfer and otherwise convey to
SBMS VII, without recourse, and SBMS VII desires to purchase, subject to the
terms and conditions set forth herein, the commercial mortgage loan (the
"Mortgage Loan") identified on the schedule annexed hereto as Exhibit A (the
"Mortgage Loan Schedule"), as such schedule may be amended from time to time
pursuant to the terms hereof.
SBMS VII intends to create a trust (the "Trust"), the primary assets
of which will be the Mortgage Loan, certain other multifamily and commercial
mortgage loans (the "Other Loans"; and, together with the Mortgage Loan, the
"Securitized Loans"). Beneficial ownership of the assets of the Trust (such
assets collectively, the "Trust Fund") will be evidenced by a series of mortgage
pass-through certificates (the "Certificates"). Certain classes of the
Certificates will be rated by Standard & Poor's Ratings Services, a division of
The XxXxxx-Xxxx Companies, Inc. and Xxxxx'x Investors Service, Inc. (together,
the "Rating Agencies"). Certain classes of the Certificates (the "Registered
Certificates") will be subject to registration under the Securities Act of 1933,
as amended (the "Securities Act"). The Trust will be created and the
Certificates will be issued pursuant to a pooling and servicing agreement to be
dated as of December 1, 2001 (the "Pooling and Servicing Agreement"), among SBMS
VII, as depositor, Midland Loan Services, Inc., as master servicer ( in such
capacity, the "Master Servicer"), as general special servicer (in such capacity,
the "General Special Servicer") and as special servicer for the mortgage loans
identified therein as the "Birch Run Mortgage Loan Pair" (in such capacity, the
"Birch Run Special Servicer"), Xxxxx Fargo Bank Minnesota, N.A., as trustee (the
"Trustee"), JPMorgan Chase Bank as certificate administrator and as tax
administrator (in such capacities, the "Certificate Administrator" and the "Tax
Administrator"), Fortress CBO Investments I, Ltd. as the holder of the mortgage
note for the mortgage loan identified therein as the "Birch Run Companion
Mortgage Loan" (the "Birch Run Companion Mortgage Loan Noteholder") and Allied
as the holder of the mortgage note for the Mortgage Loan identified therein as
the "MJ Ocala Hilton Companion Mortgage Loan" (the "MJ Ocala Hilton Companion
Mortgage Loan Noteholder"). Capitalized terms used but not otherwise defined
herein have the respective meanings assigned to them in the Pooling and
Servicing Agreement as in full force and effect on the Closing Date (as defined
in Section 1 hereof). It is anticipated that SBMS VII will transfer the Mortgage
Loan to the Trust contemporaneously with its purchase of the Mortgage Loan
hereunder.
The Depositor will acquire certain of the Other Loans from Salomon
Brothers Realty Corp. ("SBRC"), certain of the Other Loans from Greenwich
Capital Financial Products,
Inc. ("GCFP") and the remaining Other Loans from Artesia Mortgage Capital
Corporation ("AMCC"; and, together with SBRC and GCFP, the "Other Loan
Sellers").
SBMS VII intends to sell the Registered Certificates to Xxxxxxx
Xxxxx Xxxxxx Inc. ("SSBI"), Greenwich Capital Markets, Inc. ("Greenwich
Capital"), Credit Suisse First Boston Corporation ("CSFB"), X.X. Xxxxxx
Securities Inc. ("X.X. Xxxxxx") and First Union Securities, Inc. ("Wachovia
Securities") (collectively, in such capacity, the "Underwriters"), pursuant to
an underwriting agreement, dated as of the date hereof (the "Underwriting
Agreement"), between SBMS VII and the Underwriters; and SBMS VII intends to sell
the remaining Certificates (the "Non-Registered Certificates") to SSBI, pursuant
to a certificate purchase agreement, dated as of the date hereof (the
"Certificate Purchase Agreement"), between SBMS VII and SSBI. The Registered
Certificates are more fully described in the prospectus dated December 10, 2001
(the "Basic Prospectus"); and the supplement to the Basic Prospectus dated
December 18, 2001 (the "Prospectus Supplement"; and, together with the Basic
Prospectus, the "Prospectus"), as each may be amended or supplemented any time
hereafter. Certain classes of the Non-Registered Certificates are more fully
described in the private placement memorandum dated December 18, 2001 (the
"Memorandum"), as it may be amended or supplemented at any time hereafter.
Allied will indemnify SBMS VII, SSBI, Greenwich Capital, CSFB, X.X.
Xxxxxx, Wachovia Securities and certain related parties with respect to the
disclosure regarding the Mortgage Loan and Allied contained in the Prospectus,
the Memorandum and certain other disclosure documents and offering materials
relating to the Certificates, pursuant to an indemnification agreement dated as
of December 18, 2001 (the "Indemnification Agreement"), among Allied, SBMS VII,
SSBI, Greenwich Capital, CSFB, X.X. Xxxxxx and Wachovia Securities.
Now, therefore, in consideration of the premises and the mutual
agreements set forth herein, the parties agree as follows:
SECTION 1. Agreement to Purchase.
The Seller agrees to sell, assign, transfer and otherwise convey
(without recourse) to the Purchaser, and the Purchaser agrees to purchase,
subject to the terms and conditions set forth herein, the Mortgage Loan. The
purchase and sale of the Mortgage Loan shall take place on December 27, 2001, or
such other date as shall be mutually acceptable to the parties hereto (the
"Closing Date"). As of the close of business on its due date in December 2001
(the "Cut-off Date"), the Mortgage Loan will have a principal balance, after
application of all payments of principal due on the Mortgage Loan on or before
such date, whether or not received, of $6,592,596, subject to a variance of plus
or minus 5%. The purchase price for the Mortgage Loan shall be as set forth in
the price confirmation between the Seller and the Purchaser, and will include
accrued interest on the Mortgage Loan at its Net Mortgage Rate from and
including December 1, 2001 to but not including the Closing Date, and shall be
paid to the Seller by wire transfer in immediately available funds on the
Closing Date (or by such other method as shall be mutually acceptable to the
parties hereto).
2
SECTION 2. Conveyance of the Mortgage Loan.
(a) Effective as of the Closing Date, subject only to its receipt
and acceptance of the purchase price referred to in Section 1 hereof, the Seller
does hereby transfer, assign, set over and otherwise convey to the Purchaser,
without recourse but subject to the terms of this Agreement, all the right,
title and interest of the Seller in and to the Mortgage Loan identified on the
Mortgage Loan Schedule as of such date, including, without limitation, all of
the Seller's right, title and interest in and to the proceeds of any related
title, hazard or other insurance policies received by the Seller on or with
respect to the Mortgage Loan after the Cut-off Date and any Additional
Collateral. The Seller shall, within 15 days of the discovery of an error on the
Mortgage Loan Schedule, amend the Mortgage Loan Schedule and deliver to the
Purchaser or its designee an amended Mortgage Loan Schedule. The Mortgage Loan
Schedule, as it may be amended, shall conform to the requirements set forth in
this Agreement.
(b) The Purchaser shall be entitled to receive all scheduled
payments of principal and interest due on the Mortgage Loan after the Cut-off
Date, and all other recoveries of principal and interest collected thereon after
the Cut-off Date (other than scheduled payments of principal and interest due on
the Mortgage Loan on or before the Cut-off Date and collected after the Cut-off
Date, which shall belong to the Seller).
(c) On or before the Closing Date, the Seller shall, at its
expense, deliver or cause to be delivered to the Purchaser or its designee: (i)
the Mortgage File and any Additional Collateral (other than reserve funds and
escrow payments) with respect to the Mortgage Loan; (ii) if the Mortgage Loan
has an original principal balance of $15,000,000 or more, and the Borrower is a
single member limited liability company, an Opinion of Counsel to the effect
that such Borrower will not dissolve upon the bankruptcy, dissolution,
liquidation or death of the single member and that applicable law provides that
creditors of the single member may only attach assets of the member, including
membership interests in the Borrower, but not assets of the Borrower; and (iii)
if the Mortgage Loan has an original principal balance of $20,000,000 or more,
an Opinion of Counsel to the effect that the related Borrower will not be
consolidated in any insolvency proceeding involving any other party. Unless the
Purchaser notifies the Seller in writing to the contrary, the designated
recipient of the items described in the preceding sentence shall be the
Custodian.
If the Seller cannot deliver on the Closing Date any original or
certified recorded document or original policy of title insurance which is to be
delivered as part of the related Mortgage File, solely because the Seller is
delayed in making such delivery by reason of the fact that such original or
certified recorded document has not been returned by the appropriate recording
office or such original policy of title insurance has not yet been issued, then
the Seller shall notify the Purchaser, in writing, of such delay (unless the
Trustee shall have provided the Purchaser with an exception report indicating
such delay), and the Seller shall deliver such documents to the Purchaser or its
designee promptly upon the Seller's receipt thereof.
In addition, unless previously delivered by the Seller to the
Purchaser or its designee, the Seller shall, at its expense, deliver to and
deposit with, or cause to be delivered to and deposited with, the Purchaser or
its designee, the following items, within 10 days following the Closing Date
(or, if any of the following items are not in the actual possession of the
Seller,
3
as soon as reasonably practical, but in any event within 30 days, after the
Closing Date): (i) a copy of the Mortgage File for the Mortgage Loan; (ii)
originals or copies of all financial statements, leases, rent rolls and tenant
estoppels in the possession or under the control of the Seller that relate to
the Mortgage Loan and, to the extent they are not required to be a part of the
related Mortgage File in accordance with the definition thereof, originals or
copies of all documents, certificates and opinions in the possession or under
the control of the Seller that were delivered by or on behalf of the related
Borrower in connection with the origination of the Mortgage Loan and that are
necessary for the ongoing servicing and administration of the Mortgage Loan; and
(iii) all unapplied reserve funds and escrow payments in the possession or under
the control of the Seller that relate to the Mortgage Loan, other than those
that are to be retained by a sub-servicer or primary servicer that will continue
to act on behalf of the Purchaser or its servicing agent. Unless the Purchaser
notifies the Seller in writing to the contrary, the designated recipient of the
items described in clauses (i) - (iii) of the preceding sentence shall be the
Master Servicer.
The Seller shall also provide to the Purchaser or its designee the
initial data on the Mortgage Loan (as of the Closing Date or the most recent
earlier date for which such date is available) contemplated by the Loan Set-up
File, the Loan Periodic Update File, the Operating Statement Analysis Report and
the Property File.
(d) The Seller shall be responsible for all reasonable costs and
expenses associated with recording and/or filing any and all assignments and
other instruments of transfer to the Purchaser with respect to the Mortgage Loan
that are required to be recorded or filed, as the case may be, under the Pooling
and Servicing Agreement, provided that the Seller shall not be responsible for
actually recording or filing any such assignments or other instruments of
transfer; and provided, further, that, in those instances where the public
recording office retains the original assignment of Mortgage or assignment of
Assignment of Leases, the Seller shall obtain or cause to be obtained therefrom,
and forward to the Purchaser or its designee, a certified copy of the recorded
original. If any such assignment or other instrument of transfer is lost or
returned unrecorded or unfiled, as the case may be, because of a defect therein,
and the Seller receives notice to such effect from the Purchaser or its
designee, then the Seller shall prepare or cause the preparation of a substitute
therefor or cure such defect, as the case may be. The Seller shall provide the
Purchaser or its designee with a power of attorney to enable it or them to
record any loan documents that the Purchaser has been unable to record.
(e) Under generally accepted accounting principles ("GAAP"), the
Seller shall report its transfer of the Mortgage Loan to the Purchaser, as
provided herein, as a sale of those assets to the Purchaser in exchange for the
consideration specified in Section 1 hereof. In connection with the foregoing,
the Seller shall cause all of its records to reflect such transfer as a sale (as
opposed to a secured loan) and to reflect that the Mortgage Loan is no longer
property of the Seller.
(f) After the Seller's transfer of the Mortgage Loan to the
Purchaser, as provided herein, the Seller shall not take any action inconsistent
with the Purchaser's ownership of the Mortgage Loan. Except for actions that are
the express responsibility of another party hereunder or under the Pooling and
Servicing Agreement, and further except for actions that the Seller is expressly
permitted to complete subsequent to the Closing Date, the Seller shall, on or
4
before the Closing Date, take all actions reasonably required under applicable
law to effectuate the transfer of the Mortgage Loan by the Seller to the
Purchaser.
SECTION 3. Examination of Mortgage Loan Files and Due Diligence
Review.
The Seller shall reasonably cooperate with any examination of the
Mortgage File for, and any other documents and records relating to, the Mortgage
Loan, that may be undertaken by or on behalf of the Purchaser. The fact that the
Purchaser has conducted or has failed to conduct any partial or complete
examination of any of the Mortgage File for, and/or any of such other documents
and records relating to, the Mortgage Loan, shall not affect the Purchaser's
right to pursue any remedy available in equity or at law for a breach of the
Seller's representations and warranties made pursuant to Section 4, except as
such remedies are otherwise limited by the terms of this Agreement.
SECTION 4. Representations, Warranties and Covenants of the Seller.
(a) The Seller hereby makes, as of the Closing Date, to and for
the benefit of the Purchaser, each of the representations and warranties set
forth in Exhibit B.
(b) The Seller hereby makes, as of the Closing Date (or as of such
other date specifically provided in the particular representation or warranty)
to and for the benefit of the Purchaser, each of the representations and
warranties set forth in Exhibit C.
(c) It is understood and agreed that the representations and
warranties set forth in this Section 4 shall survive delivery of the related
Mortgage File to the Purchaser or its designee and shall inure to the benefit of
the Purchaser for so long as the Mortgage Loan remains outstanding,
notwithstanding any restrictive or qualified endorsement or assignment.
SECTION 4A. Representations, Warranties and Covenants of Purchaser.
The Purchaser hereby represents and warrants, as of the Closing
Date, that:
(a) The Purchaser is a duly formed corporation, validly existing
and in good standing under the laws of the State of Delaware.
(b) The Purchaser has the full power and authority to enter into
and consummate all transactions contemplated by this Agreement, has duly
authorized the execution, delivery and performance of this Agreement, and has
duly executed and delivered this Agreement.
(c) This Agreement, assuming due authorization, execution and
delivery by the Seller, constitutes a valid, legal and binding obligation of the
Purchaser, enforceable against the Purchaser in accordance with the terms
hereof, subject to (i) applicable bankruptcy, insolvency, reorganization,
moratorium and other laws affecting the enforcement of creditors' rights
generally, and (ii) general principles of equity, regardless of whether such
enforcement is considered in a proceeding in equity or at law.
5
(d) The execution and delivery of this Agreement by the Purchaser,
and the performance and compliance with the terms of this Agreement by the
Purchaser, will not violate the Purchaser's organizational documents or
constitute a default (or an event which, with notice or lapse of time, or both,
would constitute a default) under, or result in the breach of, any material
agreement or instrument to which it is a party or which is applicable to it or
any of its assets.
(e) The Purchaser is not in violation of, and its execution and
delivery of this Agreement and its performance and compliance with the terms of
this Agreement will not constitute a violation of, any law, any order or decree
of any court or arbiter, or any order, regulation or demand of any federal,
state or local governmental or regulatory authority, which violation, in the
Purchaser's good faith and reasonable judgment, is likely to affect materially
and adversely either the ability of the Purchaser to perform its obligations
under this Agreement or the financial condition of the Purchaser.
(f) No litigation is pending or, to the best of the Purchaser's
knowledge, threatened against the Purchaser which would prohibit the Purchaser
from entering into this Agreement or, in the Purchaser's good faith and
reasonable judgment, is likely to materially and adversely affect either the
ability of the Purchaser to perform its obligations under this Agreement or the
financial condition of the Seller.
(g) No consent, approval, authorization or order of, or filing or
registration with, any state or federal court or governmental agency or body is
required for the consummation by the Purchaser of the transactions contemplated
herein, except for those consents, approvals, authorizations and orders that
previously have been obtained and those filings and registrations that
previously have been completed.
SECTION 5. Notice of Breach; Cure, Repurchase and the Special
Reserve Account.
(a) If the Seller discovers or receives notice that there has been
a Material Breach or a Material Document Defect, then, not later than the end of
the applicable Initial Resolution Period, the Seller shall, subject to
subsection (b) below, (i) cure such Material Breach or Material Document Defect,
as the case may be, in all material respects or (ii) repurchase the Mortgage
Loan at the related Purchase Price provided for in the Pooling and Servicing
Agreement, which Purchase Price shall be deposited or delivered in accordance
with the directions of the Purchaser; provided that if (i) any such Material
Breach or Material Document Defect, as the case may be, does not impact whether
the Mortgage Loan was, is or will continue to be, a "qualified mortgage" within
the meaning of Section 860G(a)(3) of the Code (a "Qualified Mortgage"), (ii)
such Material Breach or Material Document Defect, as the case may be, is capable
of being cured but not within the applicable Initial Resolution Period, (iii)
the Seller has commenced and is diligently proceeding with the cure of such
Material Breach or Material Document Defect, as the case may be, within the
applicable Initial Resolution Period, and (iv) the Seller shall have delivered
to the Purchaser a certification executed on behalf of the Seller by an officer
thereof setting forth the reason that such Material Breach or Material Document
Defect, as the case may be, is not capable of being cured within the applicable
Initial Resolution Period and what actions the Seller is pursuing in connection
with the cure thereof and
6
stating that the Seller anticipates that such Material Breach or Material
Document Defect, as the case may be, will be cured within an additional period
equal to any applicable Resolution Extension Period, then the Seller shall have
an additional period equal to any applicable Resolution Extension Period to
complete such cure or, failing such, to repurchase the Mortgage Loan; and
provided, further, that, on or after June 30, 2003, if the Seller receives
notice of a Material Document Defect with respect to the Mortgage Loan, if such
Material Document Defect constitutes a Recording Omission, and if the Mortgage
Loan is still subject to the Pooling and Servicing Agreement and the Controlling
Class Representative so consents in its sole discretion, then the Seller may
establish a Recording Omission Reserve or a Recording Omission Credit as
contemplated by Section 5(c) in lieu of repurchasing the Mortgage Loan (but in
no event later than such repurchase would have to have been completed and
without diminishing its cure/repurchase obligations in respect of any other
Material Document Defect or Material Breach relating to the Mortgage Loan). Any
such repurchase of the Mortgage Loan shall be on a whole loan, servicing
released basis (subject to any right of a Designated Sub-Servicer to continue to
sub-service the Mortgage Loan as set forth in the related Designated
Sub-Servicer Agreement). The Seller shall have no obligation to monitor the
Mortgage Loan regarding the existence of a Material Breach or a Material
Document Defect, but if the Seller has actual knowledge of a Material Breach or
Material Document Defect with respect to the Mortgage Loan, it will notify the
Purchaser.
If a Material Document Defect exists with respect to the Mortgage
Loan, if such Material Document Defect consists of the Seller's failure to
deliver any related Specially Designated Mortgage Loan Document on or before the
Closing Date, and if the Seller escrows with the Purchaser or its designee, in
accordance with the Pooling and Servicing Agreement as in full force and effect
on the Closing Date, within 15 days of the Closing Date, cash in the amount of
25% of the Cut-off Date Principal Balance of the Mortgage Loan (such cash
amount, the "Purchase Price Security Deposit"), then the Initial Resolution
Period applicable to the remediation of such Material Document Defect shall be
extended until the 30th day following the Closing Date. Any Purchase Price
Security Deposit shall be maintained in an account substantially similar to the
Special Reserve Account (as defined below) and will be subject to investment at
the direction and for the benefit of the Seller in substantially the same
manner, and subject to substantially the same conditions, as funds in the
Special Reserve Account. The Seller may obtain a release of the Purchase Price
Security Deposit for the Mortgage Loan (net of any amounts payable therefrom
pursuant to the Pooling and Servicing Agreement as in full force and effect on
the Closing Date), together with any related investment income, upon the
Mortgage Loan's being paid in full or otherwise satisfied, liquidated or removed
from the Trust Fund or upon the subject Material Document Defect being remedied
in all material respects.
If the Mortgage Loan is to be repurchased as contemplated by this
Section 5(a), the Seller shall amend the Mortgage Loan Schedule to reflect the
removal of the Defective Mortgage Loan and shall forward such amended schedule
to the Purchaser.
