<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999
-----------------------------------------------
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (D) OF THE
EXCHANGE ACT
FOR THE TRANSITION PERIOD FROM TO
----------------------- -----------------------
COMMISSION FILE NUMBER: 333-9371
-------------------------------------------------------
Captec Franchise Capital Partners L.P. IV
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 38-3304095
- --------------------------------- ----------------------------
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification Number)
24 Frank Lloyd Wright Drive, Lobby L, 4th Floor
P.O. Box 544, Ann Arbor, Michigan 48106-0544
- --------------------------------------------------------------------------------
(Address of principal executive offices)
(734) 994-5505
- --------------------------------------------------------------------------------
(Issuer's telephone number)
Not Applicable
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last year)
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 (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to filing requirements
for the past 90 days. Yes X No
----- -----
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by court. Not Applicable.
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: Not Applicable
<PAGE> 2
CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
INDEX TO FORM 10-Q
<TABLE>
<CAPTION>
PART I FINANCIAL INFORMATION Page
<S> <C>
Item 1. Balance Sheets, March 31, 1999 and December 31,1998.................................... 1
Statements of Operations for the three months
ended March 31, 1999 and 1998.......................................................... 2
Statement of Changes in Partners' Capital for the three months
ended March 31, 1999 .................................................................. 3
Statements of Cash Flows for the three months
ended March 31, 1999 and 1998.......................................................... 4
Notes to Financial Statements.......................................................... 5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.............................................................. 7
PART II OTHER INFORMATION...................................................................... 9
SIGNATURES....................................................................................... 11
</TABLE>
i
<PAGE> 3
CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
BALANCE SHEET
<TABLE>
<CAPTION>
(Unaudited)
MARCH 31, DECEMBER 31,
1999 1998
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 2,053,337 $ 1,902,158
Restricted cash 1,739,409 988,189
Investment in property under leases:
Operating leases, net 22,666,435 21,433,864
Financing leases, net 8,337,552 7,507,457
Accounts receivable 131,860 130,234
Unbilled rent, net 171,715 128,842
Due from related parties 150,506 175,617
Deferred financing costs, net 550,751 393,230
----------- -----------
Total assets $35,801,565 $32,659,591
=========== ===========
LIABILITIES & PARTNERS' CAPITAL
Liabilities:
Accounts payable and accrued expenses $ 138,839 $ 46,701
Due to related parties 263,091 249,709
Notes Payable 9,651,000 6,375,000
----------- -----------
Total liabilities 10,052,930 6,671,410
----------- -----------
Partners' Capital:
Limited partners' capital accounts 25,719,338 25,964,614
General partners' capital accounts 29,297 23,567
----------- -----------
Total partners' capital 25,748,635 25,988,181
----------- -----------
Total liabilities & partners' capital $35,801,565 $32,659,591
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
1
<PAGE> 4
CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
STATEMENT OF OPERATIONS
for the three months ended March 31, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Operating revenue:
Rental income $605,860 $177,783
Finance income 200,815 90,322
-------- --------
Total operating revenue 806,675 268,105
-------- --------
Operating costs and expenses:
Depreciation 72,611 19,764
General and administrative 19,676 27,769
Amortization of debt issuance costs 14,122 --
Interest expense 131,119 --
-------- --------
Total operating costs and expenses 237,528 47,533
-------- --------
Income from operations 569,147 220,572
-------- --------
Other income:
Interest income 2,832 79,819
Other 975 --
-------- --------
Total other income 3,807 79,819
-------- --------
Net income 572,954 300,391
Net income allocable to general partner 5,730 3,004
-------- --------
Net income allocable to limited partners $567,224 $297,387
======== ========
Net income per limited partnership unit $ 18.91 $ 16.99
======== ========
Weighted average number of limited partnership
units outstanding 30,000 17,508
======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
2
<PAGE> 5
CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
for the three months ended March 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
Limited Limited General Total
Partners' Partners' Partners' Partners'
Units Accounts Accounts Capital
----- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Balance, December 31, 1998 30,000 25,964,614 23,567 25,988,181
Distributions - ($27.08 per unit) -- (812,500) -- (812,500)
Net income -- 567,224 5,730 572,954
------ ------------ ------------ ------------
Balance, March 31, 1999 30,000 $ 25,719,338 $ 29,297 $ 25,748,635
====== ============ ============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE> 6
CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
STATEMENT OF CASH FLOWS
for the three months ended March 31, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Cash flows from operating activities:
Net Income $ 572,954 $ 300,391
Adjustments to net income:
Depreciation 72,611 19,764
Amortization of debt issuance costs 14,122 --
Decrease in prepaid expenses -- --
(Increase) in unbilled rent (42,873) (7,400)
(Increase) in accounts receivable (1,626) (12,519)
Increase (decrease) in accounts payable and accrued expenses 92,137 (2,812)
----------- -----------
Net cash provided by operating activities 707,325 297,424
----------- -----------
Cash flows from investing activities:
Purchase and construction advances of real estate
for operating leases (1,305,181) (413,342)
Purchase of equipment for financing leases (1,131,619) (1,427,462)
Principal payments on financing leases 301,525 128,326
----------- -----------
Net cash used in investing activities (2,135,275) (1,712,478)
----------- -----------
Cash flows from financing activities:
Decrease (increase) in due from related parties 25,111 (34,497)
Increase in due to related parties 13,381 30,686
Proceeds from issuance of notes payable 3,276,000 --
Debt issuance costs (171,643) --
Issuance of limited partnership units -- 4,717,201
Offering costs -- (606,864)
Distributions to limited partners (812,500) (349,999)
(Increase) in restricted cash (751,220) --
----------- -----------
Net cash provided by financing activities 1,579,129 3,756,527
----------- -----------
Net (decrease) increase in cash and cash equivalents 151,179 2,341,473
Cash and cash equivalents, beginning of period 1,902,158 5,008,194
----------- -----------
Cash and cash equivalents, end of period $ 2,053,337 $ 7,349,667
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE> 7
CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
NOTES TO FINANCIAL STATEMENTS
1. THE PARTNERSHIP AND ITS SIGNIFICANT ACCOUNTING PRINCIPLES:
Captec Franchise Capital Partners L.P. IV (the "Partnership"), a Delaware
limited partnership, was formed on July 23, 1996 for the purpose of
acquiring income-producing commercial real properties and equipment
leased on a "triple net" or "double net" basis, primarily to operators of
national and regional chain and nationally franchised fast food and
family style restaurants, as well as other national and regional retail
chains. The general partners upon formation of the Partnership were
Captec Franchise Capital Corporation IV (the "Corporation"), a wholly
owned subsidiary of Captec Financial Group, Inc. ("Captec"), and Patrick
L. Beach, an individual, hereinafter collectively referred to as the
Sponsor. Patrick L. Beach is also the Chairman of the Board of Directors,
President and Chief Executive Officer of the Corporation and Captec. In
August, 1998, the general partnership interest of the Partnership was
acquired by Captec Net Lease Realty, Inc., an affiliate of Captec, for
$2,912,000.
The Partnership commenced a public offering of limited partnership
interests ("Units") on December 23, 1996. A minimum of 2,000 Units and a
maximum of 30,000 Units, priced at $1,000 per Unit, were offered on a
"best efforts, part or none" basis. The Partnership broke impound on
March 5, 1997, and the Partnership immediately commenced operations. At
March 31, 1999, the Partnership had 30,000 Units issued and outstanding.
