FCC Proudreed Properties 2005 HSBC SG CORPORATE ...

Realising shares in this manner has the disadvantage that the Issuer acquires shares in a company which
may be indebted to third parties (although, inter alia, due to the limited activities which the Borrowers will
covenant to engage in, the Borrowers covenanting not to have any employees, and the insurance which
each Borrowers will undertake to procure, the number of third party creditors should be limited). The
transfer of the Pledged Shares to the Issuer would operate to discharge the obligations of the Borrower
to the Issuer.
Alternatively, the Issuer (represented by the relevant FCC Servicer, acting under the authority of the
Management Company) may ask for a mandatory court auction (vente forcée) of the shares. Following the
service, by a bailiff (huissier), of a notice to the Borrower and the relevant Parent Obligor (and upon
failure to pay within 8 days of such notice) the mandatory auction would be initiated and the proceeds
thereof would be applied in satisfaction of the obligations of the Borrower to the Issuer.
Insurance Claims
Under each Mortgage, the Issuer will be entitled to the proceeds payable under the insurance policies
related to each Secured Property covering loss or damage to such Secured Property (but not loss of rent),
pursuant to a delegation (délégation) under Article L.121 13 of the French Code des Assurances. The
Issuer (represented by the relevant FCC Servicer, acting under the authority of the Management
Company) will be vested with a direct action against the insurance company for the payment of the
relevant insurance proceeds. Such right depends upon the notary (before which the Mortgages will be
executed) (i) notifying the relevant insurance company of each Borrower of the Issuer’s benefit under the
relevant insurance policy, and (ii) registering the Mortgages. In the absence of such notification and
registration, a payment by the relevant insurance company of the relevant insurance proceeds to the
Borrower and not to the Issuer would be considered as a valid and bona fide payment since the insurance
company could claim that it was not aware of the mortgage. The Notary has agreed to perform such
formalities immediately after the Closing Date. Where the mortgages are unregistered, the notary could
notify the insurance company of each Mortgage but the insurance company will not, in these
circumstances, be obliged to pay the insurance proceeds to the Issuer as the unregistered mortgage is not
enforceable (opposable) against any third parties and therefore against the insurance company. The
registration of any unregistered Mortgages will be carried out if either the Historical ICR or the Projected
ICR is less than 1.75:1 on any Loan Calculation Date or upon the occurrence of a Loan Event of Default
(see section entitled ‘‘No initial Registration of Additional Mortgages’’).
Rental Income
Under Dailly law assignments, each Borrower has assigned, by way of security, certain rentals proceeds
in respect of the Secured Properties. So long as no Loan Event of Default or Potential Loan Event of
Default has occurred, no notice of assignment will be given to the Occupational Tenants. Until the tenants
are properly notified of such assignment, such tenants could continue to validly discharge their debts by
paying the relevant Borrower. Assuming that notice of such assignment is given to the tenants in a proper
form and such notice instructs the tenants to pay to the Issuer any amount due by it under the relevant
lease contract, the Issuer can collect the relevant monies from the tenant.
There is some debate as to the proper interpretation of recent French case law in relation to the
assignments of receivables coming into existence after the commencement of insolvency proceedings. As
a result, it is not clear whether the rights of the Issuer, as beneficiary of a Dailly law assignment of rental
income, would be enforceable against an insolvency official or third party creditor of the relevant
Borrower in the event of insolvency proceedings affecting that Borrower.
Borrower Accounts
Each Borrower will grant a pledge over its bank accounts to secure the Borrower’s obligations under the
relevant Commercial Mortgage Loan Agreement (each, an ‘‘Account Pledge’’).
Under each Account Pledge, the Issuer (represented by the relevant FCC Servicer, acting under the
authority of the Management Company) may, pursuant to article 2078 of the French Code Civil, ask the
Court for the account balances to be transferred to it (attribution judiciaire) in satisfaction of the
obligations of the relevant Borrower to the Issuer. An order for the relevant account balances to be
transferred to the Issuer (to the extent of the secured debt) would be granted by the Court subject to,
among other things, verifying that the secured debt is due and payable and that the pledge is valid and
enforceable.
Cash Pledges (Gage-espèces)
Each Borrower will deposit (by way of gage-espèces) into the relevant Mortgage Reserve Account an
amount sufficient to cover the costs of procuring the full registration of the Additional Mortgages, as
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