Except with respect to Breaches related to requirements that
Mortgage Loan Documents provide for the Borrower to pay certain costs, it is
understood and agreed that the obligations of the Seller set forth in this
Section 5(a) to cure a Material Breach or a Material Document Defect or
repurchase the Mortgage Loan, constitute the sole remedies available to the
Purchaser with respect to a Breach or Document Defect. With respect to Breaches
related to the
7
provisions of Mortgage Loan Documents requiring that the related Borrower bear
the costs and expenses associated with any particular action or matter under
such Mortgage Loan Document(s), then the Seller shall within 90 days of the
Seller's receipt of written direction from the Purchaser or its servicing agent,
pay the amount of any such costs and expenses borne by the Trust that are the
basis of such Breach. Upon its making such payments, the Seller shall be deemed
to have cured such Breach in all respects. Provided such payment is made in
full, this paragraph describes the sole remedy available to the
Certificateholders and the Trustee on their behalf regarding any such Breach,
regardless of whether it constitutes a Material Breach, and the Seller shall not
be obligated to repurchase the Mortgage Loan on account of such Breach or
otherwise cure such Breach.
If any REO Property in respect of the Mortgage Loan is subject to
the Pooling and Servicing Agreement, and if there exists with respect to such
REO Property any alleged Material Breach or Material Document Defect, then the
Seller shall be notified promptly and in writing by the applicable Special
Servicer of any offer that it receives to purchase such REO Property. Upon the
receipt of such notice by the Seller, the Seller shall then have the right to
repurchase such REO Property from the Trust at a purchase price equal to the
amount of such offer. The Seller shall have three (3) Business Days to purchase
such REO Property from the date that it was notified of such offer. The
applicable Special Servicer shall be obligated to provide the Seller with any
appraisal or other third-party reports relating to such REO Property within its
possession to enable the related Mortgage Loan Seller to evaluate such REO
Property. Any sale of the Mortgage Loan, or foreclosure upon the Mortgage Loan
and sale of any related REO Property, to a Person other than the Seller shall be
(i) without recourse of any kind (either expressed or implied) by such Person
against the Seller and (ii) without representation or warranty of any kind
(either expressed or implied) by the Seller to or for the benefit of such
Person.
The fact that a Material Document Defect or Material Breach is not
discovered until after foreclosure (but in all instances prior to the sale of
the Mortgage Loan or any related REO Property) shall not prejudice any claim of
the Trust against the Seller for repurchase of the Mortgage Loan or any related
REO Property. The provisions of this Section 5 regarding remedies against the
Seller for a Material Breach or Material Document Defect with respect to the
Mortgage Loan shall also apply to any related REO Property.
Notwithstanding the Seller's failure to correct or cure the Material
Document Defect or Material Breach or purchase any related REO Property, the
provisions above regarding notice of offers related to such REO Property and the
Seller's right to purchase such REO Property shall apply. If a court of
competent jurisdiction issues a final order that the Seller is or was obligated
to repurchase the Mortgage Loan or any related REO Property or the Seller
otherwise accepts liability, then, after the expiration of any applicable appeal
period, but in no event later than the termination of the Trust pursuant to the
Pooling and Servicing Agreement, the Seller will be obligated to pay to the
Trust the amount, if any, by which the applicable Purchase Price exceeds any
Liquidation Proceeds received upon such liquidation (including those arising
from any sale to the Seller); provided that the prevailing party in such action
shall be entitled to recover all costs, fees and expenses (including reasonable
attorneys' fees) related thereto.
8
(b) It shall be a condition to any repurchase of the Mortgage Loan
by the Seller pursuant to Section 5(a) that (i) the Purchaser shall have
executed and delivered such instruments of transfer or assignment then presented
to it by the Seller, in each case without recourse, as shall be necessary to
vest in the Seller the legal and beneficial ownership of the Mortgage Loan
(including any property acquired in respect thereof or proceeds of any insurance
policy with respect thereto), to the extent that such ownership interest was
transferred to the Purchaser hereunder and (ii) the Purchaser or its assignee
shall release or cause the release to the Seller or its designee of the Mortgage
File, any Additional Collateral, all insurance policies and proceeds thereunder,
the Servicing File and any Escrow Payments and/or Reserve Funds held by or on
behalf of the Purchaser (or its assignee) with respect to the Mortgage Loan.
(c) If, on or after June 30, 2003, the Seller receives notice of a
Material Document Defect with respect to the Mortgage Loan, which Material
Document Defect constitutes a Recording Omission, then the Seller may, with the
consent of the Purchaser or its designees, which consent may be granted or
withheld in its sole discretion, in lieu of repurchasing the Mortgage Loan (as
and to the extent contemplated by Section 5(a)), but in no event later than such
repurchase would have to have been completed, establish a Recording Omission
Credit or a Recording Omission Reserve with the Master Servicer in accordance
with the Pooling and Servicing Agreement. In furtherance of the preceding
sentence, the Purchaser or its designee shall establish one or more accounts
(individually and collectively, the "Special Reserve Account"), each of which
shall be an Eligible Account, and the Purchaser or its designee shall deposit
any Recording Omission Reserve into the Special Reserve Account within one
Business Day of receipt. The Seller may direct the Purchaser to invest or cause
the investment of the funds deposited in the Special Reserve Account in one or
more Permitted Investments that bear interest or are sold at a discount and that
mature, unless payable on demand, no later than the Business Day prior to the
next Master Servicer Remittance Date. The Purchaser shall act upon the written
instructions of the Seller with respect to the investment of funds in the
Special Reserve Account in such Permitted Investments, provided that in the
absence of appropriate written instructions from the Seller, the Purchaser shall
have no obligation to invest or direct the investment of funds in such Special
Reserve Account. All income and gain realized from the investment of funds
deposited in such Special Reserve Account shall be for the benefit of the Seller
and shall be withdrawn by the Purchaser or its designee and remitted to the
Seller on each Master Servicer Remittance Date (net of any losses incurred), and
the Seller shall remit to the Purchaser from the Seller's own funds for deposit
into such Special Reserve Account the amount of any realized losses (net of
realized gains) in respect of such Permitted Investments immediately upon
realization of such net losses and receipt of written notice thereof from the
Purchaser; provided that the Seller shall not be required to make any such
deposit for any realized loss which is incurred solely as a result of the
insolvency of the federal or state depository institution or trust company that
holds such Special Reserve Account. Neither the Purchaser nor any of its
designees shall have any responsibility or liability with respect to the
investment directions of the Seller, the investment of funds in the Special
Reserve Account in Permitted Investments or any losses resulting therefrom. A
Recording Omission Credit shall (i) entitle the Purchaser or its designee to
draw upon the Recording Omission Credit on behalf of the Purchaser upon
presentation of only a sight draft or other written demand for payment, (ii)
permit multiple draws by the Purchaser or its designee, and (iii) be issued by
such issuer and containing such other terms as the Purchaser or its designee may
reasonably require to make such Recording Omission Credit reasonably equivalent
security to a Recording Omission
9
Reserve in the same amount. Once a Recording Omission Reserve or Recording
Omission Credit is established with respect to the Mortgage Loan, the Purchaser
or its designee shall, from time to time, withdraw funds from the related
Special Reserve Account or draw upon the related Recording Omission Credit, as
the case may be, and apply the proceeds thereof to pay the losses or expenses
directly incurred by the Purchaser or its designee as a result of a Recording
Omission. The Recording Omission Reserve or Recording Omission Credit or any
unused balance thereof with respect to the Mortgage Loan will be released to the
Seller by the Purchaser upon the earlier of the Seller's cure of all Recording
Omissions with respect to the Mortgage Loan (provided that the Purchaser has
been reimbursed with respect to all losses and expenses relating to Recording
Omissions with respect to the Mortgage Loan) or the Mortgage Loan no longer
being a part of the Trust Fund under the Pooling and Servicing Agreement.
SECTION 6. Closing.
(a) The closing of the sale of the Mortgage Loan (the "Closing")
shall be held at the offices of Sidley Xxxxxx Xxxxx & Xxxx, 000 Xxxxx Xxxxxx,
Xxx Xxxx, Xxx Xxxx 00000 at 10:00 a.m., New York City time, on the Closing Date.
(b) The Closing shall be subject to each of the following
conditions:
(i) All of the representations and warranties of the Seller
made pursuant to Section 4 of this Agreement shall be true and correct in
all material respects as of the Closing Date or such other date as
specified in Exhibit C;
(ii) All documents specified in Section 7 of this Agreement
(the "Closing Documents"), in such forms as are reasonably acceptable to
the Purchaser and, in the case of the Pooling and Servicing Agreement
(insofar as it affects the obligations of the Seller hereunder), to the
Seller, shall be duly executed and delivered by all signatories as
required pursuant to the respective terms thereof;
(iii) The Seller shall have delivered and released to the
Purchaser or its designee, all documents and funds required to be so
delivered pursuant to Section 2 of this Agreement;
(iv) All other terms and conditions of this Agreement
required to be complied with by the Seller and the Purchaser, including,
without limitation, in the case of the Purchaser, payment of the purchase
price, on or before the Closing Date shall have been complied with, and
the Seller shall have the ability to comply with all terms and conditions
and perform all duties and obligations required to be complied with or
performed after the Closing Date;
(v) The Seller shall have paid all fees, costs and expenses
payable by it to the Purchaser or otherwise pursuant to this Agreement;
and
(vi) Neither the Underwriting Agreement nor the Certificate
Purchase Agreement shall have been terminated in accordance with its
terms.
10
(c) Both parties agree to use their best efforts to perform their
respective obligations hereunder in a manner that will enable the Purchaser to
purchase the Mortgage Loan on the Closing Date.
SECTION 7. Closing Documents.
The Closing Documents shall consist of the following:
(a) this Agreement duly executed and delivered by the Purchaser
and the Seller;
(b) the Indemnification Agreement duly executed and delivered by
the Seller, the Purchaser and each of SSBI, Greenwich Capital, CSFB, X.X. Xxxxxx
and Wachovia Securities.
(c) the Pooling and Servicing Agreement duly executed and
delivered by SBMS VII, the Master Servicer, the Special Servicer and the
Trustee;
(d) an Officer's Certificate substantially in the form of Exhibit
D-1 hereto, executed by the Secretary or an assistant secretary of the Seller,
in his or her individual capacity, and dated the Closing Date, and upon which
the Purchaser, SSBI, Greenwich Capital, CSFB, X.X. Xxxxxx, Wachovia Securities
and the Rating Agencies (collectively, the "Interested Parties") may rely,
attaching thereto as exhibits the organizational documents of the Seller, as in
full force and effect on the date hereof, and the Resolutions described in
clause (g) below;
(e) a certificate of good standing with respect to the Seller
issued by the Secretary of State of the State of Maryland dated not earlier than
10 days prior to the Closing Date;
(f) a certificate of the Seller substantially in the form of
Exhibit D-2 hereto, executed by an executive officer or authorized signatory of
the Seller and dated the Closing Date, and upon which the Interested Parties may
rely;
(g) resolutions of the Seller authorizing the transactions
contemplated by this Agreement, which resolutions will be in full force and
effect, and will not have been rescinded, as of the Closing Date;
(h) a written opinion of Xxxxxxxxxx Xxxxxxxx LLP, as special
counsel for the Seller, substantially in the form of Exhibit D-3A hereto (with
any modifications required by any Rating Agency, and subject to such reasonable
assumptions, qualifications and limitations as may be requested by counsel for
the Seller and acceptable to counsel for the Purchaser), dated the Closing Date
and addressed to the Purchaser, each of the other parties to the Pooling and
Servicing Agreement and each of the other Interested Parties;
(i) a written opinion of Xxxxxxxxxx Xxxxxxxx LLP, as special
counsel for the Seller, substantially in the form of Exhibit D-3B hereto (with
any modifications required by any Rating Agency, and subject to such reasonable
assumptions, qualifications and limitations as may be requested by counsel for
the Seller and acceptable to counsel for the Purchaser), dated
11
the Closing Date and addressed to the Purchaser, each of the other parties to
the Pooling and Servicing Agreement and each of the other Interested Parties;
(j) such other written opinions as may be required by either
Rating Agency (including, without limitation, a favorable opinion as to the
"true sale" characterization of the transfer of the Mortgage Loan contemplated
by this Agreement);
(k) a written letter of Xxxxxxxxxx Xxxxxx & Xxxxxxx LLP, as
special counsel to the Seller, substantially in the Form of Exhibit D-3C,
relating to the disclosure in the Prospectus regarding the Mortgage Loan and
Allied, dated the Closing Date and addressed to the Purchaser and each of the
other Interested Parties (except for the Rating Agencies); and
(l) one or more accountants' comfort letters, addressed, and in
form and substance reasonably acceptable, to SSBI, Greenwich Capital, CSFB, X.X.
Xxxxxx and Wachovia Securities, relating to the information regarding the
Mortgage Loans contained in the Prospectus and Memorandum that is of a
statistical nature.
SECTION 8. Costs.
Any costs and expenses incurred by either party hereto in connection
with the transactions contemplated hereunder shall be borne by such party,
without right of reimbursement from the other party hereto.
SECTION 9. Notices.
All demands, notices and communications hereunder shall be in
writing and shall be deemed to have been duly given if personally delivered to
or mailed, by registered mail, postage prepaid, by overnight mail or courier
service, or transmitted by facsimile and confirmed by a similar mailed writing,
if to the Purchaser, addressed to the Purchaser at 000 Xxxxxxxxx Xxxxxx, Xxx
Xxxx, Xxx Xxxx 00000, attention: Xxxxxx Xxxxx, facsimile no.: 000-000-0000, or
to such other address or facsimile number as may hereafter be furnished to the
Seller in writing by the Purchaser; and, if to the Seller, addressed to the
Seller at 0000 Xxxxxxxxxxxx Xxxxxx, X.X., 0xx Xxxxx, Xxxxxxxxxx, XX 00000,
attention: Xxxx Xxxxxxxx, facsimile no.: 000-000-0000, or to such other address
or facsimile number as may hereafter be furnished to the Purchaser in writing by
the Seller.
SECTION 10. Characterization.
The parties hereto agree that it is their express intent that the
conveyance contemplated by this Agreement be, and be treated for all purposes
as, a sale by the Seller of all the Seller's right, title and interest in and to
the Mortgage Loan. The parties hereto further agree that it is not their
intention that such conveyance be deemed a pledge of the Mortgage Loan by the
Seller to secure a debt or other obligation of the Seller. However, in the event
that, notwithstanding the intent of the parties, the Mortgage Loan is held to
continue to be property of the Seller, then: (a) this Agreement shall be deemed
to be a security agreement under applicable law; (b) the transfer of the
Mortgage Loan provided for herein shall be deemed to be a grant by the Seller to
the Purchaser of a first priority security interest in all of the Seller's
right, title and interest in and to the Mortgage Loan and all amounts payable to
the holder(s) of those assets in
12
accordance with the terms thereof (other than scheduled payments of interest and
principal due on or before the Cut-off Date) and all proceeds of the conversion,
voluntary or involuntary, of the foregoing into cash, instruments, securities or
other property; (c) the assignment by SBMS VII to the Trustee of its interests
in the Mortgage Loan as contemplated by Section 16 hereof shall be deemed to be
an assignment of any security interest created hereunder; (d) the possession by
the Purchaser or any successor thereto of the related Mortgage Note and such
other items of property as constitute instruments, money, negotiable documents
or chattel paper shall be deemed to be "possession by the secured party" for
purposes of perfecting the security interest pursuant to Section 9-305 of the
Maryland Uniform Commercial Code and the Uniform Commercial Code of any other
applicable jurisdiction; and (e) notifications to, and acknowledgments, receipts
or confirmations from, persons or entities holding such property, shall be
deemed notifications to, or acknowledgments, receipts or confirmations from,
securities intermediaries, bailees or agents (as applicable) of the Purchaser or
any successor thereto for the purpose of perfecting such security interest under
applicable law. The Seller and the Purchaser shall, to the extent consistent
with this Agreement, take such actions, including the filing of UCC financing
statements, as may be necessary to ensure that, if this Agreement were deemed to
create a security interest in the Mortgage Loan, such security interest would be
deemed to be a perfected security interest of first priority under applicable
law and will be maintained as such throughout the term of this Agreement and the
Pooling and Servicing Agreement.
SECTION 11. Representations, Warranties and Agreements to Survive
Delivery.
All representations, warranties and agreements contained in this
Agreement, incorporated herein by reference or contained in the certificates of
officers of the Seller submitted pursuant hereto, shall remain operative and in
full force and effect and shall survive delivery of the Mortgage Loan by the
Seller to the Purchaser.
SECTION 12. Severability of Provisions.
Any part, provision, representation, warranty or covenant of this
Agreement that is prohibited or which is held to be void or unenforceable shall
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof. Any part, provision,
representation, warranty or covenant of this Agreement that is prohibited or
unenforceable or is held to be void or unenforceable in any particular
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
particular jurisdiction shall not invalidate or render unenforceable such
provision in any other jurisdiction. To the extent permitted by applicable law,
the parties hereto waive any provision of law which prohibits or renders void or
unenforceable any provision hereof.
SECTION 13. Counterparts.
This Agreement may be executed in any number of counterparts, each
of which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.
13
SECTION 14. GOVERNING LAW.
THIS AGREEMENT AND THE RIGHTS, DUTIES, OBLIGATIONS AND
RESPONSIBILITIES OF THE PARTIES HERETO SHALL BE GOVERNED IN ACCORDANCE WITH THE
LAWS AND DECISIONS OF THE STATE OF NEW YORK (WITHOUT REGARD TO CONFLICTS OF LAW
PRINCIPLES). THE PARTIES HERETO INTEND THAT THE PROVISIONS OF SECTION 5-1401 OF
THE NEW YORK GENERAL OBLIGATIONS LAW SHALL APPLY TO THIS AGREEMENT.
SECTION 15. Further Assurances.
The Seller and the Purchaser agree to execute and deliver such
instruments and take such further actions as the other party may, from time to
time, reasonably request in order to effectuate the purposes and to carry out
the terms of this Agreement.
SECTION 16. Successors and Assigns.
The rights and obligations of the Seller under this Agreement shall
not be assigned by the Seller without the prior written consent of the
Purchaser, except that any person into which the Seller may be merged or
consolidated, or any corporation or other entity resulting from any merger,
conversion or consolidation to which the Seller is a party, or any person
succeeding to all or substantially all of the business of the Seller, shall be
the successor to the Seller hereunder. In connection with its transfer of the
Mortgage Loan to the Trust as contemplated by the recitals hereto, SBMS VII is
expressly authorized to assign its rights and obligations under this Agreement,
in whole or in part, to the Trustee for the benefit of the registered holders
and beneficial owners of the Certificates. To the extent of any such assignment,
the Trustee (including acting through the Master Servicer and Special Servicer
pursuant to the terms of the Pooling and Servicing Agreement), for the benefit
of the registered holders and beneficial owners of the Certificates, shall be
the Purchaser hereunder. In connection with the transfer of the Mortgage Loan by
the Trust as contemplated by the terms of the Pooling and Servicing Agreement,
the Trustee, for the benefit of the registered holders and beneficial owners of
the Certificates, is expressly authorized to assign its rights and obligations
under this Agreement, in whole or in part, to the transferee of the Mortgage
Loan. To the extent of any such assignment, such transferee shall be the
Purchaser hereunder. Subject to the foregoing, this Agreement shall bind and
inure to the benefit of and be enforceable by the Seller and the Purchaser, and
their respective successors and permitted assigns.
SECTION 17. Amendments.
(a) No term or provision of this Agreement may be waived or
modified unless such waiver or modification is in writing and signed by a duly
authorized officer of the party against whom such waiver or modification is
sought to be enforced.
(b) Notwithstanding any contrary provision of this Agreement or
the Pooling and Servicing Agreement, no amendment of the Pooling and Servicing
Agreement executed after the Closing Date that increases the obligations of or
otherwise adversely affects the Seller, shall be effective against the Seller.
14
SECTION 18. Entire Agreement.
Except as otherwise expressly contemplated hereby, this Agreement
constitutes the entire agreement and understanding of the parties with respect
to the matters addressed herein, and this Agreement supersedes any prior
agreements and/or understandings, written or oral, with respect to such matters.
[SIGNATURE PAGE FOLLOWS]
15
IN WITNESS WHEREOF, the Seller and the Purchaser have caused their
names to be signed hereto by their respective duly authorized officers as of the
date first above written.
ALLIED CAPITAL CORPORATION
By:________________________
Name:
Title:
SALOMON BROTHERS MORTGAGE
SECURITIES VII, INC.