Allocation of profits, losses and cash distributions from operations and
cash distributions from sale or refinancing are made pursuant to the
terms of the Partnership Agreement. Profits and losses from operations
are allocated among the limited partners based upon the number of Units
owned.
The balance sheet of the Partnership as of March 31, 1999 and the
statements of operations and cash flows for the period ending March 31,
1999 and 1998 have not been audited. In the opinion of the Management,
these unaudited financial statements contain all adjustments necessary to
present fairly the financial position and results of operations and cash
flows of the Partnership for the periods then ended. Results of
operations for the interim periods are not necessarily indicative of
results expected for the full year.
5
<PAGE> 8
CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
NOTES TO FINANCIAL STATEMENTS
2. LAND AND BUILDING SUBJECT TO OPERATING LEASES:
The net investment in operating leases as of March 31, 1999 is comprised
of the following:
<TABLE>
<S> <C>
Land $ 9,561,038
Building and improvements 12,221,093
Construction draws on properties 1,121,467
------------
22,903,598
Less accumulated depreciation (237,163)
------------
Total $ 22,666,435
============
</TABLE>
3. NET INVESTMENT IN FINANCING LEASES:
The net investment in financing leases as of March 31, 1999 is comprised
of the following:
<TABLE>
<S> <C>
Minimum lease payments to be received $ 11,748,952
Estimated residual value 232,697
------------
Gross investment in financing leases 11,981,649
Less unearned income (3,644,097)
------------
Net investment in financing leases $ 8,337,552
============
</TABLE>
4. NOTES PAYABLE:
In November, 1998, the Partnership entered into a $6.375 million term
note, the proceeds of which were used to acquire additional properties.
The note has a 10 year term, is collaterized by certain properties
subject to operating leases, and bears an interest rate of 8.13% per
annum.
In March, 1999, the Partnership entered into an additional $3.3 million
term note. The note also has a 10 year term, is collaterized by certain
properties subject to operating leases, and bears an interest rate of
8.5% per annum.
Debt issuance costs of approximately $565,000 in aggregate were incurred
in connection with the issuance of the notes, and will be amortized using
the straight-line method to interest expense over the 10 year term.
6
<PAGE> 9
CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
PART I - FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
When used in this discussion, the words, "intends", "anticipates",
"expects", and similar expressions are intended to identify forward-looking
statements. Such statements are subject to certain risks and uncertainties which
could cause actual results to differ materially from those projected. Such risks
and uncertainties include the following: (i) a tenant may default in making rent
payments, (ii) a fire or other casualty may interrupt the cash flow stream from
a property, (iii) the properties may not be able to be leased at the assumed
rental rates, (iv) unexpected expenses may be incurred in the ownership of the
properties, and (v) properties may not be able to be sold at the presently
anticipated prices and times.
As a result of these and other factors, the Partnership may experience
material fluctuations in future operating results on a quarterly or annual
basis, which could materially and adversely affect its business, financial
condition and operating results. These forward-looking statements speak only as
of the date hereof. The Partnership undertakes no obligation to publicly release
the results of any revisions to these forward-looking statements which may be
made to reflect events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events.
LIQUIDITY AND CAPITAL COMMITMENTS.
The Partnership commenced the offering (the "Offering") of up to 30,000
limited partnership units ("Units") registered under the Securities Act of 1933,
as amended, by means of a Registration Statement which was declared effective by
the Securities and Exchange Commission on December 23, 1996. The Partnership
invests in income-producing commercial properties and equipment leased primarily
to operators of national chain and nationally franchised fast-food, family style
and dinner house restaurants as well as other franchised or chain businesses or
retail concerns, pursuant to triple net leases or double net leases.
As of December 31, 1998, the Partnership had accepted subscriptions for
the entire offering of 30,000 Units. After payment of approximately $3.9 million
in offering expenses, net proceeds available for investment from the sale of
units was approximately $26.1 million. As of March 31, 1999 the partnership has
invested approximately $24.0 million in 20 properties, including two properties
in the construction phase, and approximately $8.5 million in 24 equipment
leases.
In December, 1998 the Partnership entered into a $6.375 million term
note. The Partnership entered into an additional $3.276 million term note in
March, 1999. Proceeds from the notes were used to acquire additional properties.
The notes have 10 year terms, are collaterized by certain properties subject to
operating leases, and bear interest at rates ranging from 8.13 to 8.5% per
annum.
7
<PAGE> 10
CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
PART I - FINANCIAL INFORMATION
During the three months ending March 31, 1999, the Partnership
purchased two real estate properties and completely funded two properties under
construction at December 31, 1998. The Partnership acquired the properties
subject to real estate leases at a total cost, including acquisition fees, of
approximately $1.9 million, and funded approximately $543,000 to complete the
two acquisitions under construction. One real estate property, acquired for
approximately $1.1 million, is accounted for as a direct finance lease.
As of March 31, 1999 the Partnership's investments were allocated
approximately 74% to properties and 26% to equipment. This allocation is
expected to change as additional properties and equipment are acquired. The
final asset mix allocation is expected to be at least 75%, but not more than 90%
properties, and up to 25%, but not less than 10% equipment
Once substantially all of the Partnership's funds have been applied as
intended, the Partnership expects to require limited amounts of liquid assets
since the form of lease which it intends to use for its properties and equipment
will require lessees to pay all taxes and assessments, maintenance and repairs
items (except, with respect to double net properties, costs associated with the
maintenance and repair of the exterior walls and roof of the property) and
insurance premiums, including casualty insurance. The general partners expect
that the cash flow to be generated by the Partnership's properties and equipment
will be adequate to pay operating expenses and provide distributions to Limited
Partners.
RESULTS OF OPERATIONS.
For the three months ended March 31, 1999, the Partnership earned
revenues of approximately $810,000 as compared to $268,000 for the three months
ended March 31, 1998. Total revenue for the period ended March 31, 1999 is
comprised of $606,000 of rental income, $201,000 of equipment lease finance
income, and $3,000 of interest and miscellaneous income. The increase in
revenues in 1999 resulted from the acquisition of properties during the past 12
months and the benefit of a full period of revenue from properties acquired and
leased in preceding periods.
For the three months ended March 31, 1999, the Partnership incurred
expenses of approximately $238,000 as compared to $48,000 for the three months
ended March 31, 1998. Total expenses for the period ended March 31, 1999 is
comprised of $72,000 of depreciation expense, $20,000 of general and
administrative expenses, $14,000 of amortization costs, and $131,000 of interest
expense.
As a result of the above the Partnership earned net income of
approximately $573,000 for the three months ended March 31, 1999.
DISTRIBUTIONS.
The Partnership declared first quarter distributions totaling $820,000,
of which $712,000 was distributed to its limited partners on April 16, 1999 and
the remaining $108,000 will be distributed to those limited partners who elected
to receive distributions on a monthly basis.
8
<PAGE> 11
CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
9
<PAGE> 12
CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are included herein or incorporated by
reference:
<TABLE>
<CAPTION>
Number Exhibit
------ -------
<S> <C>
4 Agreement of Limited Partnership of Registrant.
(Incorporated by reference from Exhibit B of the
final Prospectus dated December 23, 1996, as
supplemented and filed with the Securities and
Exchange Commission, S. E. C. File No. 333-9371)
4.1 Amended Agreement of Limited Partnership of
Registrant. (Incorporated by reference to the
corresponding exhibit in the Registrant's Form 10-K
for the year ended December 31, 1998)
10.1 Promissory Note dated December 17, 1998 between
Registrant and National Realty Funding L.C.
