-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WFVJu/rZ7egatCRFTC7GV2IrApqtnxqw/kETrZ2626SjtER4S9TsTfjXZ+Y9XY6a /an9tU1ikKh4fh6qxtjbsA== 0000929624-99-001021.txt : 19990624 0000929624-99-001021.hdr.sgml : 19990624 ACCESSION NUMBER: 0000929624-99-001021 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990525 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TIS MORTGAGE INVESTMENT CO CENTRAL INDEX KEY: 0000833088 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 943067889 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-10004 FILM NUMBER: 99633674 BUSINESS ADDRESS: STREET 1: 655 MONTGOMERY ST STE 800 CITY: SAN FRANCISCO STATE: CA ZIP: 94111 BUSINESS PHONE: 4153938000 10-Q 1 FORM 10-Q FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended March 31, 1999 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____ to _____ Commission File NO. 1-10004 TIS MORTGAGE INVESTMENT COMPANY (Exact name of Registrant as specified in its Charter) Maryland 94-3067889 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 655 Montgomery Street 94111 San Francisco, California (Zip Code) (Address of principal executive offices) Registrant's telephone number, including area code (415) 393-8000 ______________________ Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes X NO____ ------- Indicate the number of shares outstanding of each of the Registrant's classes of Common Stock as of the latest practicable date. Class of Common Stock Outstanding at May 14, 1999 --------------------- --------------------------- $.001 PAR VALUE 8,893,250 SHARES TIS MORTGAGE INVESTMENT COMPANY Index Part I. Financial Information
Item 1. Financial Statements (Unaudited) Page Number Consolidated Financial Statements 3 Condensed Consolidated Balance Sheets March 31, 1999 and December 31, 1998 4 Condensed Consolidated Statements of Operations Three months ended March 31, 1999 and 1998 5 Condensed Consolidated Statements of Cash Flows Three months ended March 31, 1999 and 1998 6 Notes to Condensed Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 15 Item 3. Quantitative and Qualitative Disclosures About Market Risk 18 Part II. Other Information Item 1. Legal Proceedings 19 Item 6. Exhibits and Reports on Form 8-K 19
2 - -------------------------------------------------------------------------------- PART 1: FINANCIAL INFORMATION - -------------------------------------------------------------------------------- ITEM 1: CONSOLIDATED FINANCIAL STATEMENTS The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the 1998 Form 10-K of the registrant (the "Company"). These statements have been prepared in accordance with the instructions of the Securities and Exchange Commission Form 10-Q and do not include all the information and footnotes required by generally accepted accounting principles for complete consolidated financial statements. In the opinion of the Company's management, all material adjustments of a normal and recurring nature considered necessary for a fair presentation of results of operations for the interim periods have been included. The results of consolidated operations for the three months ended March 31, 1999 are not necessarily indicative of the results that may be expected for the year ending December 31, 1999. 3 TIS MORTGAGE INVESTMENT COMPANY AND SUBSIDIARY CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Amounts in Thousands except Share Data)
March 31, 1999 December 31, 1998 - -------------------------------------------------------------------------------------------------------------------- ASSETS Mortgage Related Assets Residual Interests $ 293 $ 284 Interest Only (IO) Bonds 9 840 Commercial Securitizations 184 184 -------- -------- Total Mortgage Related Assets 486 1,308 -------- -------- Operating Real Estate Assets, net 28,182 20,172 -------- -------- Other Assets Cash and Cash Equivalents 80 2,767 Restricted Cash 525 140 Accrued Interest and Accounts Receivable, Net 103 33 Amortizable Costs, Net 400 351 Prepaid Expenses 267 285 -------- -------- Total Other Assets 1,375 3,576 -------- -------- Total Assets $ 30,043 $ 25,056 ======== ======== - -------------------------------------------------------------------------------------------------------------------- LIABILITIES Accounts Payable and Accrued Liabilities $ 728 $ 473 Due to Trustee 621 1,218 Accrued Interest Payable 34 116 Notes Payable on Real Estate 19,761 13,794 Short-term Debt -- 667 -------- -------- Total Liabilities 21,144 16,268 -------- -------- SHAREHOLDERS' EQUITY Common Stock, par value $.001 per share; 100,000,000 shares authorized; 8,105,880 and 8,893,250 shares issued and outstanding on December 31, 1998 and March 31, 1999, respectively. 9 8 Additional Paid-in Capital 76,467 74,696 Accumulated Other Comprehensive Income (Loss) 8 (11) Retained Deficit (67,585) (65,905) -------- -------- Total Shareholders' Equity 8,899 8,788 -------- -------- Total Liabilities and Shareholders' Equity $ 30,043 $ 25,056 ======== ======== - --------------------------------------------------------------------------------------------------------------------
See Notes to Condensed Consolidated Financial Statements 4 TIS MORTGAGE INVESTMENT COMPANY AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (Amounts In Thousands except Per Share Data)
Three Months Ended March 31 ------------------------------------------------------ 1999 1998 - ---------------------------------------------------------------------------------------------------------------------------- MORTGAGE RELATED ASSETS Interest Income Mortgage Certificates, net $ -- $ 1,348 Short-term Investments 6 1 Residual Interests 8 35 Interest Only (IO) Bonds 41 55 Valuation Reserve Reduction -- 110 Gain (Loss) on Sale of Mortgage Related Assets 8 (21) ------------------- ------------------- Income from Mortgage Related Assets 63 1,528 ------------------- ------------------- INTEREST AND CMO RELATED EXPENSES Collateralized Mortgage Obligations Interest -- 1,510 Administration Fees -- 17 Amortization of Deferred Bond Issuance Costs -- 33 Short-term Debt 1 38 ------------------- ------------------- Total Interest and CMO Related Expenses 1 1,598 ------------------- ------------------- REAL ESTATE OPERATIONS Rental and Other Income 852 1,017 Operating and Maintenance Expenses (269) (367) Interest on Real Estate Notes Payable (437) (423) Depreciation and Amortization (157) (183) Property Taxes (74) (82) ------------------- ------------------- Loss from Real Estate Operations (85) (38) ------------------- ------------------- OTHER EXPENSES General and Administrative Expense 280 266 Repurchase of Common Stock in Excess of Market 1,377 -- ------------------- ------------------- Total Other Expenses 1,657 -- Loss Before Minority Interest (1,680) (374) Minority Interest -- 105 ------------------- ------------------- Net Loss ($1,680) ($ 269) - ----------------------------------------------------------------------------------------------------------------------- Basic Loss per Share ($0.19) ($0.03) Weighted Average Shares Outstanding 8,631 8,106 - -----------------------------------------------------------------------------------------------------------------------
See Notes to Condensed Consolidated Financial Statements 5 TIS MORTGAGE INVESTMENT COMPANY AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (Amounts in Thousands)
Three Months Ended March 31, ------------------------------------------- 1999 1998 - --------------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES Net Loss ($1,680) ($ 269) Adjustments to Reconcile Net Loss to Net Cash Provided by (Used in) Operating Activities: Depreciation and Amortization 32 204 Depreciation of Operating Real Estate Assets 157 183 Valuation Reserve Provision -- (856) Increase in Accrued Interest and Accounts Receivable (83) (103) Decrease in Prepaid Expenses 29 -- Decrease (Increase) in Other Assets -- (25) Decrease in Accounts Payable and Accrued Liabilities 179 (359) Decrease in Accrued Interest Payable (82) (56) --------------- --------------- Net Cash Used in Operating Activities (1,448) (1,281) --------------- --------------- - --------------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM INVESTMENT ACTIVITIES Net Decrease (Increase) in Restricted Cash (93) (349) Investment in Real Estate Assets (28) (19) Principal Reduction in Mortgage Certificates -- 4,035 Principal Reduction (Increase)` in Residual Interests (9) (118) Principal Reduction in IO Bonds 831 145 Purchase of TISMIC Shares (671) -- Net Cash Received in Purchase of Novato Markets 16 -- Net Increase in Minority Interest in CMO -- 1,531 --------------- --------------- Net Cash Provided by Investment Activities 46 5,225 --------------- --------------- - --------------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES Decrease in Due to Trustee (600) -- Decrease in Short-term Debt (667) (267) Increase in Notes Payable on Real Estate 45 -- Principal Payments on Notes Payable on Real Estate (63) (68) Principal Payments on CMO's -- (3,679) --------------- --------------- Net Cash Used in Financing Activities (1,285) (4,014) --------------- --------------- Net Increase (Decrease) in Cash and Cash Equivalents (2,687) (70) Cash and Cash Equivalents at Beginning of Period 2,767 185 --------------- --------------- Cash and Cash Equivalents at End of Period $ 80 $ 115 =============== =============== - ---------------------------------------------------------------------------------------------------------------------------