By:________________________
Name:
Title:
EXHIBIT A
MORTGAGE LOAN SCHEDULE
PROPERTY
CONTROL SIZE UNIT
NUMBER LOAN/PROPERTY NAME LOAN NUMBER ORIGINATOR PROPERTY ADDRESS CITY STATE ZIP CODE PROPERTY SIZE TYPE
145 MJ Ocala Hilton 4010669 ALD 0000 Xxxxxxxxx 00xx Xxxxxx Xxxxx XX 00000 197 Rooms
CROSS
COLLATERALIZED
CROSS MORTGAGE LOAN
COLLATERALIZED GROUP AGGREGATE ORIGINAL MASTER INTEREST
CONTROL (MORTGAGE LOAN CUT-OFF DATE OWNERSHIP PRINCIPAL MORTGAGE SERVICING RATE ACCRUAL
NUMBER LOAN / PROPERTY NAME GROUP) PRINCIPAL BALANCE INTEREST BALANCE RATE FEE RATE TYPE METHOD
145 MJ Ocala Hilton No 6,592,596 Fee Simple 6,600,000 7.6000% 0.0825% Fixed Actual/360
ANTICIPATED SCHEDULED
CONTROL LOAN NOTE REPAYMENT MATURITY
NUMBER TYPE DATE DATE DATE
145 Balloon 12/01/01 NAP 07/01/10
ORIGINAL STATED
TERM TO ORIGINAL STATED
MONTHLY DEBT MATURITY/ AMORTIZATION REMAINING TERM REMAINING CUT-OFF DATE
CONTROL SERVICE ARD TERM TO MATURITY/ AMORTIZATION PRINCIPAL LOAN BALANCE AT
NUMBER LOAN/PROPERTY NAME PAYMENT (MONTHS) (MONTHS) ARD (MONTHS) TERM (MONTHS) BALANCE MATURITY/ARD
145 MJ Ocala Hilton 49,203.53 104 300 103 299 6,592,596.47 5,596,184.40
YIELD YIELD PREPAYMENT YIELD YIELD
MAINTENANCE MAINTENANCE PENALTY PREPAYMENT MAINTENANCE MAINTENANCE
CONTROL DEFEASEANCE DEFEASEANCE PERIOD PERIOD START PENALTY CALCULATION INTEREST
NUMBER LOAN / PROPERTY NAME START DATE END DATE START DATE END DATE DATE END DATE METHOD RATE
145 MJ Ocala Hilton 02/01/04 01/31/10 NAP NAP NAP NAP NAP NAP
YIELD YIELD
MAINTENANCE MAINTENANCE
INTEREST RATE INTEREST
CONVERTED TO RATE
CONTROL MONTHLY REFERENCE
NUMBER MORTGAGE RATE DATE
145 NAP NAP
A-1
EXHIBIT B
REPRESENTATIONS AND WARRANTIES WITH RESPECT TO THE SELLER
The Seller hereby represents and warrants that, as of the Closing
Date:
(a) The Seller is a corporation duly organized, validly existing
and in good standing under the laws of the State of Maryland.
(b) The execution and delivery by the Seller of this Agreement,
the execution (including, without limitation, by facsimile or machine signature)
and delivery of any and all documents contemplated by this Agreement, including,
without limitation, endorsements of Mortgage Notes, and the performance and
compliance by the Seller with the terms of this Agreement will not: (i) violate
the Seller's organizational documents; or (ii) constitute a default (or an event
which, with notice or lapse of time, or both, would constitute a default) under,
or result in the breach of, any indenture, agreement or other instrument to
which the Seller is a party or by which it is bound or which is applicable to it
or any of its assets, which default or breach, in the Seller's good faith and
reasonable judgment, is likely to affect materially and adversely either the
ability of the Seller to perform its obligations under this Agreement or the
financial condition of the Seller.
(c) The Seller has full power and authority to enter into and
fully perform under this Agreement, has duly authorized the execution, delivery
and performance of this Agreement, and has duly executed and delivered this
Agreement.
(d) The Seller has the full right, power and authority to sell,
assign, transfer, set over and convey the Mortgage Loan (and, in the event that
the related transaction is deemed to constitute a loan secured by all or part of
the Mortgage Loan, to pledge the Mortgage Loan) in accordance with, and under
the conditions set forth in, this Agreement.
(e) Assuming due authorization, execution and delivery hereof by
the Purchaser, this Agreement constitutes a valid, legal and binding obligation
of the Seller, enforceable against the Seller in accordance with the terms
hereof, subject to: (i) applicable bankruptcy, insolvency, reorganization,
moratorium and other laws affecting the enforcement of creditors' rights
generally, and (ii) general principles of equity, regardless of whether such
enforcement is considered in a proceeding in equity or at law.
(f) The Seller is not in violation of, and its execution and
delivery of this Agreement and its performance and compliance with the terms
hereof will not constitute a violation of, any law, any order or decree of any
court or arbiter, or any order, regulation or demand of any federal, state or
local governmental or regulatory authority, which violation, in the Seller's
good faith and reasonable judgment, is likely to affect materially and adversely
either the ability of the Seller to perform its obligations under this Agreement
or the financial condition of the Seller.
(g) There are no actions, suits or proceedings pending or, to the
best of the Seller's knowledge, threatened against the Seller which, if
determined adversely to the Seller, would prohibit the Seller from entering into
this Agreement or, in the Seller's good faith and reasonable judgment, would be
likely to affect materially and adversely either the ability of the Seller to
perform its obligations hereunder or the financial condition of the Seller.
B-1
(h) No consent, approval, authorization or order of, or filing or
registration with, any state or federal court or governmental agency or body is
required for the consummation by the Seller of the transactions contemplated
herein, except for those consents, approvals, authorizations and orders that
previously have been obtained and those filings and registrations that
previously have been completed, and except for those filings and recordings of
Mortgage Loan documents and assignments thereof that are contemplated by the
Pooling and Servicing Agreement to be completed after the Closing Date.
(i) The transfer of the Mortgage Loan to the Purchaser as
contemplated herein is not subject to any bulk transfer or similar law in effect
in any applicable jurisdiction.
(j) The Mortgage Loan does not constitute all or substantially all
of the assets of the Seller.
(k) The Seller is not transferring the Mortgage Loan to the
Purchaser with any intent to hinder, delay or defraud its present or future
creditors.
(l) The Seller will be solvent at all relevant times prior to, and
will not be rendered insolvent by, its transfer of the Mortgage Loan to the
Purchaser, as contemplated herein.
(m) After giving effect to its transfer of the Mortgage Loan to
the Purchaser, as provided herein, the value of the Seller's assets, either
taken at their present fair saleable value or at fair valuation, will exceed the
amount of the Seller's debts and obligations, including contingent and
unliquidated debts and obligations of the Seller, and the Seller will not be
left with unreasonably small assets or capital with which to engage in and
conduct its business.
(n) The Seller does not intend to, and does not believe that it
will, incur debts or obligations beyond its ability to pay such debts and
obligations as they mature.
(o) The consideration to be received by the Seller in connection
with its transfer of the Mortgage Loan to the Purchaser, as provided herein,
constitutes at least reasonably equivalent value and fair consideration for the
Mortgage Loan.
(p) No proceedings looking toward liquidation, dissolution or
bankruptcy of the Seller are pending or contemplated.
B-2
EXHIBIT C
All exceptions to any representation and warranty should be
scheduled on a schedule or exhibit denominated to match the Section number of
the specific representation and warranty, e.g., Schedule C-12(a). Each such
Schedule shall set forth the specific exception or exceptions to the specific
part or parts of the related representation and warranty and not simply list the
loan. The standard for repurchase is to be any breach that materially and
adversely effects the value of the Mortgage Loan, the Mortgaged Property, the
interests of the Trust/Trustee in the Mortgage Loan or the interests of the
Certificateholders, or any one of them, including any economic interest, in the
Mortgage Loan.
For purposes of these representations and warranties, the phrases
"to the knowledge of the Seller" or "to the Seller's knowledge" shall mean,
except where otherwise expressly set forth below, the actual state of knowledge
of the Seller or any servicer acting on its behalf regarding the matters
referred to, in each case (i) solely in the case of the Seller, after having
conducted such inquiry and due diligence into such matters as would be
customarily performed by prudent institutional commercial or multifamily
mortgage lenders, as applicable, and in all events as required by the Seller's
underwriting standards, at the time of the Seller's origination or acquisition,
as applicable, of the particular Mortgage Loan and (ii) subsequent to such
origination, utilizing the servicing and monitoring practices customarily
utilized by prudent commercial mortgage loan servicers with respect to
securitizable commercial or multifamily, as applicable, mortgage loans, and the
phrases "to the actual knowledge of the Seller" or "to the Seller's actual
knowledge" shall mean, except where otherwise expressly set forth below, the
actual state of knowledge of the Seller or any servicer acting on its behalf
without any express or implied obligation to make inquiry. All information
contained in documents which are part of or required to be part of a Mortgage
File shall be deemed to be within the knowledge and the actual knowledge of the
Seller. Wherever there is a reference to receipt by, or possession of, the
Seller of any information or documents, or to any action taken by the Seller or
not taken by the Seller or its agents or employees, such reference shall include
the receipt or possession of such information or documents by, or the taking of
such action or the not taking such action by, either of the Seller or any
servicer acting on its behalf.
REPRESENTATIONS AND WARRANTIES
WITH RESPECT TO THE MORTGAGE LOAN
The Seller hereby represents and warrants that, as of the date
hereinbelow specified or, if no such date is specified, as of the Closing Date:
1. Mortgage Loan Schedule. The information set forth in the
Mortgage Loan Schedule with respect to the Mortgage Loan is true and correct in
all material respects as of the respective Due Date for the Mortgage Loan in
December 2001.
2. Ownership of Mortgage Loan. Immediately prior to the transfer
of the Mortgage Loan to the Purchaser, the Seller had good and marketable title
to, and was the sole owner of, the Mortgage Loan. The Seller has full right,
power and authority to sell, transfer and assign the Mortgage Loan to, or at the
direction of, the Purchaser free and clear of any and all pledges, liens,
claims, charges, security interests, participation interests and/or other
interests and
C-1
encumbrances. Subject to the completion of all recording and filing contemplated
hereby and by the Pooling and Servicing Agreement, the Seller will have validly
and effectively conveyed to the Purchaser all legal and beneficial interest in
and to the Mortgage Loan free and clear of any pledge, lien, claim, charge,
security interest or other encumbrance, or participation interest or any other
ownership interest, or any other interest of any kind or nature whatsoever,
except for the servicing rights identified on Schedule C-42. The sale of the
Mortgage Loan to the Purchaser or its designee does not require the Seller to
obtain any governmental or regulatory approval or consent that has not been
obtained. The related Mortgage Note is, or shall be as of the Closing Date,
properly endorsed to the Purchaser or its designee and each such endorsement is
genuine.
3. Payment Record. No scheduled payment of principal and interest
due under the Mortgage Loan on the Due Date in December 2001 or on any Due Date
in the twelve-month period immediately preceding the Due Date for the Mortgage
Loan in December 2001 is or was 30 days or more delinquent, without giving
effect to any applicable grace period.
4. Lien; Valid Assignment. The Mortgage related to and delivered
in connection with the Mortgage Loan is properly recorded in the applicable
jurisdiction and constitutes a valid and, subject to the exceptions and
limitations set forth in Paragraph 13 below, enforceable first priority lien
upon the related Mortgaged Property, prior to all other liens and encumbrances
and except for (a) the lien for current real estate taxes, water charges, sewer
rents and assessments not yet due and payable, (b) covenants, conditions and
restrictions, rights of way, easements and other matters that are of public
record referred to in the related lender's title insurance policy (or, if not
yet issued, referred to in a pro forma title policy or title policy commitment
meeting the requirements described below in Paragraph 8), none of which
materially interferes with the security intended to be provided by such
Mortgage, the current principal use of the related Mortgaged Property or the
current ability of the related Mortgaged Property to generate income sufficient
to service the Mortgage Loan, (c) any other exceptions and exclusions
specifically referred to in such lender's title insurance policy (or, if not yet
issued, referred to in a pro forma title policy or title policy commitment
meeting the requirements described below in Paragraph 8), none of which
materially interferes with the security intended to be provided by such
Mortgage, the current principal use of the related Mortgaged Property or the
current ability of the related Mortgaged Property to generate income sufficient
to service the Mortgage Loan, (d) other matters to which like properties are
commonly subject, none of which materially interferes with the security intended
to be provided by such Mortgage, the current principal use of the related
Mortgaged Property or the current ability of the related Mortgaged Property to
generate income sufficient to service the related Mortgage Loan, (e) the rights
of tenants (as tenants only) under leases (including subleases) pertaining to
the related Mortgaged Property which do not materially interfere with the
security intended to be provided by such Mortgage and (f) condominium
declarations of record and identified in the lender's title insurance policy
(or, if not yet issued, identified in a pro forma title policy or title policy
commitment meeting the requirements described in Paragraph 8 below) (the
foregoing items (a) through (f) being herein referred to as the "Permitted
Encumbrances"). Such Permitted Encumbrances do not, individually or in the
aggregate, materially interfere with the security intended to be provided by
such Mortgage or adversely effect the value or marketability of the Mortgaged
Property. The related assignment of such Mortgage executed and delivered in
favor of the Trustee is in recordable form (but for insertion of the name and
address of the assignee and any related recording information which is not yet
available to the Seller) to validly and
C-2
effectively convey the assignor's interest therein and constitutes a legal,
valid, binding and, subject to the exceptions and limitations set forth in
Paragraph 13 below, enforceable assignment of such Mortgage from the relevant
assignor to the Trustee.
5. Assignment of Leases and Rents. The Mortgage Loan is secured
by an assignment of leases and rents ("Assignment of Leases"), which is either a
separate instrument or is incorporated into the related Mortgage, and which
establishes and creates a valid, subsisting and, subject to the exceptions and
limitations set forth in Paragraph 13 below, enforceable first priority lien on
and security interest in, subject to applicable law, the property, rights and
interests of the related Borrower described therein; and each assignor
thereunder has the full right to assign the same. The related assignment of any
Assignment of Leases not included in a Mortgage, executed and delivered in favor
of the Trustee is in recordable form (but for insertion of the name and address
of the assignee and any related recording information which is not yet available
to the Seller) to validly and effectively convey the assignor's interest therein
and constitutes a legal, valid, binding and, subject to the exceptions and
limitations set forth in Paragraph 13 below, enforceable assignment of such
Assignment of Leases from the relevant assignor to the Trustee.
6. Mortgage Status; Waivers and Modifications. In the case of the
Mortgage Loan, except by a written instrument which has been delivered to the
Purchaser or its designee as a part of the related Mortgage File, (a) the
related Mortgage (including any amendments or supplements thereto included in
the related Mortgage File) has not been impaired, waived, modified, altered,
satisfied, canceled, subordinated or rescinded in any material respect, (b)
neither the related Mortgaged Property nor any material portion thereof has been
released from the lien of such Mortgage and (c) the related Borrower has not
been released from its obligations under such Mortgage, in whole or in material
part. Except as described on Schedule C-6 hereto, no alterations, waivers,
modifications or assumptions of any kind have intentionally been given, made or
consented to by or on behalf of the Seller since December 7, 2001. The Seller
has not taken any affirmative action that would cause the representations and
warranties of the related Borrower under the Mortgage Loan not to be true and
correct in any material respect.
7. Condition of Property; Condemnation. In the case of the
Mortgage Loan, one or more engineering assessments were performed by an
independent engineering consultant firm and except as set forth in an
engineering report prepared in connection with such assessment, the related
Mortgaged Property, to the Seller's knowledge, was as of origination, and, to
Seller's actual knowledge, is as of the Closing Date, in good repair, free and
clear of any damage that would materially and adversely affect its value as
security for the Mortgage Loan. If an engineering report revealed any material
damage or deficiencies, material deferred maintenance or other similar
conditions either (1) an escrow of funds was required or a letter of credit was
obtained in an amount sufficient to effect the necessary repairs or maintenance
or (2) such repairs and maintenance have been completed. To Seller's knowledge,
as of origination of the Mortgage Loan, there was no proceeding pending, and, to
the Seller's actual knowledge, no such proceeding for the condemnation of all or
any material portion of the Mortgaged Property securing the Mortgage Loan has
been noticed or commenced. As of the date of the origination of the Mortgage
Loan: (a) all of the material improvements on the related Mortgaged Property lay
wholly within the boundaries and, to the extent in effect at the time of
construction, building restriction lines of such property, except for
encroachments that are insured against by
C-3
the lender's title insurance referred to in Paragraph 8 below or that do not
materially and adversely affect the value or marketability of such Mortgaged
Property, and (b) no improvements on adjoining properties materially encroached
upon such Mortgaged Property so as to materially and adversely affect the value
or marketability of such Mortgaged Property, except those encroachments that are
insured against by the lender's title insurance referred to in Paragraph 8
below.
8. Title Insurance. The lien of the Mortgage securing the
Mortgage Loan is insured by an American Land Title Association (or an equivalent
form of) lender's title insurance policy (the "Title Policy") (except that if
such policy is yet to be issued, such insurance may be evidenced by a "marked
up" pro forma policy or title commitment in either case marked as binding and
countersigned by the title company or its authorized agent, either on its face
or by an acknowledged closing instruction or escrow letter) in the original
principal amount of the Mortgage Loan after all advances of principal, insuring
the originator of the Mortgage Loan, its successors and assigns (as the sole
insured) that the Mortgage is a valid first priority lien on such Mortgaged
Property, subject only to the Permitted Encumbrances. Such Title Policy (or, if
it has yet to be issued, the coverage to be provided thereby) is in full force
and effect, all premiums thereon have been paid, and Seller has made no claims
thereunder and, to Seller's actual knowledge, no prior holder of the related
Mortgage has made any claims thereunder and no claims have been paid thereunder.
Seller has not, and to the Seller's actual knowledge, no prior holder of the
Mortgage has done, by act or omission, anything that would materially impair the
coverage under such Title Policy. Immediately following the transfer and
assignment of the Mortgage Loan to the Trustee (including endorsement and
delivery of the related Mortgage Note to the Purchaser and recording of the
related Assignment of Mortgage in favor of Purchaser in the applicable real
estate records), such Title Policy (or, if it has yet to be issued, the coverage
to be provided thereby) will inure to the benefit of the Trustee without the
consent of or notice to the insurer. Such Title Policy contains no exclusion
for, or it affirmatively insures (unless, in the case of clause (b) below, the
related Mortgaged Property is located in a jurisdiction where such affirmative
insurance is not available), (a) access to a public road, and (b) that the area
shown on the survey, if any, reviewed or prepared in connection with the
origination of the Mortgage Loan is the same as the property legally described
in the Mortgage.
9. No Holdback. The proceeds of the Mortgage Loan have been fully
disbursed (except in those cases where the full amount of the Mortgage Loan has
been disbursed but a portion thereof is being held in escrow or reserve accounts
pending the satisfaction of certain conditions relating to leasing, repairs or
other matters with respect to the related Mortgaged Property), and there is no
obligation for future advances with respect thereto. Any and all requirements
under the Mortgage Loan as to completion of any on-site or off-site improvement
and as to disbursements of any funds escrowed for such purpose, which
requirements were to have been complied with on or before the Closing Date, have
been complied with in all material aspects or any such funds so escrowed have
not been released, provided that, partial releases of such funds in accordance
with the applicable Mortgage Loan Documents may have occurred.
10. Mortgage Provisions. The Mortgage Note, Mortgage and
Assignment of Leases for the Mortgage Loan, together with applicable state law,
contain customary and, subject to the exceptions and limitations set forth in
Paragraph 13 below, enforceable provisions for
C-4
commercial or multifamily, as applicable, mortgage loans such as to render the
rights and remedies of the holder thereof adequate for the practical realization
against the related Mortgaged Property of the principal benefits of the security
intended to be provided thereby.
11. Trustee under Deed of Trust. If the Mortgage for the Mortgage
Loan is a deed of trust, then (a) 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 the Mortgage and applicable law, and (b)
no fees or expenses are payable to such trustee by the Seller, the Depositor or
any transferee thereof except in connection with a trustee's sale after default
by the related Borrower or in connection with any full or partial release of the
related Mortgaged Property or related security for the Mortgage Loan and all
such fees and expenses are the obligation of the Borrower under the Mortgage.