(Incorporated by reference to the corresponding
exhibit in the Registrant's Form 10-K for the year
ended December 31, 1998)
10.2 Promissory Note dated March 30, 1999 between
Registrant and National Realty Funding L.C.
27 Financial Data Schedule
99.1 Pages 35-42 of the final Prospectus dated December
23, 1997 as supplemented. (Incorporated by reference
from the final Prospectus filed with the Securities
and Exchange Commission pursuant to Rule 424 (b)
promulgated under the Securities Act of 1933, as
amended. S.E.C. File No. 333-9371.)
</TABLE>
(b) Reports on Form 8-K:
There were no reports filed on Form 8-K for the first quarter ended
March 31, 1999.
10
<PAGE> 13
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.
By: Captec Net Lease Realty, Inc.
Managing General Partner of
Captec Franchise Capital Partners L.P. IV
By: /s/ W. Ross Martin
------------------------------------------
W. Ross Martin
Executive Vice President,
Chief Financial Officer
Date: May 14, 1999
11
<PAGE> 14
Exhibit Index
<TABLE>
<CAPTION>
Number Exhibit
------ -------
<S> <C>
4 Agreement of Limited Partnership of Registrant.
(Incorporated by reference from Exhibit B of the
final Prospectus dated December 23, 1996, as
supplemented and filed with the Securities and
Exchange Commission, S. E. C. File No. 333-9371)
4.1 Amended Agreement of Limited Partnership of
Registrant. (Incorporated by reference to the
corresponding exhibit in the Registrant's Form 10-K
for the year ended December 31, 1998)
10.1 Promissory Note dated December 17, 1998 between
Registrant and National Realty Funding L.C.
(Incorporated by reference to the corresponding
exhibit in the Registrant's Form 10-K for the year
ended December 31, 1998)
10.2 Promissory Note dated March 30, 1999 between
Registrant and National Realty Funding L.C.
27 Financial Data Schedule
99.1 Pages 35-42 of the final Prospectus dated December
23, 1997 as supplemented. (Incorporated by reference
from the final Prospectus filed with the Securities
and Exchange Commission pursuant to Rule 424 (b)
promulgated under the Securities Act of 1933, as
amended. S.E.C. File No. 333-9371.)
</TABLE>
<PAGE> 1
EXHIBIT 10.2
AMENDED AND RESTATED PROMISSORY NOTE
- --------------------------------------------------------------------------------
LOAN TERMS TABLE
LENDER: National Realty Finance L.C., a Missouri limited liability company, its
successors and assigns
LOAN NO.: 6348
LENDER'S ADDRESS: 911 Main Street, Suite #1400, Kansas City, Missouri 64105
LENDER'S FACSIMILE NO.: (816) 221-8848
BORROWER: Captec Franchise Capital Partners L.P. IV, a Delaware limited
partnership
BORROWER'S ADDRESS: 24 Frank Lloyd Wright Drive, Lobby L, 4th Floor,
P.O. Box 544, Ann Arbor, Michigan 48106-0544
BORROWER'S FACSIMILE NO.: (734) 994-1376
BORROWER'S TAX IDENTIFICATION NUMBER: 38-3304095
PROPERTY: Each real property and the improvements thereon located as described
on Schedule A attached hereto and incorporated herein by reference (collectively
referred to as the "PROPERTIES" or individually as a "PROPERTY")
NOTE DATE: March ____, 1999
ORIGINAL PRINCIPAL AMOUNT: $3,276,000.00
MATURITY DATE: April 1, 2009
INTEREST RATE: 8.50 percent (8.50%) per annum
INITIAL INTEREST PAYMENT PER DIEM: $773.50
MONTHLY PAYMENT: $28,429.89
MONTHLY INTEREST ONLY PAYMENT DATE: May 1, 1999 and on the first day of each
successive month thereafter to and including April 1, 2001
MONTHLY PAYMENT DATE: May 1, 2001 and on the first day of each successive month
thereafter
FINANCIAL STATEMENT REPORTING DEPOSIT: $138.33
DEFEASANCE LOCK-OUT PERIOD: The period of time commencing on the Note Date and
expiring on the date (the "Defeasance Lock-Out Expiration Date") which is two
(2) years and fifteen (15) days after the "startup day" within the meaning of
Section 860G(a)(9) of the Internal Revenue Code of 1986, as amended (together
with any successor statute and the related Treasury Department Regulations
including temporary regulations, the "Code") of any "real estate mortgage
investment conduit" within the meaning of Section 860D of the Code ("REMIC")
that holds this Note
PREPAYMENT CONSIDERATION: During the Defeasance Lock-Out
Period, the greater of: (a) 5% of the Outstanding Principal Balance (hereinafter
defined) of the Note which is being prepaid, or (b) the Yield Maintenance Amount
(hereinafter defined)
- --------------------------------------------------------------------------------
1. LOAN AMOUNT AND RATE. FOR VALUE RECEIVED, Borrower promises to pay
to the order of Lender, the Original Principal Amount (or so much thereof as
is outstanding from time to time, which is referred to herein as the
"Outstanding Principal Balance"), with interest on the
1
<PAGE> 2
unpaid Outstanding Principal Balance from the date of disbursement of
the Loan (as hereinafter defined) proceeds of this Promissory Note
("Note") at the Interest Rate. Interest shall be calculated on the
basis of a three hundred sixty (360) day year composed of twelve (12)
months of thirty (30) days each except that interest due and payable
for a period less than a full month shall be calculated by multiplying
the actual number of days elapsed in such period by a daily rate based
on a 360 day year. The loan evidenced by this Note will sometimes
hereinafter be called the "Loan". The above Loan Terms Table
(hereinafter referred to as the "Table") is a part of the Note and all
terms used in this Note that are defined in the Table shall have the
meanings set forth therein.
2. PRINCIPAL AND INTEREST PAYMENTS. Payments of principal and interest
shall be made as follows:
(a) An interest payment on the date of disbursement in an amount
calculated by multiplying the Initial Interest Payment Per Diem by the number of
days from (and including) the date of the disbursement of the Loan proceeds
through the last day of the calendar month in which the disbursement was made;
and
(b) Interest only at the Interest Rate shall be payable in arrears on
the Outstanding Principal Balance on the Monthly Interest Only Payment Date
through and including April 1, 2001; and
(c) A Monthly Payment on each Monthly Payment Date until the Maturity
Date, each of such payments to be applied: (i) to the payment of interest
computed at the Interest Rate; and (ii) the balance applied toward the reduction
of the principal balance of the Loan; and
(d) If not sooner paid, the balance of the principal amount of the
Loan, all unpaid interest thereon, and all other amounts owed to Lender pursuant
to this Note or any other Loan Document (as hereinafter defined) or otherwise in
connection with the Loan or the security for the Loan shall be due and payable
on the Maturity Date.