See Notes to Condensed Consolidated Financial Statements 6 TIS MORTGAGE INVESTMENT COMPANY AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Note 1 - Basis Of Presentation The accompanying interim condensed consolidated financial statements do not include all of the information and disclosures generally required for annual financial statements. They include the accounts of the Company, its wholly-owned subsidiaries and its partnership interests in real estate assets. All significant intercompany balances and transactions have been eliminated. In the opinion of management all adjustments of a normal recurring nature considered necessary for a fair presentation have been made. Operating results for the quarter ended March 31, 1999 are not necessarily indicative of the results that may be expected for the entire year. These condensed consolidated financial statements should be read in conjunction with the Company's Form 10-K for the year ended December 31, 1998. The Company's financial statements have been presented on the going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. In addition to the TIS Line (see Note 8), management is currently evaluating the Company's alternatives to fund its fiscal 1999 cash requirements. Such alternatives include, among other things, consideration of (i) the sale of real property, (ii) the sale of Structured Securities, (iii) reducing general and administrative expenses, (iv) refinancing existing debt, and (v) entering into joint venture arrangement with third parties. Management can provide no assurances as to the timing or ultimate closure of any of the alternatives. These strategies are dependent on the economic operating environment including volatility of interest rates and the ability for the California Central Valley apartment rental market to absorb rental increases. The Company believes that the proceeds from the TIS Line, together with its on-going real estate operations and mortgage related investment portfolio will provide sufficient liquidity for it to continue as a going concern throughout 1999, however, management can provide no assurance with regard thereto. The accompanying financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities or any other adjustments that might result from these uncertainties. Note 2 - Summary of Significant Accounting Policies Income Taxes - The Company has elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended. As a REIT, the Company must distribute at least 95% of its taxable income to its shareholders. No provision has been made for income taxes in the accompanying consolidated financial statements as the Company is not subject to federal income taxes. The loss reported in the accompanying financial statements may be greater or less than the taxable loss because some income and expense items are reported in different periods for income tax purposes. Over the life of a Residual Interest or IO Bond, total taxable income will equal total financial statement income. However, the timing of income recognition may differ between the two from year to year. Basic Net Loss Per Share - Basic net loss per share is based upon the weighted average number of shares of Common Stock outstanding. The common equivalent shares related to the 1995 Stock Option Plan are antidilutive and therefore are not included in the weighted average number of shares outstanding. Statement of Cash Flows - For purposes of the statement of cash flows, the Company considers only highly liquid instruments with original maturities of three months or less to be cash equivalents. During the three months ended March 31, 1999, the Company acquired real estate and assumed the underlying debt by issusing shares of the Company's common stock in a non-cash transaction (See Note 9). Use of Estimates in the Preparation of Financial Statements - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 7 New Accounting Pronouncement - Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" is expected to be adopted by the Company effective January 1, 2000. This statement establishes standards for accounting for derivative instruments and requires that an entity recognize derivatives as assets or liabilities in the statement of financial position and measure those assets and liabilities at fair value. Management has not fully assessed the impact of adoption of the statement but does not anticipate it will have a significant impact on the presentation of the Company's statements of financial position. Note 3 - Residual Interests Presented below is a schedule of the residual interests owned by the Company. RESIDUAL INTERESTS - ------------------ (In thousands)
Book Value ---------------------------------------------------- Purchase March 31, December 31, Residual Series Price 1999 1998 - ---------------------------------------------------------------------------------------------------------------------------- Nonequity Residual Interests - ---------------------------- BT 88-1 $1,537 $ 193 $ 176 LFR-9 2,589 81 89 CMSC I 8,642 14 14 FHLMC 25 4,934 3 3 FHLMC 21 5,361 2 2 - ---------------------------------------------------------------------------------------------------------------------------- Total Residual Interests $ 293 $ 284 ============================================================================================================================
8 CMO Bonds in Residual Interests - Certain characteristics of the CMO Bonds in the Company's Residual Interests are on the following tables:
RESIDUAL INTERESTS - ------------------------------------------------------------------------------------------------------------------------------- CMO Bond Data (100% Of Issue) ---------------------------------------------------------------------- Name of Issuer TIS Initial Mar. 31, 1999 and Series/ TIS Purchase Principal Principal CMO Issue Purchase TIS % Price Bond Balance Balance Bond Stated Date Date Ownership ($000) Class ($000) ($000) Coupon Maturity - ------------------------------------------------------------------------------------------------------------------------------- 1) Bankers Trust May 29, 1991 99.990% $ 1,537 1-A $ 9,722 $ 0 7.35% Jan 1, 2013 Series 1988-1 1-B 8,017 0 8.50% Apr 1, 2014 (BT 88-1) 1-C 34,769 9,385 8.75% Apr 1, 2018 Feb 16, 1988 1-D 47,492 4,601 8.63% Apr 1, 2018 -------------------------- $ 100,000 $ 13,986 - ------------------------------------------------------------------------------------------------------------------------------- 2) L F Rothschild Nov 7, 1990 100.000% $ 2,589 A $ 11,000 $ 0 Zero Coupon Jan 1, 2019 Trust 9 B 22,000 0 Zero Coupon Jan 1, 2019 (LFR-9) C 54,000 5,670 Zero Coupon Jan 1, 2019 Dec 2, 1988 D 32,850 11 Zero Coupon Jan 1, 2019 E 30,000 0 Zero Coupon Jan 1, 2019 R 150 150 Residual Bond Jan 1, 2019 -------------------------- $ 150,000 $ 5,831 - ------------------------------------------------------------------------------------------------------------------------------- 3) Collateralized Dec 21, 1988 44.000% $ 4,462 I-1 $ 291,000 $ 0 7.95% Feb 1, 2009 Mortgage Mar 23, 1989 44.000% 4,180 I-2 194,000 0 9.45% May 1, 2013 --------- -------- Securities Corp. Subtotal 88.000% $ 8,642 I-3(Z) 15,000 21,062 9.45% Feb 1, 2017 ========= ======== -------------------------- Series I (CMSC I) $ 500,000 $ 21,062 Jan 28, 1987 - ------------------------------------------------------------------------------------------------------------------------------- 4) Federal Home Jun 22, 1989 55.000% $ 4,934 25-A $ 105,923 $ 0 9.00% Nov 15, 2018 Loan Mortgage 25-B 51,002 0 9.50% Nov 15, 2005 Corporation 25-C 53,028 0 9.50% Mar 15, 2011 Series 25 25-D 46,414 0 9.50% Feb 15, 2014 (FHLMC 25) 25-E 50,936 0 9.50% May 15, 2016 Dec 1, 1988 25-F 76,167 0 9.50% Dec 15, 2018 25-G 43,940 21,414 9.50% Feb 15, 2020 25-H 72,490 0 7.90% Feb 15, 2020 R 100 4 Residual Bond Feb 15, 2020 -------------------------- $ 500,000 $ 21,418 - ------------------------------------------------------------------------------------------------------------------------------- 5) Federal Home Jan 5, 1989 62.500% $ 5,361 21-A $ 140,645 $ 0 8.90% Jan 15, 1998 Loan Mortgage 21-B 216,267 0 8.90% Feb 15, 2004 Corporation 21-C 101,503 0 9.10% Jan 15, 2006 Series 21 21-D 93,376 0 9.25% Jun 15, 2007 (FHLMC 21) 21-E 122,951 0 9.35% Feb 15, 2009 Nov 30, 1988 21-F 240,408 0 9.45% Sep 15, 2011 21-Z 84,750 39,316 9.50% Jan 15, 2020 R 100 4 Residual Bond Jan 15, 2020 -------------------------- $1,000,000 $ 39,320 ===============================================================================================================================
9 CMO Collateral - The table below sets forth certain characteristics of the mortgage collateral pledged to secure each CMO in which the Company holds a Residual Interest.