12. Environmental Conditions. In the case of the Mortgaged
Property for the Mortgage Loan, (a) an environmental site assessment meeting the
requirements of the American Society for Testing and Materials in effect at the
time the related report was prepared and covering all environmental hazards
typically assessed for similar properties including use, type and tenants of the
Mortgaged Property ("Environmental Report"), or an update of such an assessment,
was performed by an independent and licensed (to the extent required by
applicable state law) environmental consulting firm with respect to the
Mortgaged Property securing the Mortgage Loan in connection with the origination
of the Mortgage Loan and thereafter updated such that, except as set forth on
Schedule C-12(a), such Environmental Report is dated no earlier than twelve
months prior to the Closing Date, (b) a copy of each such Environmental Report
has been delivered to the Purchaser, and (c) either: (i) no such Environmental
Report provides that as of the date of the report there is a material violation
of any applicable environmental laws with respect to any circumstances or
conditions relating to the related Mortgaged Property; or (ii) if any such
Environmental Report does reveal any such circumstances or conditions with
respect to the related Mortgaged Property and the same have not been
subsequently remediated in all material respects, then, except as described on
Schedule C-12(c), one or more of the following are true -- (A) a party not
related to the related Borrower with financial resources reasonably estimated to
be adequate to cure the subject violation in all material respects was
identified as the responsible party for such condition or circumstance and such
condition or circumstance does not materially impair the value of the Mortgaged
Property, (B) the related Borrower was required to provide additional security
reasonably estimated to be adequate to cure the subject violation in all
material respects and/or to obtain an operations and maintenance plan, (C) the
related Borrower, or other responsible party, provided a "no further action"
letter or other evidence reasonably acceptable to a reasonably prudent
commercial mortgage lender that applicable federal, state or local governmental
authorities had no current intention of taking any action, and are not requiring
any action, in respect of such condition or circumstance, (D) such conditions or
circumstances were investigated further and based upon such additional
investigation, an independent environmental consultant recommended no further
investigation or remediation, (E) the expenditure of funds reasonably estimated
to be necessary to effect such remediation is not greater than 2% of the
outstanding principal balance of the related Mortgage Loan, (F) there exists an
escrow of funds reasonably estimated to be sufficient for purposes of effecting
such remediation, (G) the related Mortgaged Property is identified on Schedule
C-12(G) and insured under a policy of insurance against losses arising from such
circumstances and conditions or (H) a party with financial resources reasonably
estimated to be adequate to cure the subject violation
C-5
in all material respects provided a guaranty or indemnity to the related
Borrower to cover the costs of any required investigation, testing, monitoring
or remediation. To the Seller's actual knowledge, there are no significant or
material circumstances or conditions with respect to the Mortgaged Property not
revealed in any such Environmental Report, where obtained, or in any Borrower
questionnaire delivered to Seller at the issue of any related environmental
insurance policy, if applicable, that render such Mortgaged Property in material
violation of any applicable environmental laws. The Mortgage, or other loan
document in the Mortgage File, for the Mortgage Loan encumbering the Mortgaged
Property requires the Borrower to comply with all applicable federal, state and
local environmental laws and regulations. The Seller has not taken any action
which would cause the Mortgaged Property not to be in compliance with all
federal, state and local laws pertaining to environmental hazards or which could
subject the Seller or its successors and assigns to liability under such laws.
The Borrower represents and warrants in the Mortgage Loan documents generally to
the effect that except as set forth in certain specified environmental reports
and to the best of its knowledge, as of the date of origination of the Mortgage
Loan, there were no hazardous materials on the related Mortgaged Property,
except those in full compliance with all applicable Hazardous Materials Laws and
the Borrower will not use, cause or permit to exist on the related Mortgaged
Property any hazardous materials in any manner which violates federal, state or
local laws, ordinances, regulations, orders, directives, or policies governing
the use, storage, treatment, transportation, manufacture, refinement, handling,
production or disposal of hazardous materials. The Borrower (or an affiliate
thereof) has agreed to indemnify, defend and hold the Seller and its successors
and assigns harmless from and against, or otherwise be liable for, any and all
losses resulting from a breach of environmental representations, warranties or
covenants given by the Borrower in connection with the Mortgage Loan, generally
including any and all losses, liabilities, damages, injuries, penalties, fines,
expenses and claims of any kind or nature whatsoever (including without
limitation, attorneys' fees and expenses) paid, incurred or suffered by or
asserted against, any such party resulting from such breach. If the Mortgaged
Property is a multifamily residential property and the environmental consultant,
in its judgement in consideration of the age, history or location of the
mortgaged property, considered lead-based paint, asbestos or radon to be a
potential environmental risk, then either (I) Operations and Maintenance Plans
("O&M Plans"), as appropriate, were obtained and implemented prior to closing or
an amount sufficient to obtain and implement such O&M Plan(s) was held back at
closing, with the O&M Plan(s) required to be obtained and implemented
post-closing, or (II) an environmental assessment for lead-based paint, asbestos
or radon, as appropriate, was conducted and either (i) no further action was
recommended, (ii) O&M Plans or remediation were recommended and obtained or
performed prior to the loan closing, or (iii) O&M Plans or remediation were
recommended and escrows sufficient to obtain such O&M Plans or effect such
remediation were held back at closing with the O&M Plan(s) or remediation
required to be obtained or performed post-closing.
13. Loan Document Status. Each Mortgage Note, Mortgage, and other
agreement executed by or on behalf of the related Borrower, or any guarantor of
non-recourse exceptions and environmental liability, with respect to the
Mortgage Loan is the legal, valid and binding obligation of the maker thereof
(subject to any non-recourse provisions contained in any of the foregoing
agreements and any applicable state anti-deficiency or market value limit
deficiency legislation), enforceable in accordance with its terms, except as
such enforcement may be limited by: (i) bankruptcy, insolvency, reorganization,
fraudulent transfer and conveyance or other similar laws affecting the
enforcement of creditors' rights generally and
C-6
(ii) general principles of equity (regardless of whether such enforcement is
considered in a proceeding in equity or at law), and except that certain
provisions in such loan documents may be further limited or rendered
unenforceable by applicable law, but (subject to the limitations set forth in
the foregoing clauses (i) and (ii)) such limitations will not render such loan
documents invalid as a whole or substantially interfere with the mortgagee's
realization of the principal benefits and/or security provided thereby. There is
no right of rescission, offset, abatement, diminution or valid defense or
counterclaim available to the related Borrower with respect to such Mortgage
Note, Mortgage or other agreements that would deny the mortgagee the principal
benefits intended to be provided thereby. Seller has no actual knowledge of any
such rights, defenses or counterclaims having been asserted.
14. Insurance. All improvements upon the Mortgaged Property
securing the Mortgage Loan are insured under a fire and extended perils included
within the classification "All Risk of Physical Loss" or "Extended Coverage"
insurance (or the equivalent) policy in an amount at least equal to the lesser
of (i) the outstanding principal balance of the Mortgage Loan and (ii) 100% of
the full insurable value, or 100% of the replacement cost, of the improvements
located on the related Mortgaged Property, and if applicable, the related hazard
insurance policy contains appropriate endorsements to avoid the application of
co-insurance and does not permit reduction in insurance proceeds for
depreciation. Except as identified on Schedule C-14 hereto, the Mortgaged
Property securing the Mortgage Loan is the subject of a business interruption or
rent loss insurance policy providing coverage for at least twelve (12) months
(or a specified dollar amount which is reasonably estimated to cover no less
than twelve (12) months of rental income). If any portion of the improvements on
the Mortgaged Property securing the Mortgage Loan was, at the time of the
origination of the Mortgage Loan, in an area identified in the Federal Register
by the Flood Emergency Management Agency as a special flood hazard area (Zone A
or Zone V) (an "SFH Area") and flood insurance was available, a flood insurance
policy meeting the requirements of the then current guidelines of the Federal
Insurance Administration is in effect with a generally acceptable insurance
carrier, in an amount representing coverage not less than the least of (1) the
minimum amount required, under the terms of coverage, to compensate for any
damage or loss on a replacement basis of the improvements in the SFH Area, (2)
the outstanding principal balance of the Mortgage Loan, and (3) the maximum
amount of insurance available under the applicable National Flood Insurance
Administration Program. The Mortgaged Property and all improvements thereon are
also covered by comprehensive general liability insurance in such amounts as are
generally required by reasonably prudent commercial lenders for similar
properties. If the Mortgaged Property is located within 25 miles of the coast of
Florida, Texas, Louisiana, Mississippi, Alabama, Georgia, North Carolina or
South Carolina, such Mortgaged Property is covered by windstorm insurance in
such amount as is generally required by reasonably prudent commercial or
multifamily, as applicable, lenders for similar properties or mitigating factors
exist which would be satisfactory to reasonably prudent commercial or
multifamily, as applicable, lenders for similar properties. If the Mortgaged
Property is located in the State of California or in a "seismic zone" 3 or 4, a
seismic assessment was conducted at the time of origination or, alternatively,
prior to the Closing Date and seismic insurance in an amount which would be
acceptable to a reasonably prudent commercial lender was obtained to the extent
such Mortgaged Property has a PML of greater than twenty percent (20%) (based on
a 450-year lookback with a 10% probability of exceedance in a 50-year period).
Any Mortgaged Property constituting a materially non-conforming use under
applicable zoning laws and ordinances constitutes a legal non-conforming use
which, in the event of casualty or
C-7
destruction, may be restored or repaired to materially the same extent of the
use or structure at the time of such casualty or such Mortgaged Property is
covered by law and ordinance insurance in an amount as would be customarily
required by a reasonably prudent commercial or multifamily, as applicable,
mortgage lender or a zoning endorsement, in form, substance and amount as would
be customarily required by a reasonably prudent commercial or multifamily, as
applicable, mortgage lender, insuring against loss to the mortgagee resulting
from such non-conformity was obtained or the insurance proceeds available under
the required casualty insurance plus the value of the land and any remaining
improvements will be sufficient to repay the Mortgage Loan. Additionally, if the
Mortgage Loan has a Cut-off Date Principal Balance equal to or greater than
$20,000,000, the insurer for all of the required coverages set forth herein has
a claims paying ability rating from Standard & Poor's, Xxxxx'x or Fitch of not
less than A-minus (or the equivalent), or from A.M. Best of not less than "A:V"
(or the equivalent). All such insurance policies contain a standard mortgagee
clause for the benefit of the holder of the related Mortgage, its successors and
assigns, as mortgagee, and are not terminable (nor may the amount of coverage
provided thereunder be reduced) without thirty (30) days' prior written notice
to the mortgagee; and no such notice has been received, including any notice of
nonpayment of premiums, that has not been cured and all such insurance is in
full force and effect. The Mortgage requires that the Borrower or a tenant of
such Borrower maintain insurance as described above or permits the Mortgagee to
require insurance as described above. Except under circumstances, including
certain minimum thresholds, that would be reasonably acceptable to a prudent
commercial or multifamily, as applicable, mortgage lender or that would not
otherwise materially and adversely affect the security intended to be provided
by the Mortgage, the Mortgage for the Mortgage Loan provides that proceeds paid
under any such casualty insurance policy will (or, at the lender's option, will)
be applied either to the repair or restoration of the related Mortgaged Property
or to the payment of amounts due under the Mortgage Loan; provided that the
related Mortgage may entitle the Borrower to any portion of such proceeds
remaining after the repair or restoration of the related Mortgaged Property or
payment of amounts due under the Mortgage Loan; and provided, further, that, if
the Borrower holds a leasehold interest in the related Mortgaged Property, the
application of such proceeds will be subject to the terms of the related Ground
Lease (as defined in Paragraph 18 below). To Seller's actual knowledge, all
insurance policies described above are with an insurance carrier qualified to
write insurance in the relevant jurisdiction.
15. Taxes and Assessments. As of the origination of the Mortgage
Loan or October 1, 2001, whichever is later, there were no, and as of the
Closing Date, the Seller has no knowledge of, any delinquent property taxes or
assessments or other outstanding charges affecting the Mortgaged Property
securing the Mortgage Loan that are not otherwise covered by an escrow of funds
sufficient to pay such charge. For purposes of this representation and warranty,
real property taxes and assessments shall not be considered delinquent until the
date on which interest and/or penalties would be payable thereon.
16. Borrower Bankruptcy. No Mortgaged Property is the subject of,
and no Borrower under a Mortgage Loan is a debtor in any state or federal
bankruptcy, insolvency or similar proceeding.
17. Local Law Compliance. To the Seller's knowledge at the time of
the origination of the Mortgage Loan, based upon a letter from governmental
authorities, a legal
C-8
opinion, a zoning consultant's report or an endorsement to the related Title
Policy, and to Seller's actual knowledge as of the Closing Date, except as
described on Schedule C-17, the improvements located on or forming part of, and
the existing use of, the Mortgaged Property securing the Mortgage Loan was or
are in material compliance with applicable zoning laws and ordinances or
constitute a legal non-conforming use or structure (or, if any such improvement
does not so comply and does not constitute a legal non-conforming use or
structure, such non-compliance and failure does not materially and adversely
affect the value of the related Mortgaged Property as determined by the
appraisal performed in connection with the origination of the Mortgage Loan or
as otherwise reasonably determined by the Seller in a manner that would be
acceptable to a reasonably prudent commercial or multifamily, as applicable,
mortgage lender).
18. Leasehold Estate Only. If the Mortgage Loan is secured, in
whole or in part, by the interest of a Borrower as a lessee under a ground lease
(together with any and all written amendments and modifications thereof and any
and all estoppels from or other agreements with the ground lessor, a "Ground
Lease"), but not by the related fee interest in such property (the "Fee
Interest"), then, except as otherwise specified on Schedule C-18:
(a) Such Ground Lease or a memorandum thereof has been or will be
duly recorded; such Ground Lease permits the interest of the lessee
thereunder to be encumbered by the Mortgage and does not restrict the use
of the related Mortgaged Property by such lessee, its successors or
assigns in a manner that would materially adversely affect the security
provided by the Mortgage; and there has been no material change in the
terms of such Ground Lease since its recordation, with the exception of
material changes reflected in written instruments which are a part of the
Mortgage File;
(b) The related lessee's leasehold interest in the portion of the
related Mortgaged Property covered by such Ground Lease is not subject to
any liens or encumbrances superior to, or of equal priority with, the
Mortgage, other than Permitted Encumbrances, and such Ground Lease,
provides that it shall remain superior to any mortgage or other lien upon
the related Fee Interest;
(c) The Borrower's interest in such Ground Lease is assignable to,
and is thereafter further assignable by, the Purchaser upon notice to, but
without the consent of, the lessor thereunder (or, if such consent is
required, it has been obtained); provided that such Ground Lease has not
been terminated and all defaults, if any, on the part of the related
lessee have been cured;
(d) Such Ground Lease is in full force and effect and the Seller
has not received any notice that any material default has occurred under
such Ground Lease, and the lessor under such Ground Lease has been sent
notice of the lien evidenced by the Mortgage in accordance with the terms
of the Ground Lease;
(e) Such Ground Lease requires the lessor thereunder to give
notice of any default by the lessee to the mortgagee under the Mortgage
Loan. Furthermore, such Ground Lease further provides that no notice of
termination given under such Ground
C-9
Lease is effective against the mortgagee under the Mortgage Loan unless a
copy has been delivered to such mortgagee in the manner described in such
Ground Lease;
(f) The mortgagee under the Mortgage Loan is permitted a
reasonable opportunity (including, where necessary, sufficient time to
gain possession of the interest of the lessee under such Ground Lease) to
cure any default under such Ground Lease, which is curable after the
receipt of notice of any such default, before the lessor thereunder may
terminate such Ground Lease;
(g) Such Ground Lease has an original term (or an original term
plus options exercisable by the holder of the related Mortgage) which
extends not less than twenty (20) years beyond the end of the amortization
term of the Mortgage Loan;
(h) Such Ground Lease requires the lessor to enter into a new
lease with a mortgagee upon termination of such Ground Lease as a result
of a rejection of such Ground Lease in a bankruptcy proceeding involving
the Borrower unless the mortgagee under the Mortgage Loan fails to cure a
default of the lessee under such Ground Lease following notice thereof
from the lessor;
(i) Under the terms of such Ground Lease and the related Mortgage,
taken together, any casualty insurance proceeds, other than de minimus
amounts for minor casualties, with respect to the leasehold interest will
be applied either: (i) to the repair or restoration of all or part of the
related Mortgaged Property, with the mortgagee or a trustee appointed by
it having the right to hold and disburse such proceeds as the repair or
restoration progresses (except in such cases where a provision entitling
another party to hold and disburse such proceeds would not be viewed as
commercially unreasonable by a prudent commercial mortgage lender), or
(ii) to the payment of the outstanding principal balance of the Mortgage
Loan together with any accrued interest thereon. Under the terms of the
Ground Lease and the related Mortgage, taken together, any condemnation
proceeds or awards in respect of a total or substantially total taking
will be applied first to the payment of the outstanding principal and
interest on the Mortgage Loan (except as otherwise provided by applicable
law and subject to any rights to require the improvements to be rebuilt);
(j) Such Ground Lease does not impose any restrictions on
subletting which would be viewed as commercially unreasonable by a prudent
commercial or multifamily, as applicable, mortgage lender in the lending
area where the Mortgaged Property is located at the time of the
origination of such Mortgage Loan;
(k) The lessor under such Ground Lease is not permitted to disturb
the possession, interest or quiet enjoyment of the lessee in the relevant
portion of the Mortgaged Property subject to such Ground Lease for any
reason, or in any manner, which would materially adversely affect the
security provided by the related Mortgage; and
C-10
(l) Such Ground Lease may not be materially amended or modified
without the prior consent of the mortgagee under such Mortgage Loan, and
any such action without such consent is not binding on such mortgagee, its
successors or assigns.
19. Qualified Mortgage. The Mortgage Loan is a "qualified
mortgage" within the meaning of Section 860G(a)(3) of the Code and Treasury
regulation section 1.860G-2(a) and the related Mortgaged Property, if acquired
by a REMIC in connection with the default or imminent default of the Mortgage
Loan, would constitute "foreclosure property" within the meaning of Section
860G(a)(8).
20. Advancement of Funds. The Seller has not advanced funds or
induced, solicited or knowingly received any advance of funds from a party other
than the owner of the related Mortgaged Property or the related Borrower (other
than amounts paid by the tenant as specifically provided under related lease or
by a property manager), for the payment of any amount required by the Mortgage
Loan, except for interest accruing from the date of origination of the Mortgage
Loan or the date of disbursement of the Mortgage Loan proceeds, whichever is
later, to the date which preceded by 30 days the first due date under the
related Mortgage Note.
21. No Equity Interest, Equity Participation or Contingent
Interest. No Mortgage Loan contains any equity participation by the mortgagee
thereunder, is convertible by its terms into an equity ownership interest in the
related Mortgaged Property or the related Borrower, has a shared appreciation
feature, provides for any contingent or additional interest in the form of
participation in the cash flow of the related Mortgaged Property, or, provides
for interest-only payments without principal amortization, other than for the
initial partial month period between the date of the origination of the Mortgage
Loan and the first day of the immediately succeeding month, or for the negative
amortization of interest, except that, in the case of an ARD Loan, the Mortgage
Loan provides that, during the period commencing on or about the related
Anticipated Repayment Date and continuing until the Mortgage Loan is paid in
full, (a) additional interest shall accrue and may be compounded monthly and
shall be payable only after the outstanding principal of the Mortgage Loan is
paid in full, and (b) subject to available funds, a portion of the cash flow
generated by the Mortgaged Property will be applied each month to pay down the
principal balance thereof in addition to the principal portion of the related
Monthly Payment. Neither Seller nor any affiliate thereof has any obligation to
make any capital contribution to the Borrower under the Mortgage Loan or
otherwise.
22. Legal Proceedings. To Seller's knowledge, as of origination
there were no, and to the Seller's actual knowledge, as of the Closing Date,
there are no pending actions, suits, litigation or other proceedings by or
before any court or governmental authority against or affecting the Borrower (or
any related guarantor to the extent the Seller in accordance with Seller's
underwriting standards would consider such guarantor material to the
underwriting of the Mortgage Loan) under the Mortgage Loan or the related
Mortgaged Property that, if determined adversely to such Borrower or Mortgaged
Property, would materially and adversely affect the value of the Mortgaged
Property as security for the Mortgage Loan, the Borrower's ability to pay
principal, interest or any other amounts due under the Mortgage Loan or the
ability of any such guarantor to meet its obligations.
23. Other Liens. Except as otherwise set forth on Schedule C-23,
the
C-11
Mortgage Loan does not permit the related Mortgaged Property or any interest
therein or any controlling ownership interest in the Borrower (including, but
not limited to, any controlling interest in the manager or managing member of a
Borrower which is a limited liability company or the general partner of a
Borrower which is a general partnership, limited partnership or limited
liability partnership) to be encumbered by any mortgage lien or other
encumbrance except the related Mortgage without the prior written consent of the
holder thereof or the satisfaction of debt service coverage or similar criteria
specified therein. To Seller's knowledge, as of origination, and, to the
Seller's actual knowledge as of the Closing Date, the Mortgaged Property
securing the Mortgage Loan is not encumbered by any mortgage liens junior to or
of equal priority with the liens of the related Mortgage. The Mortgage requires
the Borrower to pay all reasonable costs and expenses related to any required
consent to an encumbrance, including reasonable legal fees and expenses and any
applicable Rating Agency fees.