3. SECURITY FOR NOTE. This Note is secured by first deeds of trust,
mortgages, or deeds to secure debt (which are herein collectively referred to as
the "SECURITY INSTRUMENTS" or individually as a "SECURITY INSTRUMENT")
encumbering each Property. This Note, the Security Instruments, and all other
documents and instruments evidencing and/or securing this Note whether now or
hereafter executed by Borrower or others in connection with or related to the
Loan, including any assignments of leases and rents, other assignments, security
agreements, financing statements, guaranties, indemnity agreements (including
environmental indemnity agreements), letters of credit, or completion/repair,
debt service, tenant finish/leasing commissions, earn-out or other
escrow/holdback or similar agreements or arrangements, together with all
amendments, modifications, substitutions or replacements thereof, are sometimes
herein collectively referred to as the "LOAN DOCUMENTS" or individually as a
"LOAN DOCUMENT". Notwithstanding anything to the contrary contained herein or in
the Loan Documents to the contrary, the term "Loan Documents" shall not include
any Environmental Indemnity Agreement executed by Borrower to Lender with
respect to the Property located in California. All amounts that are now or in
the future become due and payable under this Note, the Security Instruments, or
any other Loan Document, including any Prepayment Consideration (as hereinafter
defined)
2
<PAGE> 3
and all applicable expenses, costs, charges, and fees will be referred
to herein as the "DEBT." The remedies of Lender as provided in this
Note, any other Loan Document, or under applicable law shall be
cumulative and concurrent, may be pursued singularly, successively, or
together at the sole discretion of Lender, and may be exercised as
often as an occasion shall occur. The failure to exercise any right or
remedy shall not be construed as a waiver or release of the right or
remedy respecting the same or any subsequent default.
4. FINANCIAL STATEMENT REPORTING DEPOSIT; REBATE OF DEPOSIT. In
addition to and concurrently with each interest only payment and with each
Monthly Payment, Borrower shall also pay to Lender a constant monthly amount
equal to the Financial Statement Reporting Deposit. On the first day of the
fourteenth (14th) month following the date of the initial disbursement of funds
under this Note (the "Disbursement Date"), and on an annual basis thereafter
during the term of this Note, Lender shall remit to Borrower a portion of the
Financial Statement Reporting Deposit then held by Lender in an amount equal to
the aggregate amount of the Financial Statement Reporting Deposit actually
received by Lender during the twelve (12) month period ending upon the
immediately prior annual anniversary of the Disbursement Date (the "Annual
Compliance Period") provided that no Event of Default (as hereinafter defined),
including any failure by Borrower to strictly comply with the financial
reporting requirements set forth in the Security Instruments, is currently
existing or has occurred in the Annual Compliance Period.
5. PAYMENTS. All amounts payable hereunder shall be payable in lawful
money of the United States of America to Lender at Lender's Address or such
other place as the holder hereof may designate in writing. Each payment made
hereunder shall be made in immediately available funds and must state the
Borrower's Loan Number. If any payment of principal or interest on this Note is
due on a day other than a Business Day (as hereinafter defined), such payment
shall be made on the next succeeding Business Day, and such extension of time
shall be included in computing interest in connection with such payment. Any
payment on this Note received after 2:00 o'clock p.m. (CST or other applicable
current time in Kansas City, Missouri) shall be deemed to have been made on the
next succeeding Business Day. All amounts due under this Note shall be payable
without set off, counterclaim, or any other deduction whatsoever. All payments
from Borrower to Lender following the occurrence and during the continuance of
an Event of Default shall be applied in such order and manner as Lender elects
in its sole discretion in reduction of costs, expenses, charges, disbursements
and fees payable by Borrower hereunder or under any other Loan Document, in
reduction of interest due on unpaid principal, or in reduction of principal.
Lender may, without notice to Borrower or any other person, accept one or more
partial payments of any sums due or past due hereunder from time to time while
an uncured Event of Default exists hereunder, after Lender accelerates the
indebtedness evidenced hereby, and/or after Lender commences enforcement of its
remedies under any Loan Document or applicable law, without thereby waiving any
Event of Default, rescinding any acceleration, or waiving, delaying, or 3
forbearing in the pursuit of any remedies under the Loan Documents. Lender may
endorse and deposit any check or other instrument tendered in connection with
such a partial payment without thereby giving effect to or being bound by any
language purporting to make acceptance of such instrument an accord and
satisfaction of the indebtedness evidenced
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<PAGE> 4
hereby. As used herein, the term "Business Day" shall mean a day upon
which commercial banks are not authorized or required by law to close
in Kansas City, Missouri.
6. LATE CHARGE. If any sum payable under this Note or any other Loan
Document is not received by Lender by close of business on the fifth (5th) day
after the date on which it was due, Borrower shall pay to Lender an amount (the
"Late Charge") equal to the lesser of (a) five percent (5%) of the full amount
of such sum or (b) the maximum amount permitted by applicable law in order to
help defray the expenses incurred by Lender in handling and processing such
delinquent payment and to compensate Lender for the loss of the use of such
delinquent payment. Any such Late Charge shall be secured by the Security
Instruments and other Loan Documents. The collection of any Late Charge shall be
in addition to, and shall not constitute a waiver of or limitation of, a default
or Event of Default hereunder or a waiver of or limitation of any other rights
or remedies that Lender may be entitled to under any Loan Document or applicable
law.
7. DEFAULT RATE. Upon the occurrence and during the continuance of an
Event of Default (including the failure of Borrower to make full payment on the
Maturity Date), Lender shall be entitled to receive and Borrower shall pay
interest on the Outstanding Principal Balance at the rate of four percent (4%)
per annum above the Interest Rate ("Default Rate") but in no event greater than
the maximum rate permitted by applicable law. Interest shall accrue and be
payable at the Default Rate from the occurrence of an Event of Default until all
Events of Default have been fully cured. Such accrued interest, if not paid on
demand, shall be added to the Outstanding Principal Balance, and interest shall
accrue on such accrued interest at the Default Rate until fully paid. Such
accrued interest shall be secured by the Security Instruments and other Loan
Documents. Borrower agrees that Lender's right to collect interest at the
Default Rate is given for the purpose of compensating Lender at reasonable
amounts for Lender's added costs and expenses that occur as a result of
Borrower's default and that are difficult to predict in amount, such as
increased general overhead, concentration of management resources on problem
loans, and increased cost of funds. Lender and Borrower agree that Lender's
collection of interest at the Default Rate is not a fine or penalty, but is
intended to be and shall be deemed to be reasonable compensation to Lender for
increased costs and expenses that Lender will incur if there occurs an Event of
Default hereunder. Collection of interest at the Default Rate shall not be
construed as an agreement or privilege to extend the Maturity Date or to limit
or impair any rights and remedies of Lender under any Loan Documents. If
judgment is entered on this Note, interest shall continue to accrue
post-judgment at the greater of (a) the Default Rate or (b) the applicable
statutory judgment rate.
8. COLLECTION EXPENSES. Borrower shall pay on demand, in addition to
the principal and interest due, all reasonable expenses of protecting the
security for this Note and all expenses of enforcement and collection, including
costs for title insurance searches and endorsements, retention of collection
agents, court costs and litigation expenses in connection with any proceedings
of any nature, including appellate and bankruptcy proceedings, and all
reasonable attorneys' fees and expenses, whether incurred as part of or
separately from any formal legal proceedings.
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<PAGE> 5
9. PREPAYMENT; DEFEASANCE.
(a) PREPAYMENT.