CMO COLLATERAL - ----------------------------------------------------------------------------------------------------------------- CMO Collateral Data (100% of Issue) ------------------------------------------------ Weighted Mar.31, 1999 Current Weighted Average Collateral Weighted Average Residual Pass- Principal Average Remaining Residual Interest Type of Through Balance Coupon Months to Series Type Collateral Rate ($000) Rate Maturity - ----------------------------------------------------------------------------------------------------------------- Nonequity Residual Interests - ---------------------------- BT 88-1 Fixed GNMA 9.00% 12,743 9.50% 196 LFR-9 Fixed FNMA 9.50% 5,663 10.21% 217 CMSC I Fixed FNMA 9.50% 19,985 10.14% 189 FHLMC 25 Fixed FHLMC 9.50% 20,793 10.35% 214 FHLMC 21 Fixed FHLMC 9.50% 38,145 10.22% 217 =================================================================================================================
Note 4 - Interest Only (IO) Bonds IO Bonds include both regular IO Bonds and Inverse IO Bonds. On March 4, 1999, the Company sold its interest in its IO Bond, FNMA Series 1992-123 S for $782,879. This sale generated a gain of approximately $8,000. Presented below is a schedule of the Company's IO Bonds. INTEREST ONLY (IO) BONDS - ------------------------ (In thousands)
Book Value ------------------------------- Name and Issuer Purchase March 31, December 31, and Series Price 1999 1998 - ----------------------------------------------------------------------------- FNMA Series 1992-123 Class S $8,203 $ -- $ 809 Pru Home Mtg Corp Series 1992-7 4,776 9 31 - ----------------------------------------------------------------------------- $ 9 $ 840 =============================================================================
Certain characteristics of the Company's IO Bonds are on the following table:
INTEREST ONLY BONDS - -------------------------------------------------------------------------------------------------------------------- Collateral Data (% of IO held by TIS) ---------------------------------------------------------------- Weighted Mar. 31, 1999 Current Weighted Name of Issuer TIS Average Collateral Weighted Average and Series/ TIS Purchase Pass Principal Average Remaining CMO Issue Purchase Price Type of Through Balance Coupon Months to Date Date ($000) Collateral Rate to IO ($000) Rate Maturity - -------------------------------------------------------------------------------------------------------------------- 1) Prudential Mar 27, 1992 $ 4,776 NON 0.5652% $ 19,663 8.80% 264 Home Mortgage AGENCY Corporation Series 1992-7 March 1, 1992 - -------------------------------------------------------------------------------------------------------------------- ====================================================================================================================
10 Note 5 - Operating Real Estate Assets During the year ended December 31, 1995, the Company acquired four multifamily housing properties in California's Central Valley. The properties were purchased either in the form of direct ownership of the real property or in the form of an interest in a partnership that directly owns the real property. Capitalized costs differ from the purchase price due to capitalization of acquisition costs. During 1998, one property was sold. On February 2, 1999, the Company acquired all the shares of Novato Markets, Inc. ("Novato") from Pacific Securitization, Inc., ("Pacific"). Novato, through its wholly owned subsidiary P-SUB I, Inc. ("PSUB-I") owns two shopping centers in Northern California ( See Note 9). The carrying value of operating real estate assets at March 31, 1998 and December 31, 1998 is presented in the following table:
March 31, December 31, (in thousands) 1999 1998 --------------------------------------------------------------------- Land $ 5,985 $ 4,120 Buildings and improvements 23,204 16,920 Personal property 917 899 ----------------------------- Total 30,106 21,939 Less accumulated depreciation and amortization (1,924) (1,767) ----------------------------- Net $ 28,182 $ 20,172 =============================
At March 31, 1998, the Company's three multifamily properties had an overall occupancy of 95%. The shopping centers had 1 vacancy representing 2% of the total rentable square footage. Note 6 - Notes Payable on Real Estate As part of the 1995 acquisition of multifamily residential properties, existing secured debt totaling $18,675,000 was assumed. In addition, new secured debt of $1,815,000 was obtained in 1995. In August 1996, the River Oaks and Four Creeks - II mortgage notes payable matured and were retired using the proceeds from a new mortgage note in the principal amount of $11,235,000 (the "Interim Note"). On March 24, 1997, the Company obtained permanent financing with an insurance company (the "Permanent Financing"). The total loan proceeds from the Permanent Financing amounted to $17,400,000 and, after certain costs and fees, were used to retire the then-outstanding principal and interest on the Interim Note of $11,235,000 and the mortgage note on Villa San Marcos of $5,965,884. The Permanent Financing comprises three deeds of trust and an assignment of rents on Four Creeks - II, River Oaks and Villa San Marcos. The term of each of the underlying Mortgage Loans is ten years with a fixed annual interest rate of 8.36% for River Oaks and 8.31% for the others The mortgages comprising the Permanent Financing may not be retired during the first five years and are subject to a prepayment penalty if prepaid after the fifth year. On December 23, 1998 the Company sold its interest in River Oaks and the purchaser assumed the mortgage balance of approximately $6.3 million. The Shady Lane loan remains in the name of the seller of the property and will continue to remain so until refinanced. The Company is servicing the debt and receives all of the economic benefits from Shady Lane. 11 On February 2, 1999, the Company acquired through the purchase of stock of Novato Markets, Inc. the ownership of a shopping center located in Rohnert Park, California, named Mountain Shadows Plaza, and a shopping center in Petaluma, California, named Midtown Center (See Note 9). These shopping centers are subject to existing secured debt totaling $5,984,000 at acquisition. This financing is at a rate of 15.0% of which 10% is paid each month and the remaining 5.0% accrues to the principal balance of the loan. The maturity date of this loan is June 1, 1999 and may be extended at the option of the borrower through June 1, 2000. The Company is planning to refinance this loan prior to its maturity. The following table summarizes the debt outstanding on the properties as of March 31, 1999 and December 31, 1998, respectively.
Interest Monthly Principal Balance Basis of Rate Principal ----------------- March 31, December 31, Interest March 31, Due and Interest Property 1999 1998 Rate 1999 Date Payment - --------------------------------------------------------------------------------------------------- Shady Lane $ 1,285,705 $ 1,292,145 Floating 8.34% Dec. 1, 2004 $ 12,063 Villa San Marcos 6,793,632 6,825,984 Fixed 8.31% Apr. 1, 2007 70,597 Four Creeks - I 1,761,021 1,767,100 Fixed 8.16% Dec. 1, 2005 13,521 Four Creeks - II 3,889,902 3,908,426 Fixed 8.31% Apr. 1, 2007 31,649 Novato Markets 6,030,354 -- Fixed 15.00% June 1, 1999 (1) - --------------------------------------------------------------------------------------------------- Total $19,760,614 $13,793,655 $127,830 ===================================================================================================
(1) Payment on the Novato Markets Loan is interest only monthly at a pay rate of 10% annual interest. Interest accrues to the unpaid balance at a 5% annual rate. Note 7 - Short-Term Debt At March 31, 1999 the Company had no short-term borrowings. As of December 31, 1998, short-term borrowings totaled $667,000 and consisted of a repurchase agreement with Bear Stearns & Co. collateralized by some of the Company's IO Bonds. The repurchase agreement had an initial term of one month, was renewed on a month-to-month basis and was paid off on March 4, 1999 in conjunction with the sale of FNMA 92-123. Note 8 - Revolving Line of Credit In April of 1999, the Company entered into a financing agreement with TIS Financial Services, Inc., (the "Former Manager"), whereby the Former Manager extended a revolving line of credit of $1,000,000 to the Company (the "TIS Line"). The Former Manager and the Company have common ownership and executive officers and as such are related parties. Credit support to the Former Manager includes guaranteed loans by a bank and a board member of the Company in support of the TIS Line to the Company. This line is to provide working capital to the Company. This revolving line of credit is for a term of one year, is at the rate of prime plus one and one half percent and is partially secured by the Company's ownership in Bankers Trust series 1988-1 Residual Interest Certificate. Payment on the line of credit can be accelerated on certain events, including a change in control of the Company in which certain officers of the Company are removed or in which a majority of the Board is changed. 12 Note 9 - Exchange of Shares for Novato Markets On February 2, 1999, the Company acquired all the shares of Novato Markets, Inc. from Pacific Securitization, Inc. ("Pacific"), in exchange for 1,613,070 shares of Common Stock (the "Shares") of the Company pursuant to an Agreement and Plan of Reorganization dated as of February 1, 1999, between the Company and Pacific. Pacific is indirectly principally owned by Lorraine O. Legg, the President and Chief Executive Officer and a director of the Company, and Patricia M. Howe, a director of the Company. Through its wholly-owned subsidiary, P-SUB I, Inc., Novato owns a shopping center located in Rohnert Park, California, named Mountain Shadows Plaza, and owns a shopping center subject to a ground lease in Petaluma, California, named Midtown Center. The shopping centers have a combined commercial and retail space totaling approximately 80,000 square feet. Mountain Shadows Plaza consists of three buildings and is anchored by a large grocery store. Midtown Center consists of a single building. The Shares were issued to Pacific under an exemption to the registration requirements of the Securities Act of 1933, as amended. Accordingly, the shares are "restricted securities," as defined in Rule 144 of the Securities Act, and are not freely transferable. The Company granted Pacific one-time demand registration rights with respect to the Shares for the period beginning June 30, 1999 and ending February 2, 2001. It also granted Pacific piggy-back registration rights in the event that the Company files a registration statement under the Securities Act in connection with the proposed offer and sale for cash of shares of Common Stock by it or by any of its shareholders. The share exchange is intended to be a tax free reorganization within the meaning of Section 368(a)(1) of the Internal Revenue Code of 1986, as amended. A summary of the assets acquired is as follows:
Novato (in thousands) Markets --------------------------------------------------------- Current Assets $ 306 Land 1,865 Buildings and improvements 6,106 Personal property & Other 169 ----------------- Total 8,140 Other Assets 81 ----------------- Total Assets 8,527 Current Liabilities 100 Mortgage Debt 5,984 ----------------- Net Purchase Price $ 2,443 =================