24. No Mechanics' Liens. To Seller's knowledge, as of the
origination of the Mortgage Loan, and, to the Seller's actual knowledge, as of
the Closing Date: (i) the Mortgaged Property securing the Mortgage Loan
(exclusive of any related personal property) is free and clear of any and all
mechanics' and materialmen's liens that are prior or equal to the lien of the
related Mortgage and that are not bonded or escrowed for or covered by title
insurance; and (ii) no rights are outstanding that under law could give rise to
any such lien that would be prior or equal to the lien of the related Mortgage
and that is not bonded or escrowed for or covered by title insurance.
25. Compliance with Usury Laws. The Mortgage Loan complied with,
or was exempt from, all applicable usury laws in effect at its date of
origination.
26. Licenses and Permits. To the extent required by applicable
law, the Mortgage Loan requires the related Borrower to be qualified to do
business, and requires the related Borrower and the related Mortgaged Property
to be in material compliance with all regulations, licenses, permits,
authorizations, restrictive covenants and zoning and building laws, in each case
to the extent required by law or to the extent that the failure to be so
qualified or in compliance would have a material and adverse effect upon the
enforceability of the Mortgage Loan or upon the practical realization against
the related Mortgaged Property of the principal benefits of the security
intended to be provided thereby. To the Seller's knowledge, as of the date of
origination of the Mortgage Loan and based on any of: (i) a letter from
governmental authorities, (ii) a legal opinion, (iii) an endorsement to the
related Title Policy, (iv) a zoning report from a zoning consultant, or (v)
other due diligence that the originator of the Mortgage Loan customarily
performs in the origination of comparable mortgage loans, the related Borrower
was in possession of all material licenses, permits and franchises required by
applicable law for the ownership and operation of the related Mortgaged Property
as it was then operated or such material licenses, permits and franchises have
otherwise been issued.
27. Cross-Collateralization. The Mortgage Loan is not
cross-collateralized with any loan which is outside the Mortgage Pool.
28. Releases of Mortgaged Properties. Except as set forth on
Schedule C-28, no Mortgage Note or Mortgage requires the mortgagee to release
all or any material portion of the related Mortgaged Property from the lien of
the related Mortgage except upon: (i) payment
C-12
in full of all amounts due under the related Mortgage Loan or (ii) delivery of
"government securities", as defined Treasury regulation section
1.860G-2(a)(8)(i), in connection with a defeasance of the related Mortgage Loan;
provided that if the Mortgage Loan is secured by multiple parcels, the related
Mortgage Note may require the respective mortgagee(s) to grant releases of
material portions of the related Mortgaged Property or the release of one or
more related Mortgaged Properties upon: (i) the satisfaction of certain legal
and underwriting requirements which would be acceptable to a reasonably prudent
commercial or multifamily, as applicable, mortgage lender, or (ii) the payment
of a release price equal to at least 125% of the loan amount allocated to the
Mortgaged Property or the appraised value of such Mortgaged Property at the time
of the release and prepayment consideration in connection therewith.
29. Defeasance. If the Mortgage Loan contains a provision for any
defeasance of mortgage collateral (a "Defeasance Loan"), the related Mortgage
Note, Mortgage or other related loan document contained in the Mortgage File,
provides that the defeasance option is not exercisable prior to a date that is
at least two (2) years following the Closing Date and is otherwise in compliance
with applicable statutes, rules and regulations governing REMICs; requires prior
written notice to the holder of the Mortgage Loan of the exercise of the
defeasance option and payment by Borrower of all related reasonable fees, costs
and expenses as set forth below; requires, or permits the lender to require, the
Mortgage Loan (or the portion thereof being defeased) to be assumed by a
single-purpose entity; and requires delivery of a legal opinion that the Trustee
has a perfected security interest in such collateral prior to any other claim or
interest. In addition, if the Mortgage Loan is a Defeasance Loan, the Mortgage
Loan permits defeasance only with substitute collateral constituting
non-callable "government securities" within the meaning of Treasury regulation
section 1.860G-2(a)(8)(i) in an amount sufficient to make all scheduled payments
under the Mortgage Note (or the portion thereof being defeased) when due, and in
the case of ARD Loans, assuming the Anticipated Repayment Date is the Maturity
Date. To Seller's actual knowledge, defeasance under the Mortgage Loan is only
for the purpose of facilitating the disposition of a Mortgaged Property and not
as part of an arrangement to collateralize a REMIC offering with obligations
that are not real estate mortgages. With respect to each Defeasance Loan, the
related Mortgage or other related loan document provides that the related
Borrower shall (a) pay all Rating Agency fees associated with defeasance (if
Rating Agency approval is a specific condition precedent thereto) and all other
reasonable expenses associated with defeasance, including, but not limited to,
accountant's fees and opinions of counsel, or (b) provide all opinions required
under the related loan documents, including, if applicable, a REMIC opinion and
a perfection opinion and any applicable rating agency letters confirming no
downgrade or qualification of ratings on any classes in the transaction.
Additionally, if the Mortgage Loan has a Cut-off Date Principal Balance equal to
or greater than $20,000,000, the Mortgage Loan or the related documents require
confirmation from the Rating Agency that exercise of the defeasance option will
not cause a downgrade or withdrawal of the rating assigned to any securities
backed by the Mortgage Loan and require the Borrower to pay any Rating Agency
fees and expenses.
30. Fixed Rate Loans. The Mortgage Loan bears interest at a rate
that remains fixed throughout the remaining term of the Mortgage Loan, except in
the case of an ARD Loan after its Anticipated Repayment Date and except for the
imposition of a default rate.
31. Inspection. The Seller, or an affiliate, inspected, or caused
the inspection
C-13
of, the related Mortgaged Property within twelve (12) months of the Closing
Date.
32. No Material Default. There exists no material default, breach,
violation or event of acceleration under the Mortgage Note, Mortgage or other
related loan documents for the Mortgage Loan and, to Seller's actual knowledge,
no event or circumstance which, with the passage of time or notice and
expiration of any grace period or cure period, would constitute a material
default, breach, violation or event of acceleration under such Mortgage Note,
Mortgage or other related loan documents; provided, however, that this
representation and warranty does not cover any default, breach, violation or
event of acceleration that pertains to or arises directly out of the subject
matter of or is covered by any other representation and warranty made by the
Seller in this Exhibit C. No foreclosure or other enforcement action has been
taken by the Seller or, to the Seller's knowledge, by any prior holder of the
Mortgage Loan, against the Borrower or the Mortgaged Property with respect to
the subject Mortgage Loan.
33. Due-on-Sale. The Mortgage contains a "due on sale" clause,
which provides for the acceleration of the payment of the unpaid principal
balance of the Mortgage Loan if, without the prior written consent of the holder
of the Mortgage, either the related Mortgage Property, or any controlling
interest in the related Borrower (including, but not limited to, any controlling
interest in the manager or managing member of a Borrower which is a limited
liability company or the general partner of a Borrower which is a general
partnership, limited partnership or limited liability partnership) is pledged,
transferred or sold, other than by reason of family and estate planning
transfers (or by devise, descent or operation of law upon the death of a member,
partner or shareholder of the related Borrower), transfers of less than a
controlling interest in the Borrower, issuance of non-controlling new equity
interests, transfers to an affiliate meeting the requirements of the Mortgage
Loan, transfers among existing members, partners or shareholders in the
Borrower, transfers among affiliated Borrowers with respect to multi-property
Mortgage Loans or transfers of a similar nature to the foregoing meeting the
requirements of the Mortgage Loan. The Mortgage requires the Borrower to pay all
reasonable fees and expenses associated with securing the consent or approval of
the holder of the Mortgage for all actions requiring such consent or approval
under the Mortgage including the cost of any required counsel opinions relating
to REMIC or other securitization and tax issues and any applicable Rating Agency
fees.
34. Single Purpose Entity. The Mortgage Loan, if it has an
original principal balance over $5,000,000, requires the Borrower to be for at
least for so long as the Mortgage Loan is outstanding, and to Seller's actual
knowledge each Borrower is, a Single-Purpose Entity. For this purpose,
"Single-Purpose Entity" means a person, other than an individual, which is
formed or organized solely for the purpose of owning and operating the related
Mortgaged Property or Properties; does not engage in any business unrelated to
such Mortgaged Property or Properties and the financing thereof; and whose
organizational documents provide, or which entity represented and covenanted in
the related Mortgage Loan documents, substantially to the effect that such
Borrower (i) does not and will not have any material assets other than those
related to its interest in such Mortgaged Property or Properties or the
financing thereof; (ii) does not and will not have any indebtedness other than
as permitted by the related Mortgage or other related Mortgage Loan Documents;
(iii) maintains its own books, records and accounts, in each case which are
separate and apart from the books, records and accounts of any other person; and
(iv) holds itself out as being a legal entity, separate and apart from any other
person. If the
C-14
Mortgage Loan has an original principal balance of $15,000,000 or more, the
Borrower's organizational documents provide substantially to the effect that the
Borrower shall: conduct business in its own name; not guarantee or assume the
debts or obligations of any other person; not commingle its assets or funds with
those of any other person; prepare separate tax returns and financial
statements, or if part of a consolidated group, be shown as a separate member of
such group; transact business with affiliates on an arm's length basis pursuant
to written agreements; hold itself out as being a legal entity, separate and
apart from any other person and such organizational documents provide that: any
dissolution and winding up or insolvency filing for such entity is prohibited or
requires the unanimous consent of an independent director or member or all
partners or members, as applicable; such documents may not be amended with
respect to the Single-Purpose Entity requirements without the approval of the
mortgagee or rating agencies; the Borrower shall have an outside independent
director or member. If the Mortgage Loan has an original principal balance of at
least $20,000,000, there was obtained a counsel's opinion regarding
non-consolidation of the Borrower in any insolvency proceeding involving any
other party. To Seller's actual knowledge, each Borrower has complied in all
material respects with the requirements of the related Mortgage Loan and
Mortgage and the Borrower's organizational documents regarding
Single-Purpose-Entity status. The organizational documents of the Borrower, if
the Mortgage Loan has an original principal balance of $15,000,000 or more and
if the Borrower is a single member limited liability company, provide that the
Borrower shall not dissolve or liquidate upon the bankruptcy, dissolution,
liquidation or death of the sole member. Any such single member limited
liability company Borrower is organized in a jurisdiction that provides for such
continued existence and there was obtained an opinion of such Borrower's counsel
confirming such continued existence and that the applicable law provides that
creditors of the single member may only attach the assets of the member
including the membership interests in the Borrower but not the assets of the
Borrower.
35. Whole Loan. The Mortgage loan is a whole loan and not a
participation interest in a mortgage loan.
36. Tax Parcels. The Mortgaged Property either (i) constitutes one
or more complete separate tax lots containing no other property or (ii) is
subject to an endorsement under the related lender title policy insuring same or
(iii) an application for the creation of separate tax lots complying in all
respects with the applicable laws and requirements of the applicable governing
authority has been made and approved by the applicable governing authority and
such separate tax lots shall be effective for the next tax year.
37. ARD Loans. If the Mortgage Loan is an ARD Loan, the Mortgage
Loan commenced amortizing on its initial scheduled Due Date, and provides that:
(i) its Mortgage Rate will increase by at least two (2) percentage points in
connection with the passage of its Anticipated Repayment Date; (ii) its
Anticipated Repayment Date is not less than seven (7) years following the
origination of the Mortgage Loan; (iii) no later than the related Anticipated
Repayment Date, the related Borrower is required (if it has not previously done
so) to enter into a "lockbox agreement" whereby all revenue from the related
Mortgaged Property shall be deposited directly into a designated account
controlled by the Master Servicer; and (iv) any net cash flow from the related
Mortgaged Property that is applied to amortize the Mortgage Loan following its
Anticipated Repayment Date shall, to the extent such net cash flow is in excess
of the scheduled principal and interest payment payable therefrom, be net of
budgeted and
C-15
discretionary (servicer approved) capital expenditures.
38. Security Interests. The security agreements, financing
statements or other instruments, if any, related to the Mortgage Loan establish
and create, and a UCC financing statement has been filed and/or recorded in all
places required by applicable law for the perfection of (to the extent that the
filing of such a UCC financing statement can perfect such a security interest),
a valid security interest in the personal property granted under such Mortgage
(and any related security agreement), which in all cases includes elevators) and
all Borrower owned furniture, fixtures and equipment material to the Borrower's
operation of the Mortgaged Property and, if such Mortgaged Property is a hotel,
restaurant, healthcare facility, nursing home, assisted living facility,
self-storage facility, theatre, mobile home park or fitness center operated by
the related Borrower, such personal property, with the exception of certain
leased personal property for which there is an assignment of the Borrower's
interest, constitutes all the material personal property required to operate the
Borrower's business and any security agreement, chattel mortgage or equivalent
document related to and delivered in connection with the related Mortgage Loan
establishes and creates a valid and enforceable lien and first priority security
interest in such material personal property described therein (subject to the
exceptions and limitations set forth in Paragraph 13 above), except for certain
personal property subject to purchase money security interests or personal
property leases and security interests to secure revolving lines of credit, all
of which are in compliance with or allowable under the related Mortgage Loan
documents and are disclosed in the Mortgage Loan File or the Borrower's
financial statements or operating statements. If the Mortgage Loan is secured by
a hotel, the related loan documents contain such provisions as are necessary and
UCC Financing Statements have been filed as necessary, in each case, to perfect
a valid first priority security interest in the related revenues with respect to
such Mortgaged Property. An assignment of each UCC financing statement relating
to the Mortgage Loan has been executed by Seller in blank which the Purchaser or
Trustee, as applicable, or designee is authorized to complete and to file in the
filing office in which such financing statement was filed. The Mortgage Loan and
the related Mortgage (along with any security agreement and UCC financing
statement), together with applicable state law, contain customary and
enforceable provisions such as to render the rights and remedies of the holders
thereof adequate for the practical realization against the personal property
described above, and the principal benefits of the security intended to be
provided thereby.
39. Environmental Insurance. If the Mortgaged Property securing
the Mortgage Loan is covered by a secured creditor policy, then:
(a) the Seller --
(i) has disclosed, or is aware that there has been
disclosed, in the application for such policy or otherwise to
the insurer under such policy the "pollution conditions" (as
defined in such policy) identified in any environmental
reports related to such Mortgaged Property which are in the
Seller's possession or are otherwise known to the Seller; and
C-16
(ii) has delivered or caused to be delivered to the insurer
under such policy copies of all environmental reports in the
Seller's possession related to such Mortgaged Property,
in each case with respect to (i) and (ii) to the extent required by such
policy or to the extent the failure to make any such disclosure or deliver
any such report would materially and adversely affect the Purchaser's
ability to recover under such policy;
(b) all premiums for such insurance have been paid;
(c) such insurance is in full force and effect; and
(d) such insurance policy has a term of not less than three (3)
years beyond the maturity date of the Mortgage Loan.
40. Prepayment Premiums and Yield Maintenance Charges. Prepayment
Premiums and Yield Maintenance Charges payable with respect to the Mortgage
Loan, if any, constitute "customary prepayment penalties" within meaning of
Treasury regulation section 1.860G-1(b)(2).
41. Operating Statements. The Mortgage requires the Borrower upon
request to provide the owner or holder of the Mortgage with quarterly and annual
operating statements (or a balance sheet statement of income and expenses and a
statement of changes in financial position), rent rolls (if there is more than
one tenant) and related information and annual financial statements, which
annual financial statements (if the Mortgage Loan has an original principal
balance greater than $20 million shall) be audited by an independent certified
public accountant upon the request of the holder of the Mortgage Loan.
42. Servicing Rights. Except as set forth on Schedule C-42 hereto
and except as to the Master and Special Servicer, no Person has been granted or
conveyed the right to service the Mortgage Loan or receive any consideration in
connection therewith.
43. Recourse. The Mortgage Loan is non-recourse, except that the
Borrower and either: a principal of the Borrower who is a natural person or
other individual guarantor who is a natural person, with assets other than any
interest in the Borrower has agreed to be jointly and severally liable for all
liabilities, expenses, losses, damages, expenses or claims suffered or incurred
by the holder of the Mortgage Loan by reason of or in connection with: (i) any
fraud or material misrepresentation by the Borrower, (ii) misapplication or
misappropriation of rents, insurance payments, condemnation awards, tenant
security deposits or other funds subject to the Mortgage, (iii) acts of
material, physical waste (or, alternatively, the failure to repair or restore
the related Mortgaged Property in accordance with any Mortgage Loan document, to
the extent not covered by insurance proceeds paid on account of damage which is
the subject of any such repair or restoration which are made available for such
purpose to the Borrower or the holder of the Mortgage Loan) , (iv) violation of
applicable environmental laws or breaches of environmental covenants or (v) the
related Mortgaged Property becoming an asset in a voluntary bankruptcy or
insolvency proceeding instituted by the Borrower, that impairs the ability of
the holder of the Mortgage Loan to enforce its lien on the related Mortgaged
Property. With respect to clause (iv) in this paragraph, environmental insurance
meeting the requirements set forth in
C-17
Paragraph 39 shall satisfy such requirement. With respect to clause (v) in this
paragraph, such requirement will be satisfied if the Mortgage Loan documents
provide that the non-recourse provisions of the Mortgage Loan documents shall
not be applicable to Borrower (and a principal of Borrower who is a natural
person or other individual guarantor who is a natural person shall guaranty the
Borrower's recourse obligations arising from such non-applicability) either (a)
in the event of a voluntary bankruptcy filing by the Borrower or (b) to the
extent the Mortgage Loan holder's rights of recourse to the Mortgaged Property
are impaired by or as a result of any legal proceeding (including a voluntary
bankruptcy or insolvency proceeding) instituted by the Borrower. No waiver of
liability for such non-recourse exceptions has been granted to the Borrower or
any such guarantor or principal by the Seller or anyone acting on behalf of the
Seller.
44. Assignment of Collateral. There is no material collateral
securing the Mortgage Loan that has not been assigned to the Purchaser.
45. Fee Simple or Leasehold Interests. The interest of the related
Borrower in the Mortgaged Property securing the Mortgage Loan includes a fee
simple and/or leasehold estate or interest in real property and the improvements
thereon.
46. Servicing. The servicing and collection practices used with
respect to the Mortgage Loan in all material respects have met customary
standards utilized by prudent commercial or multifamily, as applicable, mortgage
loan servicers with respect to whole loans.
47. Originator's Authorization To Do Business. To the extent
required under applicable law to assure the enforceability of the Mortgage Loan,
as of the Mortgage Loan's funding date and at all times when it held the
Mortgage Loan, the originator of the Mortgage Loan was authorized to do business
in the jurisdiction in which the related Mortgaged Property is located.
48. No Fraud In Origination. In the origination of the Mortgage
Loan, none of the Seller, the originator or any employee or agent of the Seller
or the originator, participated in any fraud or intentional material
misrepresentation with respect to the Borrower, the Mortgaged Property or any
guarantor. To Seller's actual knowledge, no Borrower or guarantor is guilty of
defrauding or making an intentional material misrepresentation to the Seller or
originator with respect to the origination of the Mortgage Loan, the Borrower or
the Mortgaged Property.
49. Appraisal. An appraisal of the Mortgaged Property for the
Mortgage Loan was conducted in connection with the origination of the Mortgage
Loan, which appraisal is signed by an appraiser, who, to Seller's actual
knowledge, had no interest, direct or indirect, in the related Borrower, such
Mortgaged Property or in any loan made on the security of the Mortgaged
Property, and whose compensation is not affected by the approval or disapproval
of the Mortgage Loan; to the Seller's actual knowledge, the appraisal and
appraiser both satisfy the requirements of the "Uniform Standards of
Professional Appraisal Practice" as adopted by the Appraisal Standards Board of
the Appraisal Foundation, all as in effect on the date the Mortgage Loan was
originated.