(i) RESTRICTIONS. Voluntary prepayment of this Note is prohibited
except during the last ninety (90) days of the term when prepayment may be made
in whole, but not in part, without payment of any premium or penalty, on any
Monthly Payment Date. However, if (a) the tenant of any Property (each a
"TENANT") shall validly exercise its purchase option to acquire such Property in
accordance with the terms of its lease (each a "PURCHASE OPTION") at any time
prior to the Defeasance Lock-out Expiration Date, (b) Borrower complies in all
respects with the applicable provisions of this Section 9(a), and (c) as of the
Prepayment Date (as hereinafter defined), no Event of Default exists and no
event exists that, with the passage of time, giving of notice, or modification
or termination of the automatic stay of Section 362 of the Bankruptcy Code, may
become an Event of Default ("Default"), Borrower shall be permitted and is
hereby obligated to prepay the Loan in part but not in whole. Each such
prepayment shall be deemed a "PURCHASE OPTION PREPAYMENT", and the entire amount
payable by Tenant under such lease to exercise its Purchase Option (the
"PURCHASE PRICE") shall be paid directly to Lender for application by Lender as
hereinafter provided. Notwithstanding anything to the contrary contained herein,
Borrower shall use best efforts to cause such Purchase Option Prepayments to
occur during the first twenty (20) calendar days of any month during the term of
this Note.
(ii) NOTICE. Borrower shall give written notice to Lender
specifying the date on which a Purchase Option Prepayment shall be made (the
"PREPAYMENT DATE"). Borrower shall cause Lender to receive this notice not more
than sixty (60) days and not less than (30) days prior to the Prepayment Date.
If the Purchase Option is exercised, the amount of the Purchase Option
Prepayment shall be due and payable on the Prepayment Date, unless (a) an event
shall occur outside of Borrower's control that prevents the Purchase Option
Prepayment, or (b) Borrower has elected not to consummate the transaction which
would result in the Purchase Option Prepayment. If such an event shall occur,
the Note, Security Instruments and Loan Documents shall continue in full force
and effect as if the notice of prepayment had not been given.
(iii) PREPAYMENT CONSIDERATION. The entire Purchase Price shall be
used to make the Purchase Option Prepayment and pay the Prepayment Consideration
attributable thereto. Borrower acknowledges that the amount to be allocated as
between the Prepayment Consideration and the Purchase Option Prepayment cannot
be determined until on or about the Prepayment Date. Lender shall determine in
its sole discretion the amount of the Purchase Option Prepayment to be applied
to the Outstanding Principal Balance and the amount to be applied to the
Prepayment Consideration, which shall be computed in accordance with the Table
and Section 9(a)(iv) hereof. Borrower acknowledges that the Prepayment
Consideration is a bargained for consideration and not a penalty, and Borrower
recognizes that Lender will incur substantial additional costs and expenses in
the event of a Purchase Option Prepayment and that the Prepayment Consideration
compensates Lender for such costs and expenses and the loss of Lender's
investment opportunity for the principal amount being prepaid during the period
from the Prepayment Date until the Maturity Date. Borrower agrees that Lender
shall not, as a condition to receiving any Prepayment Consideration, be
obligated to actually reinvest the
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<PAGE> 6
amount prepaid in any treasury obligation or in any other
manner whatsoever.
(iv) YIELD MAINTENANCE AMOUNT. The "YIELD MAINTENANCE AMOUNT" (as
the term is used in the Table and elsewhere in this Note) shall mean the excess
of: (A) the present value, as of the Prepayment Date, of each of the then
remaining scheduled payments of principal and interest payable under this Note
from the Prepayment Date through the Maturity Date (including any balloon
payment) determined by: (1) subtracting from each then remaining scheduled
payment of principal and interest the amount of principal and interest that is
still scheduled to be paid on the due date thereof following the Purchase Option
Prepayment; and (2) discounting such payments (using simple discounting) at the
Discount Rate (hereinafter defined); over (B) the amount of principal being
prepaid. The term "DISCOUNT RATE" shall mean the rate that, when compounded
monthly, is equivalent to the Treasury Rate (hereinafter defined) when
compounded semi-annually. The term "TREASURY RATE" shall mean the yield
calculated by the linear interpolation of the yields, as reported in Federal
Reserve Statistical Release H.15-Selected Interest Rates under the heading U.S.
Government Securities/Treasury Constant Maturities for the week ending prior to
the Prepayment Date, of U.S. Treasury constant maturities with maturity dates
(one longer and one shorter) most nearly approximating the Maturity Date. (If
Release H.15 is no longer published, Lender shall select a comparable
publication to determine the Treasury Rate.)
(v) Borrower shall provide to Lender on or before the Prepayment
Date:
(a) an opinion satisfactory to Lender in its sole discretion of
a qualified valuation expert satisfactory to Lender in its sole
discretion, stating, among other things but without substantive
qualification, that (1) the loan-to-value ratio of the Loan and all
of the collateral for the Loan under the Loan Documents will not in
such expert's opinion change significantly as a result of the
Purchase Option Prepayment and partial release and any other
transactions that occur pursuant to the provisions of this Section
9(a); and (2) immediately after the occurrence of such transaction
the fair market value of the collateral that secures the Loan will
be at least equal to eighty percent (80%) of the amount of the
Loan; and
(b) an opinion of counsel for Borrower satisfactory to Lender
in its sole discretion, delivered to Lender by counsel satisfactory
to Lender in its sole discretion, stating, among other things but
without substantive qualification, that (1) neither the Purchase
Option Prepayment nor any other transaction that occurs pursuant to
the provisions of this Section 9(a) has caused or will cause the
Loan (including for this purpose the Loan Documents) to cease to be
a "qualified mortgage" within the meaning of Section 860G of the
Code, either under the provisions of Treasury Regulation Sections
1.860G-2(a)(8) or 1.860G-2(b) (as such regulations may be amended
or superseded from time to time) or under any other provision of
the Code or otherwise, and (2) each of any REMIC or any other
entity that holds this Note will not cease to be qualified as a
REMIC or as such other type of entity as a result of the Purchase
Option Prepayment and/or any
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<PAGE> 7
other transaction that occurs pursuant to the provisions of
this Section 9(a).
(vi) Borrower shall pay all costs and expenses including reasonable
attorneys' fees incurred by Lender or its servicers or other agent(s) in
connection with any Purchase Option Prepayment and related transactions,
including review of the foregoing opinions and any court costs and litigation
expenses incurred in connection with any attempted revocation or nullification
of the exercise of any Purchase Option by a Tenant.
(vii) It shall be an event of default under this Note (a "PURCHASE
OPTION PREPAYMENT DEFAULT") if (a) Borrower fails to strictly comply with all of
the requirements of the preceding clauses (i) through (vi) of this Section 9(a)
on or before the Prepayment Date, (b) the disposition of a Property pursuant to
the exercise of any Purchase Option is consummated (whether in accordance with
the terms of the lease, by order of any court or otherwise), and (c) Lender
receives or is required to receive the Purchase Price. If a Purchase Option
Prepayment Default shall occur, Lender may declare the entire Debt, including
the principal balance of the Loan (deducting therefrom the amount of the
Purchase Price actually received by Lender, which shall be applied to the
Outstanding Principal Balance), all accrued interest, and all costs, expenses,
charges and fees payable under any Loan Document, together with any applicable
Default Prepayment Consideration (which shall be calculated on the entire
Outstanding Principal Balance without deduction for the amount of the Purchase
Price), immediately due and payable.