13 Note 10. Share Purchase from Turkey Vulture Fund XIII, Ltd. On February 2, 1999, the Company acquired 793,700 shares of its Common Stock from Turkey Vulture Fund XIII, Ltd. for $1,984,250, 20,000 shares of its Common Stock from Christopher L. Jarratt for $40,000 and 12,000 shares of its Common Stock from James G. Lewis for $24,000, pursuant to an Agreement dated as of February 1, 1999, among the Company, Turkey Vulture Fund, Richard M. Osborne, Third Capital, LLC, Mr. Jarratt and Mr. Lewis. Turkey Vulture Fund, Third Capital and Messrs. Osborne, Jarratt and Lewis agreed that, for a period of seven years, they will not directly or indirectly, among other things, (i) effect or participate in or in any way assist any other person in effecting or participating in (a) any acquisition of securities or rights to acquire securities or assets of the Company or its subsidiaries, (b) any tender or exchange offer, merger or other business combination involving the Company or its subsidiaries, (c) any liquidation or other extraordinary transaction with respect to the Company or its subsidiaries, or (d) any solicitation of proxies or consents to vote any voting securities of the Company; (ii) form or in anyway participate in a "group" with respect to the Company; (iii) otherwise act, alone or in concert with others, to seek to control or influence the management, Board of Directors or policies of the Company or its subsidiaries; (iv) take any action to compel the holding of an annual or special meeting of stockholders; or (v) enter into any discussions or arrangements with any person relating to the foregoing. The parties also agreed to a mutual general release of all claims arising out of or relating to the business or affairs of the Company or the ownership of its stock. Messrs. Osborne, Jarratt and Lewis resigned from the Company's Board of Directors, effective February 2, 1999. This share purchase and the acquisition of Novato were approved by the Company's Board of Directors and, specifically, by directors with no financial interest in either transaction. The disinterested directors required that the share exchange transaction be closed as a condition to closing the share purchase transaction. In accordance with generally accepted accounting principles, the Company recorded the share purchase transaction by allocating the total cash purchase amount of $2,048,250 between additional paid-in capital on the accompanying condensed consolidated balance sheet in the amount of $670,881, representing the product of the number of shares purchased times the closing price of the Company's shares on February 1, 1999, with the balance, $1,377,369, charged to stock purchase expense on the accompanying condensed consolidated statement of operations for the three months ended March 31, 1999. Note 11. Funds Due to Trustee During the fourth quarter of 1998, the Trustee for Bankers Trust Series 1988-1 (the "Trustee"), a nonequity residual interest investment of the Company, inadvertently deposited approximately $1.2 million in the Company's accounts. Such amount is reflected within cash and cash equivalents and due to trustee on the accompanying consolidated balance sheet at December 31, 1998. In March 1999, the Company repaid $600,000 of such amount to the Trustee. On March 11, 1999, The Trustee filed an action in the United States District against the Company for alleged breach of contract, common count and conversion. The complaint alleged that the Trustee erroneously paid $1.2 million to the Company under the terms of a mortgage-backed security of which the Company is one of the holders, and that the Company has failed to repay approximately $600,000 of those monies despite demand. The complaint requested repayment, prejudgment interest, attorney's fees and costs. The Company acknowledges that it is required to repay the remaining $600,000, but denies that it is liable to the Trustee for any other amounts or that it ever breached any contract, converted monies, or otherwise acted improperly. On March 23, 1999, the Trustee filed an application for a writ of attachment, requesting expedited hearing thereon. The Company opposed the expedited hearing and the Court denied the Trustee's request. On April 1, 1999, the Trustee filed an amended complaint adding a request for a constructive trust, and also set the attachment application for regular hearing on May 11, 1999. The parties engaged in informal settlement discussions, both before and after the filing of the original complaint. On May 11, 1999 the Company and the Trustee reached settlement and agreed upon a plan of repayment of the balance remaining whereby the Company paid $250,000 upon settlement and agreed to pay the balance in July, 1999. 14 Note 12. Reporting Comprehensive Income As of January 1, 1998, the Company adopted FASB Statement of Financial Accounting Standards No. 130, Reporting Comprehensive Income, (SFAS 130). This statement established standards for the reporting and display of comprehensive income and its components in the financial statements. For the Company, comprehensive income includes net income reported on the statement of operations and changes in the fair value of its available-for-sale investments reported as a component of shareholder's equity. The following table presents net income adjusted by the change in unrealized gains or losses on the available-for-sale investments as a component of comprehensive income.
Three Months ended: March 31, 1999 1998 ----------------- ------------------- Net loss $ (1,680) $ (269) Net change in unrealized gains (losses) available for sale investments 19 (31) ----------------- ------------------- Comprehensive income (loss) $ (1,661) $ (300) ================= ===================
Note 13. Segment Data The Company's operations consist of investments in structured securities and a portfolio of multifamily residential housing. Each activity represents an operating segment as defined by Statement of Financial Accounting Standards No. 131, Disclosures about Segments of an Enterprise and Related Information and financial results of each are reported and monitored by the Company. The investments in structured securities are comprised primarily of mortgage related assets consisting of both equity and non-equity residual interest instruments and bond and REMIC based interest only strips. The real estate portfolio consists of multifamily apartment buildings located in the California Central Valley region and family shopping centers in Northern California. Units of each of the apartment buildings are rented to residential tenants on either a month- to-month basis or for terms of one year or less. The spaces in the family shopping centers are leased to tenants over various terms. The accompanying Balance Sheet and Statement of Operations are segregated according to the related operating segments. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations GENERAL TIS Mortgage Investment Company ("TISMIC") is a Maryland corporation with three subsidiaries. TIS Mortgage Acceptance Corporation, a Delaware corporation ("TISMAC") was incorporated on May 11, 1988. TIS Property Acquisition Company ("TISPAC"), a Maryland corporation, was incorporated on September 8, 1995. TISPAC is a wholly-owned subsidiary of the Company for the purpose of owning and financing real property. In March 1997, as part of the refinancing of two of the Company's multifamily residential properties and a portion of the Four Creeks property, title to those properties was vested in TISPAC. Simultaneously, in March 1997, TISPAC entered into notes secured by mortgages on those properties. TISPAC is a wholly owned subsidiary of TISMIC and as such is a Qualified REIT Subsidiary. Accordingly, the accounts of TISPAC are consolidated with those of the Company. On February 2, 1999 the Company acquired Novato Markets, Inc., ("Novato") and made it a wholly owned subsidiary of the Company. Novato was incorporated on July 26, 1956, and it has a wholly owned subsidiary P-SUB I, Inc., ("P-SUB I") which was incorporated on June 4, 1997. 15 Until 1994, the Company sought to generate income for distribution to its shareholders primarily through acquisition of Structured Securities. Structured Securities include (i) residual interests ("Residual Interests"), principal only bonds ("PO Bonds") and interest only bonds ("IO Bonds") in collateralized mortgage obligations ("CMOs"), which entitle the Company to certain cash flows from collateral pledged to secure such securities; (ii) Mortgage Certificates ("Mortgage Certificates"), which include securities collateralized by or representing equity interests in Mortgage Loans secured by first liens on single family residences, multiple family residences or commercial real estate ("Mortgage Loans"); (iii) CMOs; and (iv) Commercial Securitizations ("Commercial Securitizations"), which include debt obligations that are issued in multiple classes and are funded as to the payment of interest and principal by a specific group of Mortgage Loans on multiple family or commercial real estate, accounts and other collateral. Beginning in 1994, the Company changed its investment focus from investments in Structured Securities to multifamily real estate located in California's Central Valley. Accordingly, during 1995, the Company sold the majority of its investments in Structured Securities and acquired during 1995 a portfolio of four income-producing residential real estate properties of which one was sold in 1998. In February of 1999 the Company acquired Novato Markets and with it acquired two family shopping centers. The Company expects that the majority of its ongoing assets and operating results will be related to its investments in real estate and selective development opportunities. Two related transactions that closed during the first quarter affected the financial statements in different ways - the share repurchase described in Note 10 and the exchange of shares for shares of Novato Markets Inc. described in Note 9. The repurchase of the shares resulted in a charge to income since the price attributed to those shares was treated as a premium. The exchange of shares resulted in a premium received by the Company and is reflected as an increase in balance sheet assets. This accounting, which includes the charge to income, is in strict adherence to GAAP. In addition to historical information, this report includes forward-looking statements regarding management's beliefs, projections and assumptions concerning future results and events. These forward-looking statements may also include words such as "believes," "expects," "anticipates," "intends," "plans," "estimates" or similar expressions. Forward-looking statements are not guarantees. They involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among other things, results from investments of the Company, the outcome of the contested election of directors at the Company's 1999 annual meeting of stockholders, fluctuations in interest rates, deterioration in asset and credit quality, changes in the availability of capital leading to among other things insufficient cash and liquidity, changes in business strategy or development plans, general economic or business conditions and the other factors discussed in "Risk Factors" in the Company's Annual Report on Form 10-K for the year ended December 31, 1998. Given these risks and uncertainties, readers are cautioned not to place undue reliance on any forward-looking statements, which speak as of the date hereof. The Company has no intention and undertakes no obligation to update any forward-looking statement or to publicly announce the results of any revision of any forward-looking statement to reflect future developments or events. RESULTS OF OPERATIONS The Company had a net loss of $1,680,000 or $0.19 per share, for the quarter ended March 31, 1999. This compares to a net loss of $269,000, or $0.03 per share, for the quarter ended March 31, 1998. The Company did not pay a dividend in the first quarter of either year. There was no interest income