50. Access and Parking. The following statements are true with
respect to the
C-18
Mortgaged Property: (i) the Mortgaged Property is located on or adjacent to a
public road, or has access to an irrevocable easement permitting ingress and
egress and (ii) except for de minimus violations or legal non-conforming
parking, to the Seller's knowledge, as of the time of origination of the
Mortgage Loan, based upon a letter from governmental authorities, a legal
opinion, an independent zoning consultant's report or an endorsement to the
related title insurance policy insuring the holder of the Mortgage against
losses related to the lack of such parking, and to Seller's actual knowledge as
of the Closing Date, the Mortgaged Property has parking to the extent, if any,
required under applicable law, including local ordinances.
51. Jurisdiction of Organization. The Borrower under the Mortgage
Loan was at the time of origination of thereof either a natural person or was an
entity organized under the laws of the United States or the laws of a
jurisdiction located within the United States, its territories and possessions.
52. Reserved.
53. Escrows. All escrow deposits (including capital improvements
and environmental remediation reserves) relating to the Mortgage Loan that were
required to be delivered to the lender under the terms of the related Mortgage
Loan documents, have been received and, to the extent of any remaining balances
of such escrow deposits, are in the possession or under the control of Seller or
its agents (which shall include the Master Servicer). All such escrow deposits
are conveyed hereunder to the Purchaser.
_________________________________________
Each representation and warranty of the Seller set forth in this
Exhibit C, 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
(a) enforcement may be limited (i) by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of creditors' rights
generally as from time to time in effect, (ii) by general principles of equity
(regardless of whether such enforcement is considered in a proceeding in equity
or at law), and (iii) by any applicable anti-deficiency law or statute; and (b)
such instrument, agreement or other document may contain certain provisions
which may be unenforceable in accordance with their terms, in whole or in part,
but the unenforceability of such provisions will not (subject to the
qualification in clause (a) above) (i) cause the related Mortgage Note or the
related Mortgage to be void in their entirety, (ii) invalidate the related
Borrower's obligation to pay interest at the stated interest rate of such
Mortgage Note on, and repay the principal of, the related Mortgage Loan in
accordance with the payment terms of the Mortgage Note, such Mortgage and other
written agreements delivered to the Seller in connection therewith, (iii)
invalidate the obligation of any related guarantor to pay guaranteed obligations
with respect to interest at the stated interest rate of such Note on, and the
principal of, the Mortgage Loan in accordance with the payment terms of such
guarantor's written guaranty, (iv) impair the mortgagee's right to accelerate
and demand payment of interest at the stated interest rate of such Mortgage Note
on, and principal of, the Mortgage Loan upon the occurrence of a legally
enforceable default, or (v) impair the mortgagee's right to realize against the
related Mortgaged Property by judicial or, if applicable, non-judicial
foreclosure.
C-19
SCHEDULE C-6
MJ Ocala Hilton (4010669) - This loan was just amended to reflect a
bifurcation of the loan. Loan A is in the amount of $6,600,000 with an interest
rate of 7.61% amortized over 25 years. Loan B is $800,981 also with an interest
rate of 7.61%, but its amortized over 20 years. Both loans mature July 1, 2010.
The Borrower signed the amendment on December 7, 2001.
C-6-1
SCHEDULE C-12(a)
The Environmental report for the MJ Ocala Hilton is older than 12
months (dated 10/23/97.)
C-12-1
SCHEDULE C-23
Other than the MJ Ocala Hilton Companion Loan, there are no liens
that affect our collateral. However, there is a lien dated November 2001 placed
by the City of Ocala on the chillers and A/C equipment.
C-23-1
SCHEDULE C-53
Although the loan documents require that taxes be escrowed, the
Borrower has only provided evidence that taxes have been paid.
C-53-1
EXHIBIT D-1
FORM OF CERTIFICATE OF A SECRETARY
OR ASSISTANT SECRETARY OF THE SELLER
SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2001-C2
CERTIFICATE OF SECRETARY OF ALLIED CAPITAL CORPORATION
I, ______________________, hereby certify that I am a duly elected
and acting Assistant Secretary of Allied Capital Corporation (the "Company"),
and certify further as follows:
1. The Company is a corporation duly organized and validly
existing under the laws of the State of Maryland;
2. Attached hereto as Exhibit A is a true, correct and complete
copy of the organizational documents of the Company, as in full force and effect
on the date hereof;
3. Attached hereto as Exhibit B is a certificate of the Secretary
of State of the State of Maryland issued within ten days of the date hereof with
respect to the good standing of the Company;
4. Since the date of the good standing certificate referred to in
clause 3 above, the Company has not received any notification from the Secretary
of State of the State of Maryland, or from any other source, that the Company is
not in good standing in Maryland.
5. Attached hereto as Exhibit C are the resolutions of the board
of directors of the Company authorizing the transactions contemplated by the
Mortgage Loan Purchase Agreement dated as of December __, 2001 (the "Mortgage
Loan Purchase Agreement"), between Salomon Brothers Mortgage Securities VII,
Inc. ("SBMS VII") and the Company, including the sale of the subject mortgage
loans (the "Mortgage Loans") by the Company to SBMS VII. Such resolutions are in
full force and effect on the date hereof and are not in conflict with any other
resolutions of the board of directors of the Company in effect on the date
hereof.
6. The Mortgage Loans do not constitute all or substantially all
of the assets of the Company.
7. To the best of my knowledge, no proceedings looking toward
liquidation or dissolution of the Company are pending or contemplated.
8. Each person who, as an officer or representative of the
Company, signed (a) the Mortgage Loan Purchase Agreement, (b) the
Indemnification Agreement dated as of December __, 2001 (the "Indemnification
Agreement"), among the Company, SBMS VII, Xxxxxxx Xxxxx Xxxxxx Inc., Greenwich
Capital Markets, Inc., Credit Suisse First Boston Corporation, X.X. Xxxxxx
Securities and First Union Securities, Inc., (c) any other document or
certificate delivered on or before the date hereof in connection with the
transactions
D-1
contemplated by the foregoing documents, was, at the respective times of such
signing and delivery, and is as of the Closing Date, duly elected or appointed,
qualified and acting as such officer or representative, and the signature of
such person appearing on any such document is his or her genuine signature.
Capitalized terms used but not otherwise defined herein have the
respective meanings assigned to them in the Mortgage Loan Purchase Agreement
and, if not defined therein, then in the Indemnification Agreement.
IN WITNESS WHEREOF, I have hereunto signed my name as of
___________, 2001.
By:________________________
Name:
Title:
The undersigned, an officer of the Company, hereby certifies that
___________________ is the duly elected and qualified and acting Assistant
Secretary of the Company and that the signature appearing above is his/her
genuine signature.
IN WITNESS WHEREOF, I have hereunto signed my name as of
____________, 2001.
By:________________________
Name:
Title:
EXHIBIT D-2
FORM OF CERTIFICATE OF THE SELLER
SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.
MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2001-C2
CERTIFICATE OF ALLIED CAPITAL CORPORATION
In connection with the execution and delivery by Allied Capital
Corporation (the "Company") of, and the consummation of the various transactions
contemplated by, that certain Mortgage Loan Purchase Agreement dated as of
December __, 2001 (the "Mortgage Loan Purchase Agreement"), between Salomon
Brothers Mortgage Securities VII, Inc. ("SBMS VII") and the Company, and the
Indemnification Agreement dated as of December __, 2001 (the "Indemnification
Agreement"), among the Company, SBMS VII, Xxxxxxx Xxxxx Xxxxxx Inc., Greenwich
Capital Markets, Inc., Credit Suisse First Boston Corporation, X.X. Xxxxxx
Securities Inc. and First Union Securities, Inc. (together, the Mortgage Loan
Purchase Agreement and the
D-2
Schedule A Addressees
January 7, 2002
Page 3
Indemnification Agreement are referred to herein as the "Agreements"), the
undersigned hereby certifies that (i) the representations and warranties of the
Company in the Agreements are true and correct in all material respects at and
as of the date hereof (or, in the case of the representations and warranties set
forth in Exhibit C of the Mortgage Loan Purchase Agreement, as of such other
date specifically provided in the particular representation and warranty) with
the same effect as if made on the date hereof (or, in the case of the
representations and warranties set forth in Exhibit C of the Mortgage Loan
Purchase Agreement, on such other date specifically provided in the particular
representation and warranty), and (ii) the Company has, in all material
respects, complied with all the agreements and satisfied all the conditions on
its part required under the Mortgage Loan Purchase Agreement to be performed or
satisfied at or prior to the date hereof. Capitalized terms used but not
otherwise defined herein have the respective meanings assigned to them in the
Mortgage Loan Purchase Agreement and, if not defined therein, then in the
Indemnification Agreement.
Certified this ___ day of December, 2001.
ALLIED CAPITAL CORPORATION
By:________________________
Name:
Title:
EXHIBIT D-3A
FORM OF OPINION OF SPECIAL COUNSEL
TO THE SELLER
TO THE PERSONS ON THE
ATTACHED SCHEDULE A
Re: Salomon Brothers Commercial Mortgage Trust 2001 - C2
Ladies and Gentlemen:
We have acted as special counsel for Allied Capital Corporation, a
Maryland Corporation ("Allied"), and have been requested to provide this opinion
on behalf of Allied, in its capacity as the Seller under that certain Mortgage
Loan Purchase Agreement dated as of December ___, 2001 (the "MLPA") by and
between Allied and Salomon Brothers Mortgage Securities VII, Inc. ("SBMS VII")
as Purchaser, and in its capacity as the MJ Ocala-Hilton Companion Mortgage Loan
Noteholder under that certain Pooling and Servicing Agreement dated as of
December 1, 2001 by and among SBMS VII as Depositor; Midland Loan Services, Inc.
as Master Servicer, General Special Servicer and Birch Run Special Servicer;
Xxxxx Fargo Bank, Minnesota, N.A. as Trustee; JPMorgan Chase Bank as Certificate
Administrator and Tax Administrator; Fortress CBO Investments Ltd. as Birch Run
Companion Mortgage Noteholder and Allied (the "PSA" and collectively with the
MLPA and the other related documents described on Exhibit 1 hereto, the
"Transaction Documents") which Transaction Documents were entered into in
connection with Allied's sale pursuant to the MLPA of a commercial mortgage loan
to SBMS VII and SMBS VII's issuance pursuant to the PSA of certain commercial
mortgage backed securities. Capitalized terms used herein and not otherwise
defined shall have the same meanings assigned to such terms in the PSA.
In rendering the opinions set forth herein, we have examined and relied on
originals or copies, certified or otherwise identified to our satisfaction, of
the Transaction Documents, copy of the articles of incorporation and by-laws of
Allied certified by an assistant secretary of Allied (the "Articles"), a good
standing certificate issued by the State of Maryland Department of Assessments
and Taxation dated December __, 2001 (the "Good Standing Certificate") and such
other documents as we have deemed necessary or appropriate as a basis for the
opinion set forth below.
In our examination we have assumed the genuineness of all signatures, the
legal capacity of natural persons, the authenticity of all documents submitted
to us as originals, the conformity to original documents of all documents
submitted to us as certified or photostatic copies, and the authenticity of the
originals of such copies. As to any facts material to this opinion, we have
relied upon statements and representations of Allied and its officers and
representatives, the factual representations of Allied in the Transaction
Documents and those certificates of public officials that we considered
appropriate as a basis for the opinion set forth below.
Schedule A Addressees
January 7, 2002
Page 5
In furnishing this opinion, we have assumed that: (i) the Transaction
Documents have been duly authorized, executed and delivered by all parties
thereto (other than Allied); (ii) all parties to the Transaction Documents
(other than Allied) have the power and authority to execute the Transaction
Documents; (iii) the execution, delivery and performance of the Transaction
Documents by each of the parties thereto (other than Allied) does not violate
such party's charter, by-laws or other organizational documents or any contract
or undertaking to which it is a party or by which it is bound and complies with
all laws, governmental rules and regulations, judgments and orders applicable to
all such parties (other than Allied); and (iv) the Transaction Documents
constitute the legal, valid and binding obligation of the parties thereto (other
than Allied).
Based on the foregoing, and subject to the assumptions and qualifications
set forth herein, we are of the opinion that:
1. Based solely on the Articles and the Good Standing Certificate,
Allied is a corporation organized, existing and in good standing under the laws
of the State of Maryland and has the requisite power and authority, corporate or
other, to enter into and perform its obligations under the Transaction
Documents.
2. The Transaction Documents have been duly and validly authorized,
executed and delivered by Allied and, upon due authorization, execution and
delivery by the other parties thereto, will constitute the legal, valid and
binding agreement of Allied, enforceable against Allied in accordance with their
terms, subject, as to enforcement, to (a) applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors' rights
generally, (b) general principles of equity (regardless of whether
enforceability is considered in a proceeding at law or in equity), (c) the
enforceability of any choice of law or consent to jurisdiction provisions, and
(d) the enforceability of any indemnification provision which purports to
indemnify any person for their own gross negligence, reckless disregard or
willful misconduct.
3. To our knowledge, no consent, approval, authorization or order of
any state or federal court or governmental agency or body is required for the
execution, delivery and performance by Allied of the Transaction Documents or
the consummation by Allied of the transactions contemplated by the Transaction
Documents, except for those consents, approvals, authorizations or orders which
previously have been obtained.
4. The fulfillment by Allied of the terms of the Transaction Documents
will not result in a breach of any term or provision of the articles of
incorporation or by-laws of Allied, or conflict with or result in a violation of
any State of Maryland or federal statute or regulation applicable to Allied, or
to our knowledge, conflict with, result in a breach or violation of or
constitute a default under, the terms of any indenture or other agreement to
which Allied is a
Schedule A Addressees
January 7, 2002
Page 6
party or by which it is bound, or, to our knowledge, any order of any State of
Maryland, State of New York or federal court, regulatory body, administrative
agency or governmental body having jurisdiction over Allied, except in any such
case where the default, breach or violation would not have a material adverse
effect on Allied or its ability to perform its obligations under the Transaction
Documents.
5. To our knowledge, there is no action, suit, proceeding or
investigation pending or threatened against Allied before any court,
administrative agency or other tribunal which, either in one instance or in the
aggregate, would draw into question the validity of the Transaction Documents,
or which seeks to prevent the consummation of any of the transactions
contemplated in the Transaction Documents, or which would be likely to impair
materially the ability of Allied to perform under the terms of the Transaction
Documents.
Our use of the term "to our knowledge" or any similar phrase to qualify a
statement in this opinion means that those attorneys in this firm who have given
substantive attention to the representation described in the introductory
paragraph of this opinion do not have current actual conscious knowledge that
the statement is inaccurate. Such terms do not include any knowledge of other
attorneys within our firm (regardless of whether they have represented or are
representing Allied in connection with any other matter) or any constructive or
imputed notice of any matters or items of information. We have not undertaken
any independent investigation to determine the accuracy of the qualified
statement and any limited inquiry undertaken by us during the preparation of
this opinion letter should not be regarded as such an investigation. No
inference as to our knowledge of any matters bearing on the accuracy of any such
statement should be drawn from the fact that we represent Allied in connection
with this opinion letter or in other matters. In addition, with respect to our
opinion in paragraph 4 above, we hereby notify you that we have not reviewed any
indenture or other agreement to which Allied is a party other than the
Transaction Documents and the related agreements specifically referenced
therein; and, with respect to our opinion in paragraph 5 above, we have
undertaken no searches of any court docket or any other action to determine the
existence of any action, suit, proceeding or investigation and we understand
each of these are acceptable to each of the addressees.
The opinions expressed herein are limited to the federal laws of the
United States, the laws of the State of New York and the statutory laws of the
State of Maryland relative to corporate organization and authorization as
compiled in Xxxxxxx Xxxxxx'x Maryland Code Annotated, 2001, all as in effect on
the date hereof, except that we express no opinion with respect to federal
securities laws, state securities or blue sky laws, or ERISA, or the rules and
regulations under any of the foregoing. Furthermore we express no opinion as to
whether the Limited Power of Attorney, which is Item 3 on Exhibit 1 hereto, is
in the proper form for, or is legally sufficient for, any particular
jurisdiction.
Schedule A Addressees
January 7, 2002
Page 7
This opinion is being furnished only to the parties to whom this opinion
is addressed and is solely for their benefit and no other person or entity shall
be entitled to rely on this opinion without our express prior written consent.
Very truly yours,
XXXXXXXXXX XXXXXXXX LLP
By: _______________________
Xxx X. Xxxx, Partner
SCHEDULE A
Xxxxx'x Investors Services, Inc. Salomon Brothers Mortgage Securities VII, Inc.
00 Xxxxxx Xxxxxx 000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000 Xxx Xxxx, Xxx Xxxx 00000
Standard and Poor's Midland Loan Services, Inc.
00 Xxxxx Xxxxxx 000 Xxxx 00xx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, XX 00000 Xxxxxx Xxxx, XX 00000
Xxxxx Fargo Bank Minnesota, N.A. JPMorgan Chase Bank
00 Xxxxxxxx, 00xx Xxxxx 000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000 Xxx Xxxx, XX 00000
Fortress CBO Investments I, CTL X.X. Xxxxxx Securities Inc.
0000 Xxxxxx xx xxx Xxxxxxxx, 00xx Xxxxx 000 Xxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, XX 00000 Xxx Xxxx, XX 00000
Xxxxxxx Xxxxx Barney Inc. First Union Securities, Inc.
000 Xxxxxxxxx Xxxxxx 000 Xxxxx Xxxxx Xxxxxx
Xxx Xxxx, XX 00000 Xxxxxxxxx, XX 00000
Greenwich Capital Markets, Inc. Credit Suisse First Boston Corporation
000 Xxxxxxxxx Xxxx 00 Xxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000 Xxx Xxxx, XX 00000
D-3A-1
EXHIBIT D-3B
FORM OF OPINION OF SPECIAL COUNSEL
TO THE SELLER
Xxxxx'x Investors Services, Inc. Greenwich Capital Markets, Inc.
00 Xxxxxx Xxxxxx 000 Xxxxxxxxx Xxxx
Xxx Xxxx, XX 00000 Xxxxxxxxx, XX 00000
Standard and Poor's Ratings Group Credit Suisse First Boston Corporation
25 Broadway 00 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000 Xxx Xxxx, XX 00000
Salomon Brothers Mortgage Securities VII, Inc. X.X. Xxxxxx Securities Inc.
000 Xxxxxxxxx Xxxxxx 000 Xxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000 Xxx Xxxx, XX 00000
Xxxxxxx Xxxxx Barney Inc. First Union Securities, Inc.
000 Xxxxxxxxx Xxxxxx 000 Xxxxx Xxxxx Xxxxxx
Xxx Xxxx, XX 00000 Xxxxxxxxx, XX 00000
RE: Salomon Brothers Mortgage Securities VII, Inc. (the
"Depositor") Commercial Mortgage Pass-Through
Certificates Series 2001-C2
Ladies and Gentlemen:
We have acted as counsel to Allied Capital Corporation ("Allied" ), a Maryland
corporation, in connection with the issuance of Salomon Brothers Mortgage
Securities VII, Inc. Commercial Mortgage Pass-Through Certificates Series
2001-C2 (the "Certificates"). Capitalized terms and letters used herein without
definition have the meaning ascribed to them in the Pooling and Servicing
Agreement or in Schedule 2 hereto. The Certificates will consist multiple
classes designated as follows:
X-0, X-0, X-0, B, C, D, E, F, G, H, J, K, L, M, N, P, Q, BR, R, Y,
X-1, and X-2
and will represent in the aggregate the entire beneficial ownership interest in
a separate trust fund (the "Trust") the property of which is primarily
comprised of multi-family and commercial mortgage loans (collectively, the
"Mortgage Loans"). The Mortgage Loans being so transferred were (i) loans
originated or acquired from time to time by Salomon Brothers Realty Corp.
("SBRC"), (ii) loans originated or acquired from time to time by Greenwich
Capital Financial Products ("GCFP"), (iii) loans originated or acquired from
time to time by Artesia Mortgage Capital Corporation ("AMCC") and (iv) one loan
originated by Allied.
All loans are being transferred to Depositor by four (4) separate Mortgage Loan
Purchase Agreements between said respective parties and Depositor (collectively,
the "Mortgage Loan Purchase Agreements"). Depositor, pursuant to the Pooling and
Servicing Agreement, then is selling the Mortgage Loans to Xxxxx Fargo Bank
Minnesota, N.A., as Trustee (the "Trustee") of the Trust.
The Certificates are being issued by the Trust to Depositor in full payment for
the Mortgage Loans and Depositor will sell all the Certificates to the
Certificate Sellers and receive the net proceeds thereof in cash. In a separate
transaction Allied will acquire the Certificates designated as J, K, L, M, N, P,
Q and Y (the " Allied Certificates").
The payments to SBRC, GCFP, AMCC and Allied will be made by Depositor in cash on
Closing.