(b) DEFEASANCE.
(i) FULL DEFEASANCE. Provided that as of the Release Date (as
hereinafter defined) the Debt has not been accelerated, no Default or Event of
Default exists, Borrower may cause the release of the Properties from the liens
of the Security Instruments and the other Loan Documents (a "FULL DEFEASANCE")
on any Monthly Payment Date following the Defeasance Lock-out Expiration Date
upon Borrower's satisfaction of the following conditions:
(A) Borrower shall provide Lender not less than thirty (30)
days prior written notice specifying a Monthly Payment Date (such
Date, or any extended date upon which Borrower and Lender may
mutually agree is referred to herein as the "RELEASE DATE") on
which the Full Defeasance transaction is to be consummated;
(B) On the Release Date Borrower shall pay in full all accrued
and unpaid interest and all other sums due under this Note and
under the other Loan Documents up to the Release Date, including
all costs and expenses including attorneys' fees incurred by Lender
or its servicers or other agent(s) or to or on behalf of any rating
agencies in connection with such release and related transactions
(including the review of the proposed Defeasance Collateral and the
preparation of the Defeasance Security Agreement (as hereinafter
defined) and related documentation) together with a defeasance
processing fee in an amount equal to one-half of one percent (0.5%)
of the then Outstanding Principal Balance but in no event less than
(A) $10,000 or greater than (B) $20,000; and
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<PAGE> 8
(C) Borrower shall deliver the following, all of which must be
satisfactory to Lender in its sole discretion, at or prior to the
release of the Properties and substitution of the Defeasance
Collateral:
(1) Direct, non-callable and non-redeemable securities
evidencing an obligation to pay principal and interest in a
full and timely manner that are direct obligations of the
United States of America for the payment of which its full
faith and credit is pledged ("GOVERNMENT SECURITIES") in
amounts sufficient to pay all scheduled principal and interest
payments required under this Note (the "DEFEASANCE
COLLATERAL"), which securities provide for payments prior, but
as close as possible, to the Business Day prior to each
successive Monthly Payment Date occurring after the Release
Date, with each such payment being equal to or greater than the
amount of the corresponding Monthly Payment required to be made
hereunder for the balance of the term hereof plus the amount
required to be paid on the Maturity Date (the "SCHEDULED
DEFEASANCE PAYMENTS"), each of which shall be duly endorsed by
the holder thereof as directed by Lender or accompanied by a
written instrument of transfer in form and substance
satisfactory to Lender in its sole discretion (including such
instruments as may be required by the depository institution or
other entity holding such securities or the issuer thereof, as
the case may be, to effectuate book-entry transfers and pledges
through the book-entry facilities of such institution) in order
to perfect upon the delivery of the Defeasance Security
Agreement (as hereinafter defined) a valid, first priority lien
and security interest therein in favor of Lender in conformity
with all applicable state and federal laws governing granting
of such security interest;
(2) any and all agreements, certificates, opinions,
documents or instruments required by Lender in its sole
discretion in connection with the Full Defeasance including (a)
a pledge and security agreement, in form and substance
satisfactory to Lender in its sole discretion, creating a first
priority security interest in favor of Lender in the Defeasance
Collateral (the "DEFEASANCE SECURITY AGREEMENT"), and (b) any
and all agreements, certificates, opinions, documents, or
instruments required by Lender in its sole discretion that
affect or relate in any way to the maintenance by any REMIC
that holds this Note of its qualification and status for tax
purposes as a REMIC (collectively "REMIC QUALIFICATION
DOCUMENTS");
(3) a certificate of Borrower certifying that (a) all of
the requirements set forth in this Section 9(b) have been
satisfied, (b) the transactions that are being carried out
pursuant to this Section 9(b) (including specifically the
release of the lien of the Security Instrument) are being
effected to facilitate the disposition of the Property or any
other customary commercial transaction and not as part of an
arrangement to collateralize a
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<PAGE> 9
REMIC offering with obligations that are not real estate
mortgages, and (c) the amounts of the Defeasance Collateral
comply with all the requirements of this Section including the
requirement that the Defeasance Collateral shall generate
monthly amounts equal to or greater than the Scheduled
Defeasance Payments;
(4) an opinion of counsel for Borrower satisfactory to
Lender in its sole discretion, delivered to Lender by counsel
satisfactory to Lender in its sole discretion, stating, among
other things but without substantive qualification, that (a)
Lender has a valid, duly perfected, first priority security
interest in the Defeasance Collateral and that the Defeasance
Security Agreement is enforceable against Borrower in
accordance with its terms, (b) neither the Full Defeasance nor
any other transaction that occurs pursuant to the provisions of
this Section 9(b) has caused or will cause the Loan (including
for this purpose the Loan Documents) to cease to be a
"qualified mortgage" within the meaning of Section 860G of the
Code, either under the provisions of Treasury Regulation
Sections 1.860G-2(a)(8) or 1.860G-2(b) (as such regulations may
be amended or superseded from time to time) or under any other
provision of the Code or otherwise, and (c) each of any REMIC
or any other entity that holds this Note will not cease to be
qualified as a REMIC or as such other type of entity as a
result of the Full Defeasance and/or any other transaction that
occurs pursuant to the provisions of this Section 9(b);
(5) a certificate and opinion delivered by an independent
certified public accounting firm acceptable to Lender in its
sole discretion (a) certifying that the amounts of the
Defeasance Collateral comply with all the requirements of this
Section including the requirement that the Defeasance
Collateral shall generate monthly amounts equal to or greater
than the Scheduled Defeasance Payments; (b) setting forth the
change in the yield of the Loan that results from the Full
Defeasance and any other transactions that occur pursuant to
the provisions of this Section 9(b), including supporting
computations which shall be made in a manner that is consistent
with the provisions of Treasury Regulation Sections
1.1001-3(e)(1) and (2), and (c) opining that such change has
not constituted or caused and will not constitute or cause a
significant modification of the Loan (including for this
purpose the Loan Documents) under such provisions of the
regulations;
(6) written confirmation from the rating agencies that have
rated any of the securities issued by any REMIC that holds this
Note to the effect that the Full Defeasance will not result in
a downgrading, withdrawal or
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<PAGE> 10
qualification of the respective ratings in effect immediately
prior to such Full Defeasance for any rated securities then
outstanding, and if required by any rating agency or Lender, a
non-consolidation opinion with respect to the Defeasance
Obligor (as hereinafter defined) in form and substance
satisfactory to Lender and such rating agency; and
(7) Borrower shall (unless otherwise agreed to in writing
by Lender in its sole discretion), at Borrower's sole expense,
assign all of its obligations under this Note, together with
the Defeasance Collateral, to a successor entity ("DEFEASANCE
OBLIGOR") designated by Borrower and approved by Lender in its
sole discretion that is a single purpose, bankruptcy remote
entity as determined by Lender in its sole discretion. The
Defeasance Obligor shall execute an assumption agreement
pursuant to which it shall assume Borrower's obligations under
this Note, the Loan Documents, and the Defeasance Security
Agreement. As conditions to such assignment and assumption,
Borrower shall (a) deliver to Lender an opinion of counsel
satisfactory to Lender in its sole discretion, delivered to
Lender by counsel satisfactory to Lender in its sole
discretion, stating, among other things, that such assumption
agreement has been duly authorized and is enforceable against
Borrower and the Defeasance Obligor in accordance with its
terms, that the Note, the Defeasance Security Agreement and the
other Loan Documents, as so assumed, have been duly authorized
and are enforceable against the Defeasance Obligor in
accordance with their respective terms, and that the delivery
of the Defeasance Collateral to the Defeasance Obligor does not
constitute a fraudulent transfer, preferential payment, or
other voidable transfer under applicable bankruptcy law,
subject only to such reasonable and customary conditions,
limitations, exceptions and assumptions as are reasonably
satisfactory to Lender, and (b) pay all costs and expenses
including attorneys' fees incurred by Lender or its servicer or
other agent(s) in connection with such assignment and
assumption (including the review of the proposed transferee and
the preparation of the assumption agreement and related
documentation). Upon such assumption, Borrower shall be
relieved of its obligations under this Note, the Defeasance
Security Agreement and the other Loan Documents, other than
those obligations which are specifically intended to survive
the payment of this Note and the termination, satisfaction or
assignment of this Note, the Defeasance Security Agreement or
the other Loan Documents or the exercise of Lender's rights and
remedies under any of such documents and instruments.