from mortgage certificates in the first quarter of 1999 due to the sale of CMOT 28 during 1998. There was also no interest expense related to Collateralized Mortgage Obligations, administration fees or amortization of deferred bond issuance costs in the first quarter due to this sale of CMOT-28. Income from Residual Interests and Interest Only bonds was $49,000 in the three months ended March 31, 1999 as compared to $90,000 in the prior year period. The decline is due to reductions in carrying values on the assets as well as the sale of FNMA 92-123 in the first quarter of 1999. On March 4, 1999, the Company sold its interest in its IO Bond, FNMA Series 1992-123 S for $782,879. This sale generated a gain of approximately $8,000. The Company used $616,000 of the proceeds to retire its short-term debt. Real Estate operations generated a loss of $85,000 and $38,000 in the three months ended March 31, 1999 and 1998, respectively. The major reason for the decline was due to the sale of River Oaks Apartments in the fourth quarter of 1998 and the inclusion of Novato Markets in two months of the quarter. For the three months ended March 31, 1999, general and administrative expense totaled $280,000 as compared to $266,000 in the comparable prior year period. The increase is primarily attributable to legal expenses incurred in the first quarter. The stock purchase expense on the accompanying condensed consolidated statement of operations for the three months ended March 31, 1999 relates to the share purchase transaction described in Note 10 to the accompanying financial statements. In accordance with generally accepted accounting principles, the Company recorded the share purchase transaction by allocating the total cash purchase amount of $2,048,250 between additional paid-in capital on the accompanying condensed consolidated balance sheet in the amount of $670,881, representing the product of the number of shares purchased times the closing price of the Company's shares on February 1, 1999, with the balance, $1,377,369, charged to stock purchase expense. 16 LIQUIDITY AND CAPITAL RESOURCES The Company uses cash flow from operations to provide working capital to support its operations and for the payment of dividends to its stockholders, and uses its other capital resources for the purchase of, mortgage instruments, multifamily residential properties and other real estate investments. In April of 1999, the Company entered into a financing agreement with the Former Manager whereby the Former Manager extended a revolving line of credit of $1,000,000 to the Company. This line is to provide working capital to the Company. This revolving line of credit is for a term of one year, is at the rate of prime plus one and one half percent and is partially secured by the Company's ownership in Bankers Trust series 1988-1 Residual Interest Certificate. Payment on the line of credit can be accelerated on certain events, including a change in control of the Company in which certain officers of the Company are removed or in which a majority of the Board is changed. The Company's cash flows for the three months ended March 31, 1999 and 1998 are as follows:
(in thousands) 1999 1998 ---------------------------------------------------------------------------------- Used in Operating Activities $(1,448) $(1,281) Used in Financing Activities (1,285) (4,014) Provided by Investment Activities 46 5,225 --------------------------------------------- Net Increase in Cash and Cash Equivalents ($2,687) ($ 70) =============================================
At March 31, 1999, the Company had unrestricted cash and cash equivalents of $80,000. Over the twelve months ending December, 1999, scheduled principal maturities on the notes payable on multifamily real estate amount to $176,000 and are expected to be funded by cash flow from the Company's multifamily residential properties. During the three months ended March 31, 1999 and 1998, the income from real estate operations before depreciation and amortization amounted to $58,000 and $145,000, respectively. The Company has no significant commitments for capital expenditures relating to the real estate operations over the twelve months ended December 31, 1999 and anticipates that any capital expenditures or repair and maintenance activities would be funded from cash generated from real estate activities. The Company expects to commence construction on 126 units of apartments to be built on the ten acres of land adjacent to the Villa San Marcos Apartments in Fresno, California. This construction is expected to be funded by a construction loan. The Company expects to retire the approximately $6 million in debt assumed with the acquisition of Novato Markets prior to its maturity in June of 1999 and replace it with permanent financing however, the Company may, at its option, extend the current loan to June 1, 2000. On May 11, 1999 the Company and the Trustee reached settlement and agreed upon a plan of repayment of the funds balance due to Trustee whereby the Company paid $250,000 upon settlement and agreed to pay the balance in July, 1999. 17 The Company's financial statements have been presented on the going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. In April 1999, the Company obtained a $1,000,000 revolving line of credit from the Former Manager of the Company for working capital purposes. In addition to the TIS Line, management is currently evaluating the Company's alternatives to fund its fiscal 1999 cash requirements. Such alternatives include, among other things, consideration of (i) the sale of real property, (ii) the sale of Structured Securities, (iii) reducing general and administrative expenses, (iv) refinancing existing debt, and (v) entering into joint venture arrangements with third parties. Management can provide no assurances as to the timing or ultimate closure of any of these alternatives. These strategies are dependant on the economic operating environment including volatility of interest rates and the ability for the California Central Valley apartment rental market to absorb rental increases. The Company believes that the proceeds from the TIS Line, together with its on- going real estate operations and mortgage related investment portfolio will provide sufficient liquidity for it to continue as a going concern throughout 1999, however, management can provide no assurance with regard thereto. The accompanying financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities or any other adjustments that might result from these uncertainties. YEAR 2000 COMPLIANCE State of Readiness. The Company utilizes a number of computer software programs and operating systems across its entire organization, including applications used in financial business systems and various administrative functions. To the extent that the Company's software applications contain source code that is unable to appropriately interpret the upcoming calendar year "2000" and beyond, some level of modification, or replacement of such application will be necessary. The Company is in the process of identifying applications that are not yet "Year 2000" compliant. Costs of Addressing the Company's Year 2000 Issues. Given information known at this time about the Company's systems that are non-compliant, coupled with the Company's ongoing, normal course-of-business efforts to upgrade or replace critical systems as necessary, management does not expect Year 2000 compliance costs to have any material adverse impact on the Company's liquidity or ongoing results of operations. Risks of the Company's Year 2000 Issues. No assurance can be given, however, that all the Company's systems will be Year 2000 compliant or that compliance costs or the impact of the Company's failure to achieve substantial Year 2000 compliance will not have a material adverse impact on the Company's future liquidity or results of operations. The Company's Contingency Plan. Management has identified manual operating procedures for critical operations to address the most reasonably likely worst case scenarios regarding Year 2000 compliance. DIVIDEND REINVESTMENT PLAN The Company has a Dividend Reinvestment and Share Purchase Plan designed to enable shareholders to have their dividends from the Company automatically invested in additional shares of the Company. Mellon Securities Trust Company, which is unaffiliated with the Company, acts as the Plan Administrator. The purpose of the Plan is to provide shareholders with a convenient and economical way of investing dividends in additional shares of the Company's Common Stock. These shares will be purchased on the open market or, at the direction of the Company's Board of Directors, directly from the Company at a 3% discount from the open market price. The Company has registered 1,000,000 Common shares for possible issuance under the Plan. The impact on liquidity from the Dividend Reinvestment and Share Purchase Plan, if any, is expected to be immaterial. ITEM 3. Quantitative and Qualitative Disclosures About Market Risk. ----------------------------------------------------------- Reference is made to Item 7A of the Company's Annual Report on Form 10-K for the year ended December 31, 1998 for information about market risk, which Item 7A is incorporated herein by reference. There have been no material changes in this information. 18 PART II - OTHER INFORMATION - --------------------------- ITEM 1. Legal Proceedings ----------------- On March 11, 1999, The Bank of New York ("BNY") filed an action in the United States District Court for the Northern District of California, Case No. C.99- 1130 MJJ, against the Company for alleged breach of contract, common count and conversion. The complaint alleged that BNY erroneously paid $1.2 million to the Company under the terms of a mortgage-backed security of which the Company is one of the holders, and that the Company has failed to repay approximately $600,000 of those monies despite demand. The complaint requested repayment, prejudgment interest, attorneys fees' and costs. The Company acknowledges that it is required to repay the remaining $600,000, but denies that it is liable to BNY, a trustee to the Company, for any other amounts or that it ever breached any contract, converted monies, or otherwise acted improperly. On March 23, 1999, BNY filed an application for a writ of attachment, requesting expedited hearing thereon. The Company opposed the expedited hearing and the Court denied BNY's request. On April 1, 1999, BNY filed an amended complaint adding a request for a constructive trust, and also set the attachment application for regular hearing on May 11, 1999. The parties engaged in informal settlement discussions, both before and after the filing of the original complaint. On May 11, 1999 the Company and the Trustee reached settlement and agreed upon a plan of repayment of the balance remaining whereby the Company paid $250,000 upon settlement and agreed to pay the balance in July, 1999. On January 27, 1999, Henry G. Elkins, Jr., who claims to be a shareholder of the Company, brought an action against the Company in the California Superior Court, San Francisco, Case No. 300 825, to compel the Company to hold an annual meeting. On February 12, 1999, the Company voluntarily agreed to a stipulated order requiring it to hold an annual meeting on or before June 11, 1999, subject to there being a quorum, and to mail notice of the meeting on or before April 26, 1999. At Mr. Elkins' request, the Superior Court has scheduled a May 27, 1999 hearing to determine whether to hold the Company in contempt or to sanction it for violation of the stipulated order. The Company believes that it has made all efforts to comply in good faith with the stipulated order, that it was effectively