D-3B-1
Certificates are being issued pursuant to the Pooling and Servicing Agreement
and are being offered pursuant to the Underwriting Agreement and the Certificate
Purchase Agreement. The Certificate Sellers are offering all the Class X-0, X-0,
X-0, X, X, X and E Certificates (the "Public Certificates") by public offering
by the Prospectus and the Prospectus Supplement (defined below), and the balance
of the Certificates ( the "Private Certificates") by the Private Placement
Memorandum (defined below).
Midland Loan Services, Inc. (the "Servicer") will service the Mortgage Loans
under the terms of the Pooling and Servicing Agreement.
We have acted as special counsel to Allied in connection with the transfer by
Allied of the Mortgage Loan identified on Attachment A hereto (the "Loan") and
the acquisition of the Allied Certificates.
In this regard we have reviewed the following:
1. The Mortgage Loan Purchase Agreement dated as of December 18,
2001 by and between Allied as Seller and the Depositor as
Purchaser (the "MLPA");
2. The Pooling and Servicing Agreement dated as of December 1,
2001 by and among the Depositor as Depositor, Midland Loan
Services as Master Servicer, General Special Servicer, and
Birch Run Special Servicer, Xxxxx Fargo Bank Minnesota, N.A.
as Trustee, JPMorgan Chase Bank as Certificate Administrator
and Tax Administrator, Fortress CBO Investments I, LTD. As
Birch Run Companion Mortgage Loan Noteholder and Allied as MJ
Ocala-Hilton Companion Mortgage Loan Noteholder (the "PSA");
3. Certificates of Xxxxxxx Xxxxxxx and Xxxx Xxxxxxxx of Allied,
dated the date hereof and in the form attached hereto as
Exhibits A and B(the "Supporting Certificates");
4. The Prospectus and Prospectus Supplement dated December __,
2001 prepared by the Depositor by which the Public
Certificates were offered ( the "Prospectus and Prospectus
Supplement");
5. The Private Placement Memorandum prepared by the Depositor by
which the Private Certificates were offered (the Private
Placement Memorandum"); and
6. The Indemnification Agreement dated and effective as of
December __, 2001 among Allied , the Depositor, Xxxxxxx Xxxxx
Barney Inc., Greenwich Capital Markets, Inc. Credit Suisse
First Boston Corporation, X.X. Xxxxxx Securities Inc. and
First Union Securities, Inc. (the "Indemnification
Agreement").
D-3B-2
OPINIONS REQUESTED
In our capacity as special counsel to Allied, we have been requested to
provide to each of you our opinion as to whether a bankruptcy court, in a
properly presented case under currently reported decisions and statutes,
correctly applying applicable law and exercising reasonable judgment after full
consideration of the facts, would conclude that, if Allied becomes a debtor
under Title 11 of the United States Code (the "Bankruptcy Code"), the transfer
of the Loan by Allied to the Depositor constitutes a true sale of the Bonds and,
therefore, that the Note does not constitute property of the bankruptcy estate
of Allied under Section 541 of the Bankruptcy Code.
ASSUMPTIONS
In rendering our opinion, we have examined and relied upon originals or
copies, certified or otherwise identified to our satisfaction of such
certificates, corporate or other records, and other documents as we have deemed
appropriate for the purpose of rendering this opinion. We have examined and
relied upon, among other things: (a) a certificate of an officer of Allied
representing that the applicable facts set forth herein are accurate, and (b)
the statements of fact in the Documents to the extent such statements are
relevant hereto. We have not made any independent inquiry with regard to the
accuracy of the matters stated in such certificates or in the Documents.
Our opinions expressed herein are based upon and subject to the following
assumptions and statements of fact being and remaining correct:
1. Compliance by each of SBRC, GCFP, AMCC, Allied, Depositor and the
Trustee with the relevant provisions of each of their certificates of
incorporation or organization, bylaws and the terms and provisions relating to
the transfer of the Mortgage Loans as provided by the Pooling and Servicing
Agreement. All instruments of transfer and other documents issued or executed in
connection with the issuance and sale of the Certificates are legal, valid, and
binding upon, and enforceable in accordance with their terms against, all
parties or signatories thereto, except as such enforceability may be affected by
(a) laws relating to bankruptcy, insolvency and other similar laws and (b) the
principles of equity.
2. SBRC, GCFP, AMCC, Allied, Depositor and the Trustee will each at all
relevant times maintain its existence (corporate or as a national banking
association, as the case may be) in good standing under the laws of its
respective state (and as to the Trustee, the laws of the United States) of
formation; each of said parties has otherwise complied and will, to the extent
such laws are applicable to each with respect to the transactions herein
described, comply in all respects with the laws of such government controlling
their respective formation, and with all other laws, federal, state or
otherwise, the violation of which would: (a) affect title to or the
transferability of the Mortgage Loans, (b) affect the validity or formation of
the Trust, or (c) affect the authorization for or the validity of the
Certificates, including but not limited to all laws relating to the issuance,
sale and distribution of securities as it relates to the Certificates; each will
observe all requisite corporate and, as the case may be, national banking
association formalities with respect to the transactions herein described; and
all contemplated transactions in
D-3B-3
connection with the issuance of the Certificates are duly authorized under, and
in compliance with, applicable federal and state laws other than laws relating
to bankruptcy.
3. The genuineness and due authorization of all signatures, the
authenticity of all documents submitted to us as originals, the conformity to
original documents of all documents submitted to us as copies, and the
authenticity of the originals of all documents submitted to us as copies.
4. All necessary endorsements and assignments required under applicable
state laws to transfer effectively the Mortgage Loans will be executed,
delivered and, where state law requires, recorded, or the borrowers notified, or
both, and the promissory notes for the Mortgage Loans will be delivered to
Depositor and by Depositor to the Trustee for the Trust in accordance with the
terms of the Mortgage Loan Purchase Agreements and the PSA.
5. Each of SBRC, GCFP, AMCC and Allied is and will be solvent
immediately after the transfer by each of Mortgage Loans to Depositor.
6. Depositor is and will be solvent immediately after both the transfer
by it of the Mortgage Loans to the Trustee and the sale of the Certificates to
the Certificate Sellers.
7. The Trustee or other appropriate party in interest would oppose any
attempt to treat the Loan as property of the estate of Allied in the event
Allied were to file a voluntary petition under the Bankruptcy Code or have a
trustee appointed for it under the Bankruptcy Code.
8. Allied was, immediately prior to the transfer thereof by it to
Depositor, the owner of the Loan transferred by it under the MLPA.
9. For purpose of the statements, conclusions and qualifications
hereinafter set forth, the term "Mortgage Loan" shall be deemed to include
certain related contract rights and accounts held by the Servicer (or other
servicers), certain related collection and or distribution accounts, certain
funds of the borrowers, certain related reserve accounts and certain insurance
policies related to the loans, all held by the Servicer (or other servicers) on
behalf of the respective owners of the loans.
10. Commencing on the date hereof the following transactions will occur
sequentially:
(a) SBRC, GCFP, AMCC and Allied will transfer those Mortgage Loans
owned by each of them to Depositor, pursuant to their respective mortgage loan
purchase agreements. The consideration to be paid SBRC, GCFP, AMCC and Allied
pursuant to the Mortgage Loan Purchase Agreements will be cash equal to the fair
market value of the Mortgage Loans so transferred, payable as hereinabove set
forth.
(b) Pursuant to the Pooling and Servicing Agreement, Depositor
will transfer to the Trustee, for the benefit of the holders of Certificates,
all of its right, title and interest in and to the Mortgage Loans in exchange
for the Certificates, which will represent a value no less than the fair market
value of the Mortgage Loans.
D-3B-4
(c) Pursuant to the Underwriting Agreement and the Certificate
Purchase Agreement, Depositor will transfer the Certificates to Certificate
Sellers in consideration for an aggregate purchase price which represents the
fair market value for the Certificates. Certificate Sellers intend to sell all
of the Certificates to purchasers that are not affiliated with Depositor.
11. The Pooling and Servicing Agreement provides for the issuance of the
Certificates, which collectively evidence 100% ownership interest in the Trust.
The Trust is comprised of the Mortgage Loans.
12. The parties intend, and the applicable documents so indicate, the
transfer of the Mortgage Loans pursuant to the Mortgage Loan Purchase and Sale
Agreements to be sales by each of SBRC, GCFP, AMCC and Allied to Depositor. The
parties intend to treat the transfers as sales for accounting and tax purposes.
The purchase price for the Mortgage Loans will be fair market value. SBRC, GCFP,
AMCC and Allied will each irrevocably transfer and relinquish all rights with
respect to the Mortgage Loans and, specifically, will have no right to sell,
pledge, or otherwise dispose of the Mortgage Loans after their respective
transfers thereof. Depositor, subject to the Pooling and Servicing Agreement,
will be free to deal with the Mortgage Loans as its own property. Depositor will
transfer the Mortgage Loans without recourse and will have no obligation to
deliver other property to the Trust either in substitution for or in addition to
the Mortgage Loans in the event of a credit loss or decline in value of the
Mortgage Loans. The Trust will have no right to transfer the Mortgage Loans back
to Depositor.(1) Consequently, Depositor will have transferred the benefits and
risks of ownership of the Mortgage Loans to the Trust. Neither SBRC, GCFP, AMCC,
Allied, nor Depositor will have transferred the Mortgage Loans in contemplation
of insolvency or with a design to prefer one or more creditors to the exclusion
in whole or in part of others or with an intent to hinder, delay or defraud any
of its creditors, but will transfer (or heretofore transferred) its interest in
said Mortgage Loans in accordance with the ordinary course and scope of its
business. The owners of the interests in the Trust did not transfer their
interests in the Trust in contemplation of insolvency or with a design to prefer
one or more creditors to the exclusion in whole or part of others or with an
intent to hinder, delay or defraud any of their
---------- (1) Allied, SBRC, GCFP and AMCC make (or will pass through) certain
representations and warranties regarding each of the Mortgage Loans in the
respective mortgage loan purchase agreements and under certain
circumstances one or more of them (or the parties which originated any
such Mortgage Loans as to loans originated by such other parties) may be
obligated to repurchase one or more of the Mortgage Loans due to breach of
any such representation or warranty, which representations and warranties
were passed on by Depositor to the Trust. However, each such obligation is
limited and does not result from a decline in the value of or future
payment defaults on any one or more of the Mortgage Loans and does not
give SBRC, GCFP, AMCC, Allied or Depositor a right to repurchase or
otherwise reacquire any of the Mortgage Loans or to reclaim any of the
incidents of ownership, except to comply with each such party's respective
representations and warranties. Furthermore, each Mortgage Loan Seller, if
such breach is also a default under a Mortgage Loan, has a right to cure
such breach and to have its expenses in so doing repaid to it, subject and
subordinate to the rights of the Trustee. Such cure rights do not amount
to a reacquisition of the Mortgage Loan and constitute a less drastic
method of compliance with a party's representations and warranties.
D-3B-5
respective creditors, but transferred such beneficial interest in accordance
with the ordinary course and scope of their businesses.
13. Under the Pooling and Servicing Agreement and the Mortgage Loan
Purchase Agreements, Depositor has no obligation to deliver other property to
any holder of the Mortgage Loans either in substitution therefor or in addition
thereto in the event of a credit loss or decline in value of the Mortgage Loans,
nor does the holder of the Mortgage Loans have a right to transfer the Mortgage
Loans to Depositor or Allied , except as noted in footnote 1.
14. Under the Pooling and Servicing Agreement, when the total stated
principal balance of the Mortgage Loans declines to 1% of the initial pool
balance as of the Cut-Off Date, the holder(s) of a majority of the controlling
class, the most subordinate Class of Certificates then outstanding that has at
least 25% of its principal outstanding or the Special Servicer, in such order of
priority, may opt to purchase the Mortgage Loans and any REO Properties then
remaining at a price requiring payment of a sum that would pay all principal
balances (as adjusted by the Special Servicer for loans for which it determines
all payment or recoveries have been made, and excluding REO Properties),
interest and unreimbursed expenses and fair market value for all other assets,
including REO Properties.
15. Under the Pooling and Servicing Agreement all payments on Mortgage
Loans will be sent directly by the borrowers obligated on the Mortgage Loans to
Servicer, to be deposited by it in an account or accounts titled in the name of
the Trustee, with Servicer authorized to draw thereon by the Pooling and
Servicing Agreement only for the purposes specified in said Pooling and
Servicing Agreement.
16. The purchase of the Loan by the Depositor from Allied was not
conditioned upon Allied purchasing the Allied Certificates.
17. Allied's decision to purchase the Allied Certificates was based on
its assessment of the value of the Allied Certificates and was not made to
induce the purchase of the Loan.
Our opinion is based upon, and is subject to, the additional assumptions
set forth herein.
In rendering our opinion, we have, with your permission and at your
direction, relied upon the following factual assumptions, the accuracy of which
we have not independently verified and which constitute our understanding of the
transactions described herein and which have been confirmed to us in the
Supporting Certificate:
A. Allied is a corporation having all requisite power and
authority to transfer the Loan.
B. Allied transferred and absolutely assigned all of its right,
title and interest in and to the Loan pursuant to the MLPA. In
consideration for such conveyance, Allied received an amount equal to the
outstanding principal balance and accrued interest less approximately
$80,000.00 (such sum the "Purchase Price") representing the purchase
D-3B-6
price for the Loan (including accrued and unpaid interest to the Transfer
Date) in cash on the Transfer Date.
C. The Purchase Price is consistent with amounts paid in other
sales of mortgage loans similar to the Loan in connection with a sale made
at arm's length to a third party and reflects the fair market value of the
Loan.
D. All records (electronic and otherwise) of Allied relating to
the Loan have been and will continue to be marked to indicate that the
Loan has been sold by Allied.
E. Other than as specifically provided in the PSA and set forth
above, Allied has no right to substitute or exchange the Loan it has sold
and Depositor has no right to require Allied to so substitute or exchange
the Loan.
F. In consideration for its purchase of the Allied Certificates,
Allied paid approximately $40,300,000.00 (the "Allied Certificate
Purchase Price") representing the purchase price for the Allied
Certificates in cash on the Transfer Date.
G. The Allied Certificate Purchase Price is consistent with
amounts paid in other sales of certificates similar to the Allied
Certificates in connection with a sale made at arm's length to a third
party and reflects the fair market value of the Allied Certificates.
H. The Loan is secured by a mortgage which also secures another
loan (the B-Note") which is subordinated to the Loan with respect to
payment and remedies in the event of a default under the Loan or the
mortgage. Allied is the owner of the B-Note. In the event of a default
under the Loan, Allied as the holder of the B-Note will be precluded from
taking any action or receiving any payment on the B-Note unless and until
the Loan is paid in full.
In rendering our opinion herein, we have reviewed Section 541 of the
Bankruptcy Code and judicial interpretations thereof, as well as other relevant
law that we deemed necessary.
DISCUSSION
Section 541 of the Bankruptcy Code provides that the estate of a debtor is
comprised of "all legal or equitable interests of the debtor in property as of
the commencement of the [bankruptcy] case." Because the Bankruptcy Code does not
state under what circumstances the debtor may have any such interest in
property, that determination is made under applicable state law.(2)
----------
(2) Xxxxxxxx x. Xxxxxxx, 000 X.X. 000, 398, 112 S. Ct. 1386, 1389 (1992) (in
the absence of any controlling federal law, property and interests in
property "are creatures of state law"); In re Crysen/Montenay Energy Co.,
902 F.2d 1098, 1101 (2d Cir. 1990) (stating that federal law
D-3B-7
In this regard, we have not located relevant authority specifically
interpreting transfers of the type described above. State decisional law does
exist in analogous areas. In these instances, courts have considered whether
transfers of assets should be characterized as sales, absolute assignments,
contingent assignments or secured loans for purposes of tax, bankruptcy and
usury laws. Those courts have focused on differing factors to determine whether
a transfer of assets constitutes an "absolute assignment" or a "true sale" of
those assets. The most relevant factors are discussed below.
Further, judicial determination of a "true sale" generally proceeds on a
case-by-case basis, involving analysis of all of the facts and circumstances of
a particular case, rather than by the consistent application of a
well-established legal doctrine, and no prescribed formula or set of factors
that can be consistently applied has been developed. In addition, reported cases
do not indicate any single factor or combination of factors that is conclusive.
As a result of the case-by-case analysis of particular facts and
circumstances, the reported decisions are not conclusive as to the relative
weight to be given to any factor discussed in those cases or in this
transaction. Further, the cases do not uniformly apply the factors considered.
In certain decisions, transactions with certain facts similar to those present
in this transaction were characterized as loans secured by the assets.(3)
In considering the issue of whether a transaction is a true sale or a financing
arrangement, courts generally have looked to the following factors:
1. Intent of the Parties. Principally, the courts examine the intent of
the parties, as determined from all of the facts and circumstances surrounding
the transaction.(4) Courts have held that the objective intent of the parties to
a transaction is critical in determining the nature and effect of the
transaction.(5) In particular, in transactions among sophisticated parties, the
----------
determines the "outer boundary of what may constitute property of the
estate," but that state law determines the nature of the debtor's interest
in a given item).
(3) Home Bond Co. x. XxXxxxxxx, 000 X.X. 000 (1916); Xxxxxxxxx v. Commercial
Credit Corp., 263 F.2d 97 (5th Cir.), cert. denied, 000 X.X. 000 (1959);
Xxxxxx x. Credit Discount Co., 27 Cal. 2d 335, 163 P.2d 869 (Cal. 1945).
(4) In re Xxxxxx, 65 F.3d 670, 674 (8th Cir. 1995); Stratford Financial Corp.
v. Finex Corp., 367 F.2d 569, 571 (2d Cir. 1966); In re Golden Plan of
California, Inc., 829 F.2d 705, 709 (9th Cir. 1986); In re Xxxxx Xxxx
Corp., 38 B.R. 571, 575-76 (Bankr. S.D.N.Y. 1984); In re Eagle-Picher
Industries, 139 B.R. 873, 875 (Bankr. S.D. Ohio 1992); In re Evergreen
Valley Resort, Inc., 00 X.X. 000, 000 (Xxxxx. D. Me. 1982).
(5) In re Xxxxxx, Xxxxxxx & Xxxxxxxx Asset Management Corp., 67 B.R. 557,
597-98 (Bankr. D.N.J.) aff'd, 805 F.2d 120 (3d Cir. 1986); In re CRIIMI
MAE, Inc., 251 B.R. 796, 801 (Bankr. D. Md. 2000); see also Xxxxx Bros.
Electric Contractors, Inc. x. Xxxx Construction Corp., 41 N.Y.2d 397, 399,
361 N.E. 99, 101 (N.Y. 1977) (stating that courts must look to the
"objective manifestations of the intent of the parties as gathered by
their express words and deeds").
D-3B-8
stated intent of those parties is generally the controlling consideration.(6) In
determining the intent of the parties, it is a primary rule of contract
construction that when the terms of a written agreement are clear and
unambiguous, the intent of the parties must be found within the four corners of
the contract.(7) However, if a contract has internal inconsistencies pointing to
ambiguity, courts will allow extrinsic evidence to determine the intent of the
parties.(8)
Courts will defer to the parties' characterization of a transaction unless
the components of the transaction are clearly inconsistent with the stated
intent or the effect of the transaction would result in a clear evasion of
public policy. Further, although the documentation often determines the parties'
intent,(9) the law requires "no particular phraseology . . . to effectuate an
assignment."(10) However, merely labeling the transfer an "absolute assignment"
or a "true sale" is not dispositive and, without more, will not generally
persuade a court to so characterize the transfer.(11)
----------
(6) In re Xxxxxx, 67 B.R. at 597-98; Equipment Finance, Inc. x. Xxxxxxx, 000
X.0x 00 (Xx. Super Ct. 1966); Granite Partners, L.P. v. Bear, Xxxxxxx &
Co. Inc., 17 F.Supp.2d 275, 300 (S.D.N.Y. 1998).
(7) In re CRIMMI MAE, Inc., 251 B.R. at 801-802; Slamow v. Del Cor, 174 A.D.2d
725, 726 571 N.Y.S.2d 335 (N.Y. App. Div. 1991) aff'd 79 N.Y.2d 1016, 594
N.E.2d 918 (N.Y. 1992).
(8) In re CRIIMI MAE, 251 B.R. at 802; Federal Ins. Co. v. Americas Ins. Co.,
258 A.D.2d 39, 43, 691 N.Y.S.2d 508, 512 (N.Y. App. Div. 1999).
(9) In re Golden Plan, 829 F.2d at 709; United States x. Xxxxx, 127 F.3d 739,
n.2 (8th Cir. 1997); Guaranty Savings & Loan Association v. Ultimate
Savings Bank, 737 F. Supp. 366, 370-71 (W.D. Va. 1990).