(D) Upon compliance with the requirements of this Section,
Lender shall
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<PAGE> 11
release the Properties from the liens of the Security
Instruments and the other Loan Documents, and the Defeasance
Collateral shall constitute collateral which shall secure this
Note and all other obligations under the Loan Documents. Lender
will, at Borrower's expense, execute and deliver any agreements
reasonably requested by Borrower to release the liens of the
Security Instruments from the Properties. Borrower, pursuant to
the Defeasance Security Agreement, shall authorize and direct
that the payments received from Defeasance Collateral be made
directly to Lender and applied to satisfy the obligations of
Borrower under this Note.
(E) Upon the release of the Properties in accordance with
this Section 9(b), Borrower shall have no further right to
prepay this Note. Borrower shall pay any revenue, documentary
stamp or intangible taxes or any other tax or charge due in
connection with the transfer of this Note or otherwise required
to accomplish the agreements of this Section.
(F) If any notice of Full Defeasance is given pursuant to
Section 9(b)(i)(A), Borrower shall be required to defease the
Loan on the Release Date (unless such notice is revoked by
Borrower prior to the Release Date in which event Borrower
shall immediately reimburse Lender for any and all reasonable
costs and expenses incurred by Lender in connection with
Borrower's giving of such notice and revocation).
(G) At Borrower's request, Lender may agree in its sole
discretion that Lender or its servicer or other agent, acting
on Borrower's behalf as Borrower's agent and attorney-in-fact,
shall purchase the Defeasance Collateral that Borrower is
required to deliver to Lender pursuant to Section
9(b)(i)(C)(1). If such an agreement is made then Borrower shall
deposit with Lender or Lender's servicer or other agent, as
directed by Lender or Lender's agent(s), on or prior to the
Release Date a sum of money sufficient to purchase the
Defeasance Collateral. By making such deposit Borrower shall
thereby appoint Lender or Lender's servicer or other agent as
Borrower's agent and attorney-in-fact, with full power of
substitution, for the purpose of purchasing the Defeasance
Collateral with the funds so provided and delivering the
Defeasance Collateral to Lender pursuant to Section
9(b)(i)(C)(1).
(H) Notwithstanding any release of the Security Instrument
or any Full Defeasance hereunder, the Defeasance Obligor shall,
and hereby agrees to be, bound by and obligated under Sections
3.1 (Payment of Debt), 7.2 (Further Acts Etc.), 7.4(a)
(Estoppel Certificates), 11.2 (Application of Proceeds), 11.7
(Other Rights Etc.) and 14.2 (Marshalling and Other Matters)
and Article 13
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<PAGE> 12
(Indemnification) of the Security Instrument; provided, however,
that all references therein to "PROPERTY" or "PERSONAL PROPERTY"
shall be deemed to refer only to the Defeasance Collateral
delivered to Lender.
(ii) PARTIAL DEFEASANCE. If any Tenant shall have validly exercised
its Purchase Option to acquire a Property after the Defeasance Lock-out
Expiration Date, Borrower may cause the release of such Property from the lien
of the Security Instrument encumbering such Property and the other Loan
Documents and substitute collateral as provided herein (a "PARTIAL DEFEASANCE")
on any Monthly Payment Date following the Defeasance Lock-Out Expiration Date
provided that, as of the Release Date, the Debt has not been accelerated, no
Default or Event of Default exists, and upon satisfaction of the following
conditions:
(A) Immediately available funds shall have been wired to
Lender's servicing agent or other designee (the "SERVICER") or, if
there is no Servicer, Lender or Lender's designee (Servicer,
Lender, or Lender's designee being herein sometimes referred to for
this purpose as the "DEFEASANCE AGENT") in an amount (the
"PROCEEDS") equal to the greater of (1) the Purchase Price of such
Property, net of closing costs, or (2) the net present value as
determined by the Defeasance Agent in its sole discretion, using
the weighted average yield of the Government Securities purchased
pursuant to Section 9(b)(ii)(B) as the discount rate to compute
such value, of the partial defeasance principal amount set forth on
Schedule B attached hereto attributable to the Property that is the
subject of the Purchase Option (the "PARTIAL DEFEASANCE PRINCIPAL
AMOUNT") together with interest thereon at the Interest Rate from
the Release Date to the Maturity Date;
(B) Borrower hereby appoints Defeasance Agent as Borrower's
agent and attorney-in-fact to utilize all Proceeds (or as much of
the Proceeds as is possible) to purchase Government Securities,
which securities provide for payments ("PARTIAL SCHEDULED
DEFEASANCE PAYMENTS") that replicate as closely as possible (ie.
are made in the same proportions as) the scheduled payments due
under this Note for the balance of the term hereof including the
amount (adjusted to reflect any Purchase Option Prepayments
received by Lender prior to the Defeasance Lock-Out Expiration
Date) required to be paid on the Maturity Date, all as determined
by the Defeasance Agent in its sole discretion (all such Government
Securities are hereinafter referred to as the "PARTIAL DEFEASANCE
COLLATERAL"). If the Defeasance Agent determines in its sole
discretion that all Proceeds cannot be used to purchase Partial
Defeasance Collateral, then such excess Proceeds shall be delivered
to Borrower. Each Government Security included in the Partial
Defeasance Collateral shall be duly endorsed by the holder thereof
as directed by Lender or accompanied by a written instrument of
transfer in form and substance satisfactory to Lender in its sole
discretion (including such instruments as may be required by the
depository institution or other entity holding such securities or
the issuer thereof, as the case may be, to effectuate book-entry
transfers and pledges
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<PAGE> 13
through the book-entry facilities of such institution) in order to
perfect upon the delivery of the Defeasance Security Agreement a
valid, first priority lien and security interest therein in favor
of Lender in conformity with all applicable state and federal laws
governing granting of such security interest.