prevented from complying with the strict terms of the stipulated order by delays in the SEC's review of the Company's preliminary proxy materials and that the Company should not be held in contempt or sanctioned. On or about April 26, 1999 the Company received a letter from Frederick G. Tobin purporting to nominate himself and five other individuals for election as directors. On May 18, 1999, the Company brought an action (which was amended on May 21, 1999) against Mr. Tobin in federal District Court for the District of Rhode Island, Case No. CA 99 250L seeking among other things a determination that Mr. Tobin's nominations are invalid and to enjoin him from soliciting proxies from the Company's stockholders. The Court declined the Company's request for a temporary restraining order, but will hear the Company's request for a preliminary injunction on May 28, 1999. ITEM 2. Changes in Securities and Use of Proceeds. ------------------------------------------ On February 2, 1999, the Company acquired all the shares of Novato Markets, Inc. from Pacific Securitization, Inc., in exchange for 1,613,070 shares of Common Stock of the Company (or approximately 18.1% of its then outstanding shares), pursuant to an Agreement and Plan of Reorganization dated as of February 1, 1999, between the Company and Pacific. Pacific is indirectly principally owned by Lorraine O. Legg, the President and Chief Executive Officer and a director of the Company, and Patricia M. Howe, a director of the Company. The Shares were issued to Pacific under a Section 4(2) exemption to the registration requirements of the Securities Act of 1933, as amended. The Company valued the shares of Novato at $2,443,000, representing the net asset value of the underlying real estate assets. ITEM 6. Exhibits and Reports on Form 8-K -------------------------------- (a) Exhibits: Exhibit No. ----------- 10.1 Revolving Credit Agreement, dated as of April, 1999, between TIS Mortgage Investment Company and TIS Financial Services, Inc. 10.2 Pledge Agreement, dated as of May, 1999, between TIS Mortgage Investment Company and TIS Financial Services, Inc. 27 Financial Data Schedule (b) During the first quarter of 1999, the Company filed a Current Report on Form 8-K, on February 17, 1999, covering the Company's issuance of shares of common stock to Pacific Securitization, Inc., under Item 2 of Form 8- K, and the Company's repurchase of shares of common stock from Turkey Vulture Fund XIII, Ltd. and its affiliates, and the appointment of new directors, under Item 5 of Form 8-K. The Company filed an amendment to this Report, on April 5, 1999, stating that it had determined that financial statements and proforma financial information on the Pacific Securitization transaction did not need to be filed under Item 7 of Form 8-K. 19 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. TIS MORTGAGE INVESTMENT COMPANY May 24, 1999 BY:/s/ Lorraine O. Legg - ------------------------- ------------------------------------- Lorraine O. Legg Date President and Chief Executive Officer (Principal Executive Officer) May 24, 1999 BY:/s/ John E. Castello - ------------------------- ------------------------------------- John E. Castello Date John E. Castello, Executive Vice President and Chief Financial Officer (Principal Financial Officer) 20 EXHIBIT INDEX Exhibit No. Description - ----------- ----------- 10.1 Revolving Credit Agreement, dated as of April, 1999, between TIS Mortgage Investment Company and TIS Financial Services, Inc. 10.2 Pledge Agreement, dated as of May, 1999, between TIS Mortgage Investment Company and TIS Financial Services, Inc. 27 Financial Data Schedule EX-10.1 2 REVOLVING CREDIT AGREEMENT REVOLVING LINE OF CREDIT AGREEMENT ---------------------------------- This Revolving Line of Credit Agreement is made as of April ____, 1999 by and between TIS Mortgage Investment Company, a Maryland corporation, ("Borrower") and TIS Financial Services Company, a California corporation, ("Lender") with reference to the following facts: RECITALS 1. Borrower wishes to have access to and Lender is willing to make available to Borrower a revolving line of credit in the amount of One Million Dollars ($1,000,000) (the "Line of Credit"). 2. Borrower is the registered owner of a 99.99% residual interest in a pool of mortgage backed certificates guaranteed by the Government National Mortgage Association as defined in the Certificate attached as Exhibit A to this Pledge Agreement ("Mortgage Certificates"), which Mortgage Certificates shall be pledged as security for Borrower's faithful performance of Borrower's obligations under this Line of Credit Agreement; 3. The parties desire to enter into this Line of Credit Agreement to provide for the terms and conditions stated below. NOW, THEREFORE, the parties agree as follows: I. THE LINE OF CREDIT A. Nature of the Line of Credit. Lender agrees to make a revolving line of ---------------------------- credit available to Borrower in the amount of One Million Dollars ($1,000,000) (the "Credit Limit") on the terms and conditions set forth herein, and Borrower accepts such Line of Credit subject to such terms and conditions of this Agreement. Borrower may request an advance of all or a part of the Line of Credit at any time while the Line of Credit is available. Any amount repaid by the Borrower becomes available for the Borrower to reborrow after the expiration of a hold period for payments by personal checks of up to eleven business days. If Lender delays the availability of funds, it will mail to the Borrower a notice within one business day. Page 2 of 10 B. Advances. Advances under the Line of Credit may be in any amount not to -------- exceed the credit limit remaining available. Advances shall be made by writing to Lender and requesting the release of available funds. C. Restrictions on Borrower's Use of the Line of Credit: Borrower agrees that ---------------------------------------------------- this Line of Credit shall only be used for the purposes of normal operating expenses, improving and/or enhancing the Borrower's existing properties, other matters associated with the maintenance and upkeep of Borrower's existing properties or expenses incurred in the normal course of business on terms and conditions agreed to by the Company. D. Default. Lender may, in its sole discretion, refuse to make advances ------- hereunder if an Event of Default has occurred (as defined in Paragraph V. below). E. Availability of the Line of Credit. Advances under the Line of Credit will ---------------------------------- be available until the earlier of the following (the "Termination Date"): (1) the anniversary of the date of this Agreement, unless the Agreement is renewed by Lender as described in paragraph 1.H below; or (2) the date Lender terminates the Line of Credit because of an Event of Default pursuant to Paragraph V; or (3) the date the Line of Credit is cancelled by the Borrower pursuant to Paragraph III.A. On the Termination Date, no further advances will be made available to the Borrower. F. Credit Limit. A credit limit of One Million Dollars ($1,000.000) has been ------------ set on the Line of Credit. The Borrower agrees not to allow the principal amount that the Borrower owes at any one time under this Agreement to exceed the Credit Limit. Lender does not have to honor any request for an advance which, when added to the unpaid balance, would exceed the Credit Limit. G. Payments. -------- 1. The minimum payment due each month shall be the amount of accrued interest and shall be due and payable in full on the tenth (10th) day of each month, or on the next business day if said date falls on a Saturday or Sunday, or on a holiday on which Lender is closed. In addition, the Borrower must pay any amounts past due, any amount that exceeds the Credit Limit and any other charges assessed as described in this Agreement. 2. The entire outstanding principal balance of the Line of Credit, together with all accrued and unpaid interest thereon, and fees and charges owing in connection therewith, shall be due and payable in full on the Termination Date. Page 3 of 10 3. All sums received from the Borrower for application to the Line of Credit shall be applied to the Borrower's obligations under the Line of Credit in such order as determined by Lender. H. Renewal. Upon a review of the Borrower's performance under this Agreement ------- and other credit factors, Lender may, in its sole and absolute discretion, renew this Agreement under terms and conditions satisfactory to the Borrower and Lender. Any such renewal will be for a period of one year from the date of the renewal. II. INTEREST AND PAYMENTS A. Payments. The Borrower can pay the balance of the credit outstanding under this Agreement in full or part at any time without premium or penalty. Lender may accept partial payments, whether or not marked "paid in full" without losing our rights under this Agreement. Payments shall be made to: TIS Financial Services, Inc. 655 Montgomery Street, Suite 800 San Francisco, California 94111 If Lender receives the payment at the above address by 9:00 a.m. on any business day, except Saturday or Sunday, Lender will credit the payment to the amount outstanding under this Agreement as of that day. C. Interest Rate. -------------- 1. The principal balance outstanding under this Agreement shall bear interest at a fluctuating interest rate per annum equal to the Prime Rate as announced by the San Francisco Federal Reserve Bank plus one and one- half (1 1/2) percentage points, as said Prime Rate may change from time to time. 2. Computation of Interest and Fees. All computations of interest and fees made or called for hereunder shall be calculated on the basis of the actual number of days the unpaid principal balance is outstanding divided by a 365/366 day year as appropriate. 3. Default Rate. At Lender's sole option in each instance, any amount not paid when due under this Agreement (including interest) shall bear interest from the due date at the interest rate shown above in Paragraph C. 1. This may result in compounding of interest. Page 4 of 10 D. Promise to Pay Fees and Costs. The Borrower promises to pay according to ----------------------------- the terms of this Agreement, all amounts outstanding and fees and costs which may be assessed under this Agreement including reasonable attorneys' fees (which may include the allocated costs of in-house counsel), court costs, and collection costs. E. Loan Fees. Borrower shall pay to Lender Three and One-Half (3 1/2) points --------- upon Borrower's receiving any of the principal amount of this Line of Credit. III. OTHER TERMS A. Cancellation by the Borrower. The Borrower may cancel this Agreement by ---------------------------- written notice to Lender. The Borrower's request will take effect at the time it is received by Lender. If there is more than one Borrower, Lender may treat a request by one of them under this Paragraph as a request by all of them. At the time of cancellation, the outstanding balance will be immediately due and payable. B. Security: Borrower agrees to enter into the Pledge Agreement of even date -------- as security for the performance of Borrower's obligations under this Line of Credit. IV. COVENANTS The Borrower agrees that so long as credit is available under this Agreement and until Lender is repaid in full, it will, unless Lender shall otherwise consent in writing: A. Insurance. Maintain public liability, property damage and worker's --------- compensation insurance and insurance on all its insurable property against fire and other hazards with responsible insurance carriers to the extent usually maintained by similar businesses. B. Records and Reports. Maintain a standard and modern system of accounting in ------------------- accordance with generally accepted accounting principles or another basis acceptable to Lender; permit Lender's representatives to have access to and to examine its properties, books and records at all reasonable times; and furnish Lender: 1. Promptly, a notice in writing of the occurrence of any event of default hereunder or of any event which would become an event of default hereunder upon giving of notice, lapse of time, or both. 2. Financial Statements and other information relating to the affairs of the Borrower and any guarantors as Lender may request from time to time. Page 5 of 10 C. Purpose. Use the proceeds of the credit provided in this Agreement solely ------- for the purposes of normal operating expenses, improving and/or enhancing the Borrower's existing properties, other matters associated with the maintenance and upkeep of Borrower's existing properties or expenses incurred in the normal course of business on terms and conditions agreed to by the Company. D. Compliance with Laws. Comply with the laws, regulations and orders of any -------------------- government body with authority over the Borrower's business. E. No Further Encumbrances: Other than a first lien, Borrower shall not incur ----------------------- any lien or encumbrance on any of Borrower's real estate assets without the prior written consent of Lender. V. EVENTS OF DEFAULT The occurrence of any of the following events of default shall, at Lender's option, terminate Lender's obligation to extend credit under this Agreement, and make all sums of principal and interest immediately due and payable without demand, presentment or notice, all of which are hereby expressly waived and Lender may exercise all its rights against the Borrower, any guarantor and any collateral as provided by law. A. Failure to Pay Indebtedness. Failure to pay when due any obligation of --------------------------- the Borrower to Lender. B. Other Defaults. The occurrence of any event of default whether or not -------------- waived by the obligee under any other indebtedness extended by any institution or individual to the Borrower. C. Breach of Covenant. Failure of the Borrower to perform any other term or ------------------ condition of this Agreement binding upon the Borrower. D. Breach of Warranty. Any of the Borrower's representations or warranties ------------------ made herein or any statement or certificate at any time given pursuant hereto or in connection herewith shall be false or misleading in any material respect. E. Insolvency: Receiver or Trustee. The Borrower, any guarantor of the -------------------------------- indebtedness of the Borrower to Lender, or general partner of the Borrower shall become insolvent, or admit its inability to pay its debts as they mature, or make an assignment for the benefit of creditors, or apply for or consent to the appointment of a receiver or trustee for it or for a substantial part of its property or business. Page 6 of 10 F. Judgments, Attachments. Any money judgment, writ, or warrant of attachment, ---------------------- or similar process shall be entered or filed against the Borrower or any guarantor of any of the Borrower's obligations to Lender or any of its assets and shall remain unvacated, unbonded or unstayed for a period of ten days or in any event later than five days prior to the date of any proposed sale thereunder. G. Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation ---------- proceedings or other proceedings for relief under any bankruptcy law or any law for the relief of debtors shall be instituted by or against the Borrower, any guarantor of the indebtedness of the Borrower to Lender or general partner of the Borrower. H. Material Adverse Change. A material adverse change occurs in the Borrower's ----------------------- financial condition or the financial condition of any guarantor of the Borrower's obligations to Lender, which, in the opinion of Lender, would affect the ability of the Borrower to repay any advances made by Lender hereunder or any other of the Borrower's obligations hereunder, or of such guarantor to perform under its guaranty. I. Guaranty. Any guaranty of the indebtedness of the Borrower to Lender, at -------- any time after the execution and delivery of such guaranty and for any reason other than satisfaction in full of all indebtedness incurred hereunder, ceases to be in full force and effect or is declared to be null and void; or the validity or enforceability thereof is contested in a judicial proceeding; or any guarantor denies that it has any further liability under such guaranty; or any guarantor defaults in any provision of any guaranty; or any financial information provided by any guarantor is false or misleading in any material respect. J. Change of Control. If any officer of Borrower shall resign, be replaced, ----------------- or is terminated or if any member of the Board of Directors of Borrower shall resign or be replaced, then Lender, at its sole option, may demand in writing that all outstanding amounts due pursuant to this Line of Credit shall be accelerated and shall become immediately due and owing. Lender may make this demand even though the term of the Line of Credit, or any extension of the Line of Credit, has not expired. K. Government Action. Any government authority takes action that Lender ----------------- believes materially adversely affects the Borrower's or any guarantor's financial condition or ability to repay. Page 7 of 10 VIII. MISCELLANEOUS PROVISIONS A. Failure or Indulgence Not Waiver. No failure or delay on the part of Lender, -------------------------------- in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege. All rights and remedies existing under this Agreement are cumulative to, and not exclusive of, any rights or remedies otherwise available. B. Other Agreements. Nothing herein shall in any way limit the effect of the ---------------- conditions set forth in any security or other agreement executed by the Borrower, but each and every condition hereof shall be in addition thereto. C. Governing Law. The Borrower understands and agrees that this Agreement will ------------- be governed by and interpreted in accordance with the laws of the State of California. D. Severability. If any provision of this Agreement is held to be ------------ unenforceable, such determination shall not affect the validity of the remaining provisions of this Agreement. E. Successors and Assigns. This Agreement is binding on the Borrower's and the ---------------------- Lender's successors and assignees. The Borrower agrees that it may not assign this Agreement without the Lender's prior consent. F. Arbitration ----------- 1. This paragraph concerns the resolution of any controversies or claims between the Borrower and Lender, including but not limited to those that arise from: (a) This Agreement (including any renewals, extensions or modifications of this Agreement); (b) Any document, agreement or procedure related to or delivered in connection with this Agreement; (c) Any violation of this Agreement; or (d) Any claims for damages resulting from any business conducted between the Borrower and Lender, including claims for injury to persons, property, or business interests (torts). 2. Arbitration proceedings will be administered by the American Arbitration Association and will be subject to its commercial rules of arbitration. Page 8 of 10 3. For purposes of the application of the statute of limitations, the filing of an arbitration pursuant to this paragraph is the equivalent of the filing of a lawsuit, and any claim or controversy that may be arbitrated under this paragraph is subject to any applicable statute of limitations. The arbitrators will have the authority to decide whether any such claim or controversy is barred by the statute of limitations and, if so to dismiss the arbitration on that basis. 4. If there is a dispute as to whether an issue is arbitrable, the arbitrators will have the authority to resolve any such dispute. 5. The decision that results from an arbitration proceeding may be submitted to any authorized court of law to be confirmed end enforced. 6. This provision does not limit the right of the Borrower or Lender to: (a) exercise self-help remedies such as setoff: (b) foreclose against or sell any real or personal property collateral: or (c) act in a court of law, before, during or after the arbitration proceeding to obtain (i) an interim remedy, and/or (ii) additional or supplementary remedies. 7. The pursuit of or a successful action for interim, additional or supplementary remedies, or the filing of a court action, does not constitute a waiver of the right of the Borrower or Lender, including the suing party, to submit the controversy or claim to arbitration if the other party contests the lawsuit. G. Hazardous Waste Indemnification. The Borrower will indemnify and hold ------------------------------- harmless Lender from any loss or liability directly or indirectly arising out of the use, generation, manufacture, production, storage, release, threatened release, discharge, disposal or presence of a hazardous substance. This indemnity will apply whether the hazardous substance is on, under or about the Borrower's property or operations or property leased to the Borrower. The indemnity includes but is not limited to attorneys' fees (including the reasonable estimate of the allocated cost of in-house counsel and staff). The indemnity extends to Lender, its parent, subsidiaries and all of their directors, officers, employees, agents, successors, attorneys and assigns. For these purposes, the term "hazardous substances" means any substance which is or becomes designated as "hazardous" or "toxic" under any federal, state or local law. This indemnity will survive repayment of the Borrower's obligations to Lender. Page 9 of 10 H. One Agreement. This Agreement and any related security or other agreements ------------- required by this Agreement collectively: (1) represent the sum of the understandings and agreements between Lender and the Borrower concerning this credit; and (2) replace any prior oral or written agreements between Lender and the Borrower concerning this credit; and (3) are intended by Lender and the terms agreed to by them. In the event of any conflict between this Agreement and any other agreements required by this Agreement, this Agreement will prevail. I. Change of Terms. Lender may change any term or condition of this Agreement, --------------- to the extent permitted by law, by providing written notice to the Borrower. Any such change shall apply to any unpaid balance outstanding under this Agreement as well as any future transactions under this Agreement. J. Notice. As required herein, notice to Lender shall be sent to the Lender to ------ be effective when received by Lender, with a copy to Lender's counsel by facsimile at: Lender: ------- TIS Financial Services, Inc Attention: Lorraine Legg 655 Montgomery Street, Suite 800 San Francisco, California 94111 Facsimile: (415) 393-8006 With a copy to counsel for Lender: ---------------------------------- Leonard P. Mastromonaco, Esq. Zitrin & Mastromonaco, LLP 445 Bush Street, Suite 600 San Francisco, California 94108 Facsimile: (415) 732-7555 Notice to Borrower shall be sent to Borrower, to be effective when received by Borrower, with a copy to Borrower's counsel by facsimile at: Borrower: --------- TIS Mortgage Investment Company Attention: Lorraine Legg 655 Montgomery Street, Suite 800 San Francisco, California 94111 Facsimile: (415) 393-8006 Page 10 of 10 With a copy to counsel for Borrower: ------------------------------------ Daniel E. Titlebaum, Esq. Heller, Ehrmann, White & McAuliffe 333 Bush Street San Francisco, California 94104 Facsimile: (415) 772-6268 The Borrower agrees to notify Lender promptly in writing of a change in the Borrower's mailing address. K. Costs. If Lender incurs any expense in connection with administering or ----- enforcing this Agreement, or if Lender takes collection action under this Agreement, it is entitled to costs and reasonable attorneys' fees, including any allocated costs of in-house counsel. At Lender's option, Lender may add these costs to the principal amount outstanding under this Agreement. L. Attorneys' Fees. In the event of a lawsuit or arbitration proceeding, the --------------- prevailing party is entitled to recover costs and reasonable attorneys' fees (including any allocated costs of in-house counsel) incurred in connection with the lawsuit or arbitration proceeding, as determined by the court or arbitrator. TIS Financial Services, Inc., a California corporation By: ________________________________________ LORRAINE O. LEGG President and Chief Executive Officer TIS Mortgage Investment Company, a Maryland corporation By: ________________________________________ LORRAINE O. LEGG President and Chief Executive Officer EX-10.2 3 PLEDGE AGREEMENT PLEDGE AGREEMENT (Mortgage Certificates) This Pledge Agreement ("Agreement") is made as of this _________ day of May 1999 by TIS Mortgage Investment Company, a Maryland corporation ("Pledgor"), and TIS Financial Services, Inc., a California corporation ("Lender"). RECITALS -------- WHEREAS, pursuant to a certain Revolving Line of Credit Agreement of even date herewith, between Lender and Pledgor, as Borrower, Lender agreed to make available to Pledgor the sum of One Million Dollars ($1,000,000.00) in the form of a line of credit ("the Line of Credit"); WHEREAS, Pledgor has agreed to secure Pledgor's obligations in the Line of Credit by Pledgor's residual 99.99% interest in a pool of mortgage backed certificates guaranteed by the Government National Mortgage Association as defined in the Certificate attached as Exhibit A to this Pledge Agreement ("Mortgage Certificates"); and WHEREAS, as a condition of making the Line of Credit, Lender has required Pledgor to execute and deliver this Agreement. NOW, THEREFORE, in consideration of the foregoing, Pledgor hereby agrees as follows: SECTION 1. Definitions. All capitalized terms used in this Agreement, but not ------------ defined herein, shall have the meanings set forth in the Revolving Line of Credit Agreement. SECTION 2. Pledge. The Pledgor hereby pledges to Lender, and grants to Lender a ------ security interest in, the Mortgage Certificates. SECTION 3. Security for Obligations. This Agreement secures the payment of all ------------------------ obligations of the Pledgor now or hereafter existing under the Line of Credit whether for principal, interest, fees expenses or otherwise, and all obligations of the Pledgor now or hereafter existing under this Agreement (all such obligations of the Pledgor being the "Obligations"). SECTION 4. Delivery of Mortgage Certificates. All certificates or instruments --------------------------------- representing or evidencing the Mortgage Certificates shall be delivered to and held by or on behalf of Lender. SECTION 5. Representations and Warranties. The Pledgor represents and warrants ------------------------------ as follows: Page 1 of 5 (a) The Pledged Debt has been duly authorized, authenticated, or issued and delivered, and is the legal, valid and binding obligation of the issuers thereof, and is not in default. (b) The Pledgor is the legal and registered owner of the Mortgage Certificates free and clear of any lien, security interest, option or other charge or encumbrance except for the security interest created by this Agreement. (c) The pledge of the Mortgage Certificates pursuant to this Agreement creates a valid and perfected first priority security interest of Pledgor's interest in the Mortgage Certificates, securing the payment of the Obligations. SECTION 6. Further Assurances. The Pledgor agrees that at any time and from ------------------ time to time, at the expense of the Pledgor, the Pledgor will promptly execute and deliver all further instruments and documents, and take all further action, that may be necessary or desirable, or that Lender may request, in order to perfect and protect any security interest granted or purported to be granted hereby or to enable Lender to exercise and enforce its rights and remedies hereunder with respect to the Mortgage Certificates. SECTION 7. Transfers and Other Liens. Without the prior written consent of ------------------------- Lender, the Pledgor agrees that it will not (i) sell or otherwise dispose of or grant any option with respect to, the Mortgage Certificates or (ii) create or permit to exist any lien, security interest, or other charge or encumbrance upon or with respect to the Mortgage Certificates, except for the security interest under this Agreement. SECTION 8. Lender Appointed Attorney-in-Pact. The Pledgor hereby appoints --------------------------------- Lender as the Pledgor's attorney-in-fact, with full authority, from and after the occurrence of an Event of Default, in the place and stead of the Pledgor and in the name of the Pledgor or otherwise, from time to time, in Lender's discretion to take any action and to execute any instrument which Lender may deem necessary or advisable to accomplish the purposes of this Agreement, including, without limitation, to receive, endorse, and collect all instruments made payable to the Pledgor representing any principal payment, interest payment, or other distribution in respect of the Mortgage Certificates or any part thereof and to give full discharge for the same. SECTION 9. Lender May Perform. If the Pledgor fails to perform any agreement ------------------ contained herein, Lender may itself perform, or cause performance of such agreement, and the expenses of Lender incurred in connection therewith shall be payable by the Pledgor under Section 12 of this Agreement. Page 2 of 5 SECTION 10. Transfer by Lender. Lender shall have the right to pledge, ------------------- hypothecate or other transfer its security interest in the Mortgage Certificates to any Third Party without the consent of Pledgor. SECTION 11. Remedies upon Default. If any Event of Default shall have occurred ---------------------- and be continuing: (a) Lender may exercise in respect of the Mortgage Certificates, in addition to other rights and remedies provided for herein or otherwise available to it, all the rights and remedies of a secured party on default under the Uniform Commercial Code (the 'Code") in effect in the State of California at that time, and Lender may also, without notice except as specified below, sell the Mortgage Certificates or any part thereof in a reasonably commercial manner. (b) Any and all proceeds received by Lender in respect of any income, sale of, collection from, or other realization upon all or any part of the Mortgage Certificates may, in the discretion of Lender, be held by Lender as collateral for, and/or then or at any time thereafter applied (after payment of any amounts payable to Lender pursuant to Section 12 in whole or in part by Lender against, all or any part of the Obligations in such order as Lender shall elect. Any surplus of such cash or cash proceeds held by Lender and remaining after payment in full of all Obligations shall be paid over to the Pledgor or to whomsoever may be lawfully entitled to receive such surplus. SECTION 12. Expenses The Pledgor will upon demand pay to Lender the amount of -------- any and all reasonable expenses, including the reasonable fees and expenses of its counsel and of any experts and agents, which Lender may incur in connection with (i) the administration of this Agreement, (ii) the custody or preservation of, or the sale of, collection from, or other realization upon, any of the Mortgage Certificates, (iii) the exercise or enforcement of any of the rights of Lender hereunder, or (iv) the failure by the Pledgor to perform or observe any of the provisions hereof. SECTION 13. Security Interest Absolute. All rights of Lender and security -------------------------- interests hereunder and all obligations of the Pledgor hereunder, shall be absolute and unconditional irrespective of: (a) any lack of validity or enforceability of the Line of Credit or any other agreement or instrument relating thereto; (b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations, or any other amendment or waiver of or any consent to any departure from the Line of Credit; Page 3 of 5 (c) any exchange, release or non-perfection of any other collateral, or any release or amendment or waiver of or consent to departure from any guaranty, for all or any of the Obligations; or (d) any other circumstances which might otherwise constitute a defense available to, or a discharge of the Pledgor. SECTION 14. Amendments. Etc. No amendment or waiver of any provision of this ---------------- Agreement nor consent to any departure by the Pledgor herefrom, shall in any event be effective unless the same shall be in writing and signed by Lender, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. SECTION 15. Notice. Any notice required to be given by Lender under this ------ Agreement shall be effective immediately upon Borrower's receipt of such notice to each of the following parties at the following addresses: Pledgor: -------- TIS Mortgage Investment Company Attention: Lorraine Legg 655 Montgomery Street, Suite 800 San Francisco, California 94111 Facsimile: (415) 393-8006 With a copy to counsel for Pledgor: ----------------------------------- Daniel E. Titlebaum, Esq. Heller, Ehrmann, White & McAuliffe 333 Bush Street San Francisco, California 94104 Facsimile: (415) 772-6268 Furthermore, any notice required to be given by Pledgor under this Agreement shall be effective immediately upon Lender's receipt of such notice to the following parties at each of the following addresses: Lender: ------- TIS Financial Services, Inc Attention: Lorraine Legg 655 Montgomery Street, Suite 800 San Francisco, California 94111 Facsimile: (415) 393-8006 Page 4 of 5 With a copy to counsel for Lender: ---------------------------------- Leonard P. Mastromonaco, Esq. Zitrin & Mastromonaco, LLP 445 Bush Street, Suite 600 San Francisco, California 94108 Facsimile: (415) 732-7555 SECTION 16. Continuing Security Interest: Transfer of Mortgage Certificates. --------------------------------------------------------------- This Agreement shall create a continuing security interest in the Mortgage Certificates and shall (i) remain in full force and effect until all of the indebtedness outstanding under the Line of Credit shall have been paid in full, (ii) be binding upon the Pledgor, its successors and assigns, and (iii) inure to the benefit of Lender and its successors, transferees and assigns. SECTION 17. Governing Law: Terms This Agreement shall be governed by and -------------------- construed in accordance with the laws of tile State of California. Unless otherwise defined herein or in the Line of Credit defined in Article 9 of the Uniform Commercial Code in the State of California are used herein as therein defined IN WITNESS WHEREOF, the Pledgor has caused this agreement to be duly executed and delivered by its officer thereunto duly authorized as of the date first above written. PLEDGOR: TIS Mortgage Investment Company, a Maryland corporation By: ________________________________________ LORRAINE O. LEGG, President and CEO Page 5 of 5 EX-27 4 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS DEC-31-1999 JAN-01-1999 MAR-31-1999 80 486 103 0 0 0 30,106 (1,924) 30,043 1,406 0 0 0 8 19,738 30,043 0 915 0 0 781 0 437 (1,680) 0 (1,680) 0 0 0 (1,680) (0.19) (0.19)
-----END PRIVACY-ENHANCED MESSAGE-----