(10) In re Xxxxx Xxxx Corp., 38 B.R. at 575; Coastal, Commercial Corp. v.
Xxxxxx Xxxxxx & Sons, Inc., 199 N.Y.S.2d 852, 855 (N.Y. App. Div 4th Dept
1960).
(11) In re Xxxxxx Xxxxxx Hat Co., 482 F.2d 937, 940 (2d Cir. 1973) (concluding
that an "absolute assignment" agreement actually was an assignment for
security); Endico Potatoes, Inc. v. CIT Group/Factoring, 67 F.3d 1063,
1068-069 (2d Cir. 1995); Major's Furniture Mart, Inc. v. Castle Credit
Corp., 602 F.2d 538, 543 (3d Cir. 1979); In re Xxxxxxx Co., 813 F.2d 266,
272 (9th Cir. 1987); People v. Service Institute, Inc., 421 N.Y.S.2d 325,
326 (N.Y. Sup. Ct. 1979); In re Xxxxxxx Mortgage Corp., 158 B.R. 926, 932
(Bankr. S.D. N.Y. 1993) (holding that "[l]xxxxx cannot change the true
nature of the underlying transactions."); but see In re Xxxxxx, 67 B.R. at
597 (noting that unequivocal language in the documents characterizing the
transaction as a purchase and sale was strong prima facie evidence that
the parties intended the transaction to be an absolute assignment rather
than a secured loan).
D-3B-9
There is no indication in the MLPA that the transfer of the Loan to the
Depositor by Allied is intended to constitute a transaction other than an
absolute sale of the Loan. The clearly expressed intention of the parties under
the MLPA is that the transfer of the Loan by Allied to the Depositor be a sale,
not a pledge of the Loan to secure a debt or other obligation of Allied. MLPA,
Section 10.
2. Recourse. The right of a transferee to seek payment from the
transferor of an asset (i.e., recourse) for losses incurred as a result of the
non-collectability of the asset following its transfer is a primary factor in
the determination of whether a transfer should be characterized as an "absolute
assignment" or "true sale" or, instead, as a secured loan.(12) The mere presence
of recourse to the transferor "without more will not automatically convert a
sale into a security interest . . . [rather] [t]he question for the court . . .
is whether the nature of the recourse, and the true nature of the transaction,
are such that the legal rights and economic consequences of the [transaction]
bear a greater similarity to a financing transaction."(13)
Accordingly, where a transferee has full recourse to the transferor for
losses on the transferred assets, the transfer is more likely to be
characterized as a secured loan or contingent assignment.(14) Conversely, if the
transferee has no or limited recourse to the transferor, it is more likely that
the transfer will be characterized as an absolute assignment.(15) Thus, where a
transferor obligated itself to repurchase all assets it conveyed that became 60
or more days past due(16) or warranted that each asset would be paid within 60
days of transfer,(17) courts have found the transfers of those assets to be
contingent assignments as security for loans and not absolute assignments. In
contrast, where a transferor established a 20% reserve fund for any credit loss
that the transferee might sustain in respect of any asset and the transferee had
full recourse to the
----------
(12) Home Bond Co. x. XxXxxxxxx, 000 X.X. 000; In re Gotham Can Co., 48 F.2d
540, 541 (2d Cir. 1931); Major's Furniture Mart, Inc., 602 F.2d at 545
(referencing "the extremely relevant factor" of recourse); In re Evergreen
Valley Resort, Inc., 23 B.R. at 662; Xxxxxx v. State, 000 X.0x 000,
586-588 (Alaska 1996).
(13) Major's Furniture Mart, Inc., 602 F.2d at 544 (emphasis in original;
footnote omitted).
(14) In re Xxxxxxx Transport Enterprises, Inc., 744 F.2d 293, 295-96 (2d Cir.
1984); In re Gotham Can Co., 48 F.2d at 541; In re Xxxxxxx Co., 813 F.2d
266. But see X. X. Xxxxx Co. v. National Investment Corporation of
Houston, 421 S.W.2d 723 (Tex. Ct. App. 1967) (holding presence of full
recourse not inconsistent with sale); Xxxxxx, 910 P.2d at 588 (court
concluded the nature of the recourse, not the existence of full recourse,
was determinative factor).
(15) In re Golden Plan, 829 F.2d at 709.
(16) Major's Furniture Mart, Inc., 602 F.2d 538; West Pico Furniture Company of
Los Angeles v. Pacific Finance Loans, 2 Cal.3d 594, 469 P.2d 665 (1970).
(17) Milana, 27 Cal.2d 335, 163 P.2d. 869; Service Institute, 421 N.Y.S.2d at
326.
D-3B-10
transferor with respect to any asset created without the prior approval of the
transferee, the court found the transfer to be a "true sale(18)".
In the instant transaction, Allied does not guaranty the Loan or receipt
by Depositor of any payment in respect of the Loan and Depositor has no right to
require Allied to make any payment in respect of any loss experienced by
Depositor as a result of any loss incurred with respect to the Loan other than
for a breach of specific representations and warranties that do not relate to
the collectability of the Loan.
Though there is no recourse to Allied for non-payment of the Loan absent
the breach of a representation or warranty, a party challenging the true sale
character of the transfer might argue that, by purchasing classes of
Certificates which rank lowest in order of priority of payment, Allied
effectively has retained the risk of non-payment of the Loan, thereby
manifesting an intention inconsistent with an absolute assignment. Such an
argument should be found unpersuasive. Allied's risk on the subordinated
Certificates is only marginally related to performance of the Loan, which
constitutes an exceedingly small portion of the Mortgage Loans. The Loan could
perform in exemplary fashion, yet Allied could suffer losses on its investment
in the subordinated Certificates because of non-performance of other Mortgage
Loans. This fact demonstrates that Allied's purchase of the Certificates is not
being driven by the sale of the Loan to the Depositor. Allied's purchase of the
subordinated Certificates is not a condition to the sale by Allied of the Loan,
nor is Allied acquiring the Certificates to induce the purchase of the Loan.
Where, as here, the purchase of the subordinated Certificates is a transaction
independent of the sale of the Loan, the argument that the Certificate
acquisition evidences an intent inconsistent with a true sale should be found
singularly unpersuasive.
3. Control of the Transferred Property. The extent to which the
transferor of assets retains the right to make decisions regarding the assets
after the transfer, and the types of decisions the transferor is entitled to
make, are aspects of control over transferred assets to which certain courts
have ascribed importance in the characterization of a transfer as an absolute
assignment.(19)
In this regard, courts have also looked at whether the transferor (i)
continues to service the transferred assets,(20) (ii) is permitted to commingle
either the transferred assets or collections
----------
(18) Refinance Corp. v. Northern Lumber Sales, Inc., 329 P.2d 109 (Cal. App.
2nd Dist. 1958).
(19) In re Xxxxxxx Co., 813 F.2d at 268; Xxxxxx x. Xxxxx Fargo Bank
International Corp., 406 F. Supp. 452, 473 (S.D.N.Y. 1975), aff'd, 540
F.2d 548 (2d Cir. 1976); In re Xxxxx Xxxx Corp., 38 B.R. at 575; SBRC
Manhattan Bank, N.A. v. F.D.I.C., 554 F. Supp. 251, 256 (W.D. Okla. 1983).
(20) In re Golden Plan, 829 F.2d at 709; In re Xxxx Commercial Corp., 327 F.
Supp. 1315, 1317 (S.D.N.Y. 1971); West Pico Furniture Company, 2 Cal. 3d
at 604.
D-3B-11
thereon, or both, with the transferor's own assets,(21) or (iii) notifies the
obligors on the assets of the transfer.(22)
Initially as Controlling Class Representative, Allied will have the right
to consent to certain actions taken with respect to the Mortgage Loans. Allied
will not service the Mortgage Loans nor make any final decisions with respect to
the Mortgage Loans but rather Allied's consent will be required with respect to
specific limited decisions and the Servicer may ignore Allied's direction or
take those specific actions notwithstanding Allied's failure to consent if the
Servicer determines that Allied's direction or failure to consent would cause
the Servicer to violate the Servicing Standard with respect to the best
interests of the all of the Certificateholders. Accordingly Allied's control
over any Mortgage Loan is specifically limited and subject to be superceded by
the judgment of the Servicer on behalf of the Trust and all of the
Certificateholders.
4. Additional Factors. Courts have identified additional factors that
may indicate whether a transfer is a sale or a secured loan. These factors
include whether the transferor has any redemption rights,(23) whether the
transferee has made an independent credit evaluation of credit risks on the
asset,(24) whether the transferor must pay interest to the transferee with
respect to amounts that remain unpaid under any asset after the estimated
collection period expires,(25) whether the assets transferred are specifically
identified,(26) whether, prior to the transfer, the transferee had any right in
the asset transferred, or was owed any financial obligation by the
transferor,(27) whether the transferor has treated the transfer as a sale of
assets for accounting purposes,(28) whether the transferor must bear the expense
of servicing and collecting the
----------
(21) In re Xxxxxxx Transport Enterprises, Inc., 744 F.2d 293, 295 (2d Cir.
1984); In re Xxxx Commercial Corp., 327 F. Supp. at 1317.
(22) In re Xxxx Commercial Corp., 327 F. Supp. 1315; SBRC Manhattan Bank, 554
F. Supp. at 255.
(23) Fox x. Xxxx Iron & Metal Co., 25 B.R. 674, 689 (Bankr. S.D. Cal. 1982); In
re Eagle-Picher Industries, Inc., 139 B.R. at 875; In re Carolina
Utilities Supply Co., 118 B.R. 412, 415-16 (Bankr. D.S.C. 1990); In re
Evergreen Valley Resort, Inc., 23 B.R. at 661.
(24) In re Xxxxxxx Transport Enterprises, Inc., 744 F.2d at 296; In re Xxxx
Commercial Corp., 327 F. Supp. at 1317; West Pico Furniture Company, 2
Cal.3d at 604, 46 P.2d 665.
(25) In re Carolina Utilities, 118 B.R. at 416.
(26) In re Casco Electric Corp., 28 B.R. 191, 195 (Bankr. E.D.N.Y.), aff'd, 35
B.R. 731 (E.D.N.Y. 1983); Cessna Finance Corporation x. Xxxxxxx Aviation
Inc., 13 B.R. 15, 22 (Bankr. D. Neb. 1981).
(27) In re Xxxxxx Xxxxxx, 482 F.2d 937.
(28) X.X. Xxxxx Co., Inc., 421 S.W.2d at 728.
D-3B-12
transferred assets,(29) and whether the transferee's rights in the assets would
terminate if the transferee received payment other than through the assets
themselves.(30) However, as noted by one court, the "root of all these factors
is the transfer of risk . . . [i]f the lender holds only a security interest . .
. the lender's risk is derivative or secondary, that is, the borrower remains
liable for the debt and bears the risk of non-payment by the account
debtor."(31)
The Loan constitutes an identifiable instrument as to which Allied has
executed an endorsement by allonge to effect the absolute transfer to Depositor
and an assignment to transfer all rights to the mortgage to the extent is
secures the Loan. Prior to the transfer to Depositor, Depositor had no interest
in the Loan. In addition, the transfer of the Loan to Depositor by Allied was
not made to, and did not, extinguish or reduce any indebtedness previously owed
by Allied to Depositor.
Upon the transfer of the Loan to Depositor, Depositor obtained the
unrestricted right to sell or otherwise transfer the Loan to any person.
OPINION
On the basis of the facts, discussion, analysis, and assumptions set forth
herein, and subject to the qualifications set forth herein, we are of the
opinion that, in a properly presented case under currently reported authority
and statutes, a court correctly applying applicable law and exercising
reasonable judgment after full consideration of the facts would conclude that,
if Allied becomes a debtor under the Bankruptcy Code, the transfer of the Loan
by Allied to Depositor will constitute an absolute assignment of the Loan and,
therefore, the Loan will not constitute property of the bankruptcy estate of
Allied under Section 541 of the Bankruptcy Code.
We express no opinion (i) as to whether a court may temporarily delay or
preliminarily restrain the exercise of any right by Depositor or any of its
assignees with respect to the Loan, payments thereon or proceeds thereof for any
period during which the court considers the characterization of the transfer of
the Loan from Allied to Depositor or (ii) as to any transfer or the effect
thereof other than the transfer of the Loan by Allied to Depositor. In addition,
we express no opinion as to any choice of law or conflict of laws matter.
While we believe that our opinion set forth herein is supported by sound
analysis of existing law, we have found no statutes or reported cases that
discuss directly whether the specific type of transaction at issue in the
transfer of the Loan from Allied to Depositor would be treated as an absolute or
contingent assignment.
----------
(29) XxXxxxxxx, 239 U.S. at 575; Xxxxxxxxx, 263 F.2d at 106.
(30) In re Evergreen Valley Resort, Inc., 23 B.R. at 661.
(31) Endico Potatoes, Inc., 67 F.3d at 1069.
D-3B-13
In addition, we have found no reported judicial authority that has
considered a transaction containing all the facts and circumstances that are
present in this transaction. In rendering our opinion, we have thus relied on
cases discussing certain of the facts and circumstances that are present in this
transaction and cases discussing more generally whether the transfer of an asset
was a transfer of ownership or a transfer of a more limited interest.
Accordingly, our opinion is not based on directly controlling precedent but
rather on what we believe to be a sound analysis of existing authorities. The
foregoing opinion is expressly subject to there being no material fact that has
not been communicated to us.
We render no opinion herein as to any law other than the laws of the State
of New York and the federal laws of the United States of America. This opinion
is limited to the effect of the present state of the laws of the State of New
York and the United States of America and, in rendering this opinion, we assume
no obligation to revise or supplement this opinion should we become aware that
any of the facts or assumptions that we have relied upon or any of the present
laws, or the interpretation thereof, have changed.
This opinion has been furnished to you solely in connection with the
transactions described herein and on the condition that the opinions expressed
herein may not be published or otherwise communicated by you to any other party
without our specific prior written approval in each instance. Except as may be
permitted in a written consent or by order of court, the existence, the contents
and/or the conclusions of this opinion may not be disclosed at any time to any
person for any purpose whatsoever. This opinion is to be relied upon solely by,
and is addressed solely to, the addressees listed on Schedule A hereto (each, an
"Addressee"); no other person is authorized to receive and no person is
authorized to deliver to any other person, a copy of this opinion. If any person
other than an Addressee or a person specifically entitled to rely hereon, as
evidenced by such person's receipt from Xxxxxxxxxx Xxxxxxxx LLP of an original
executed reliance letter from Xxxxxxxxxx Xxxxxxxx LLP (a "Reliance Letter"),
receives a copy of this opinion from any person, including any Addressee or a
person specifically entitled to rely hereon, as evidenced by such person's
receipt of a Reliance Letter, and such recipient does not receive a Reliance
Letter, such person is not entitled to rely on this opinion. Xxxxxxxxxx Xxxxxxxx
LLP disclaims any responsibility and/or liability to any persons other than the
Addressees and to those persons specifically entitled to rely hereon, as
evidenced by a Reliance Letter.
This opinion should be interpreted in accordance with the Special Report
by the TriBar Opinion Committee, Opinions in the Bankruptcy Context: Rating
Agency, Structured Financing and Chapter 11 Transactions, 46 Bus. Law. 717
(1991).
Very truly yours,
XXXXXXXXXX XXXXXXXX LLP
___________________________
Xxx X. Xxxx, Partner
D-3B-14
EXHIBIT D-3C
FORM OF LETTER RELATING
TO DISCLOSURE FROM SPECIAL COUNSEL
TO THE SELLER
December 27, 2001
Xxxxxxx Xxxxx Barney, Inc. Greenwich Capital Markets, Inc.
000 Xxxxxxxxx Xxxxxx c/o Xxxxxxx Xxxxx Xxxxxx, Inc.
Xxx Xxxx, Xxx Xxxx 00000 000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Credit Suisse First Boston Corporation X.X. Xxxxxx Securities, Inc.
c/o Xxxxxxx Xxxxx Xxxxxx, Inc. c/o Xxxxxxx Xxxxx Barney, Inc.
00 Xxxxxxx Xxxxxx 000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000 Xxx Xxxx, Xxx Xxxx 00000
First Union Securities, Inc. Salomon Brothers Mortgage Securities
c/o Xxxxxxx Xxxxx Xxxxxx, Inc. VII, Inc.
000 Xxxxxxxxx Xxxxxx 000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000 Xxx Xxxx, Xxx Xxxx 00000
RE: ALLIED CAPITAL CORPORATION
Ladies and Gentlemen:
We have acted as counsel to Allied Capital Corporation, a Maryland
corporation (the "Company"), in connection with reviewing those sections of that
certain Prospectus Supplement ("Prospectus Supplement") dated December 18, 2001,
consisting of "Summary of Prospectus Supplement - Mortgage Loan Sellers," the
first and last paragraphs under "Description of the Mortgage Pool - The Mortgage
Loan Sellers" and the underlined definitions in the Glossary of the terms
"Allied" and "MJ Ocala Hilton Co-Lender Agreement", excluding any sections
cross-referenced within the sections noted above (the "Mortgage Loan Seller
Sections"). The Company has advised us that it has entered into the MJ Ocala
Hilton Co-Lender Agreement as defined in the Prospectus Supplement (the
"Co-Lender Agreement").
In connection with furnishing this letter, we have examined the originals
or copies, certified or otherwise identified to our satisfaction as being true
copies, of such records, documents or other instruments as we in our judgment
have deemed to be necessary or
D-3C-1
appropriate to enable us to make the statement hereinafter expressed including,
without limitation, the Prospectus Supplement and the Co-Lender Agreement.
With respect to such examination, we have assumed (i) the genuineness of
all signatures on all documents submitted to us for examination, (ii) the legal
capacity of all natural persons, (iii) the authenticity of all documents
submitted to us as originals, (iv) the conformity to original documents of all
documents submitted to us as conformed or reproduced copies and the authenticity
of the originals of such copied documents, and (v) that all certificates issued
by public officials have been properly issued.
We have assumed, without independent check or verification, that each of
the parties to the Co-Lender Agreement has all requisite power and authority to
execute, deliver and perform its obligations under the Co-Lender Agreement, and
that the Co-Lender Agreement has been duly authorized by all necessary action on
the part of such parties, has been duly executed and delivered by such parties
and constitutes the legal, valid and binding obligation of such parties,
enforceable against such parties in accordance with its terms.
We have relied upon certificates of appropriate state officials, upon
certificates and/or representations of current executive officers and
responsible employees of the Company, upon such other certificates as we deemed
appropriate, upon the representations, warranties and covenants of the Company
set forth in the Co-Lender Agreement, and upon such other data as we have deemed
to be appropriate under the circumstances. Except as otherwise stated herein, we
have undertaken no independent investigation or verification of factual matters.
We have also made such examination of law as we have considered necessary
for the purposes of making the statement hereinafter contained.
We are not passing upon and do not assume any responsibility for the
accuracy, sufficiency, completeness or fairness of any statements,
representations, warranties, descriptions, information or financial data
supplied in connection with the contemplated transactions and we have not
independently verified the accuracy, sufficiency, completeness or fairness of
any of the foregoing.
This letter is limited to the matters explicitly addressed herein and does
not extend, by implication or otherwise, to any other matter. We express no
opinion as to the enforceability of the Co-Lender Agreement.
We take no responsibility as to the accuracy or completeness of statements
of fact contained in the Prospectus Supplement. Based on our review of the
Mortgage Loan Seller Sections of the Prospectus Supplement, nothing has come to
our attention that would lead us to believe that the Mortgage Loan Seller
Sections (other than the numerical and statistical information contained therein
or omitted therefrom, as to which we express no belief) at the date thereof and
at the date hereof contained or contains any untrue statement of a material fact
or omitted or omits to state a material fact necessary in order to make the
statements therein, in the
E-2
light of the circumstances under which they were made, not misleading. We make
no statement regarding the information not specifically referenced in this
paragraph contained in or omitted from the Prospectus Supplement.
This letter is solely for the benefit of the addressees hereof and may not
be relied upon by, nor may copies be delivered to, any other person, firm or
corporation for any purpose without our prior written consent except for the
addresses and their counsel. This letter is given as of the date hereof, and we
are under no duty to update the statements contained herein.
Respectfully submitted,
XXXXXXXXXX XXXXXX & XXXXXXX LLP
By: ___________________________
E-3