(C) Borrower shall have provided Lender with not less than
thirty (30) days prior written notice specifying the Release Date
on which the Partial Defeasance transaction is to be consummated;
(D) On the Release Date, Borrower shall have paid in full all
accrued and unpaid interest and all other sums due under this Note
and under the other Loan Documents up to the Release Date,
including all costs and expenses including reasonable attorneys'
fees incurred by Lender or the Defeasance Agent or to or on behalf
of any rating agencies in connection with such release and related
transactions (including the review of the proposed Partial
Defeasance Collateral and the preparation of the Defeasance
Security Agreement and related documentation) together with a
defeasance processing fee in an amount equal to one-half of one
percent (0.5%) of the portion of the Outstanding Principal Balance
being defeased, but in no event less than (A) $10,000 or greater
than (B) $20,000; and
(E) Defeasance Agent shall have obtained, as Borrower's agent
and on Borrower's behalf at Borrower's sole cost and expense, the
following, all of which must be satisfactory to Lender in its sole
discretion, at or prior to the release of any Property and
substitution of the Partial Defeasance Collateral:
(1) any and all agreements, certificates, opinions or
documents required by Lender in its sole discretion in
connection with the Partial Defeasance including a Defeasance
Security Agreement and any REMIC Qualification Documents;
(2) a certificate certifying that (a) all of the
requirements set forth in this Section 9(b)(ii) have been
satisfied, (b) the transactions that are being carried out
pursuant to this Section 9(b)(ii) (including specifically the
release of the lien of any Security Instrument) are being
effected to facilitate the disposition of one or more of the
Properties or any other customary commercial transaction and
not as part of an arrangement to collateralize a REMIC offering
with obligations that are not real estate mortgages, and (c)
the amounts of the Partial Defeasance Collateral comply with
all the requirements of this section including, the requirement
that the Partial Defeasance Collateral shall generate monthly
amounts equal to or greater than the Partial Scheduled
Defeasance Payments
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<PAGE> 14
required to be paid under this Note through the Maturity Date;
(3) an opinion of counsel for Borrower satisfactory to
Lender in its sole discretion, delivered to Lender by counsel
satisfactory to Lender in its sole discretion, stating, among
other things but without substantive qualification, that (a)
Lender has a valid, duly perfected, first priority security
interest in the Partial Defeasance Collateral and that the
Defeasance Security Agreement is enforceable against Borrower
in accordance with its terms, (b) neither the Partial
Defeasance nor any other transaction that occurs pursuant to
the provisions of this Section 9(b)(ii) has caused or will
cause the Loan (including for this purpose the Loan Documents)
to cease to be a "qualified mortgage" within the meaning of
Section 860G of the Code, either under the provisions of
Treasury Regulation Sections 1.860G-2(a)(8) or 1.860G-2(b) (as
such regulations may be amended or superseded from time to
time) or under any other provision of the Code or otherwise,
and (c) each of any REMIC or any other entity that holds this
Note will not cease to be qualified as a REMIC or as such other
type of entity as a result of the Partial Defeasance and/or any
other transaction that occurs pursuant to the provisions of
this Section 9(b)(ii);
(4) a certificate and opinion delivered by an independent
certified public accounting firm acceptable to Lender in its
sole discretion (a) certifying that the amounts of the Partial
Defeasance Collateral comply with all the requirements of this
Section including the requirement that the Partial Defeasance
Collateral shall generate monthly amounts equal to or greater
than the Partial Scheduled Defeasance Payments; and (b) setting
forth the change in the yield of the Loan that results from any
Partial Defeasance and any other transactions that occur
pursuant to the provisions of this Section 9(b)(ii), including
supporting computations which shall be made in a manner that is
consistent with the provisions of Treasury Regulation Sections
1.1001-3(e)(1) and (2), and opining that such change has not
constituted or caused and will not constitute or cause a
significant modification of the Loan (including for this
purpose the Loan Documents) under such provisions of the
regulations;
(5) written confirmation from the rating agencies that have
rated any of the securities issued by any REMIC that holds this
Note to the effect that no Partial Defeasance will result in a
downgrading, withdrawal or qualification of the respective
ratings in effect immediately prior to such Partial Defeasance
for any rated securities then outstanding, and if required by
any rating agency or Lender, a non-consolidation opinion with
respect to the Defeasance Obligor in form and substance
satisfactory to Lender and such rating agency; and
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<PAGE> 15
(6) Defeasance Agent, as Borrower's agent and
attorney-in-fact, shall cause Borrower, at Borrower's sole
expense, to assign an undivided interest in the Note equal to
the percentage obtained by dividing the Partial Defeasance
Principal Amount by the original principal amount of the Loan
(the "PARTIAL DEFEASANCE PORTION") together with the Partial
Defeasance Collateral, to the Defeasance Obligor. The
Defeasance Obligor shall execute an assumption agreement
pursuant to which it shall assume Borrower's obligations under
this Note with respect to the Partial Defeasance Portion and
the Defeasance Security Agreement. As conditions to such
assignment and assumption, Defeasance Agent shall obtain for
Lender, at Borrower's sole expense and on Borrower's behalf, an
opinion of counsel satisfactory to Lender in its sole
discretion delivered by counsel satisfactory to Lender in its
sole discretion stating, among other things, that such
assumption agreement has been duly authorized and is
enforceable against Borrower and the Defeasance Obligor in
accordance with its terms, that the Note and the Defeasance
Security Agreement, as so assumed, have been duly authorized
and are enforceable against the Defeasance Obligor in
accordance with their respective terms, and that the delivery
of the Partial Defeasance Collateral to the Defeasance Obligor
does not constitute a fraudulent transfer, preferential
payment, or other voidable transfer under applicable bankruptcy
law, subject only to such reasonable and customary conditions,
limitations, exceptions and assumptions as are reasonably
satisfactory to Lender. Borrower shall be solely responsible
for paying all reasonable costs and expenses including
attorneys' fees incurred by Lender or Defeasance Agent or other
agent(s) in connection with such assignment and assumption
(including the review of the proposed transferee and the
preparation of the assumption agreement and related
documentation).
(F) Upon compliance with the requirements of this Section
9(b)(ii), Lender shall release the Property involved in the Partial
Defeasance from the lien of the Security Instrument encumbering
such Property, and the Partial Defeasance Collateral shall
constitute a portion of the collateral securing this Note. Lender
will, at Borrower's expense, execute and deliver any agreements
reasonably requested by Borrower or Defeasance Agent to release the
lien of the Security Instrument from such Property. Borrower,
pursuant to the Defeasance Security Agreement, shall authorize and
direct that the payments received from the Partial Defeasance
Collateral be made directly to Lender and applied to partially
satisfy the obligations of Borrower under this Note. Upon
determination of the Partial Scheduled Defeasance Payments, the
portion of the Monthly Payment payable from sources other than
Partial Defeasance Collateral shall be adjusted by subtracting the
monthly Partial Scheduled Defeasance Payment from the amount of the
Monthly Payment, and Borrower shall thereafter be required on each
Monthly Payment to pay on each Monthly Payment Date such portion of
the Monthly Payment from sources of funds other than the Partial
Defeasance
15
<PAGE> 16
Collateral.
(G) Borrower shall pay any revenue, documentary stamp or
intangible taxes or any other tax or charge due in connection with
the transfer of the Partial Defeasance Interest in this Note or
otherwise required to accomplish the agreements of this Section.
(H) If any notice of Partial Defeasance is given pursuant to
Section 9(b)(ii)(C), Defeasance Agent shall be required to defease
all or any portion of the Loan on a Release Date (unless such
notice is revoked by Borrower prior to such Release Date in which
event Borrower shall immediately reimburse Lender and Defeasance
Agent for any and all reasonable costs and expenses incurred by
Lender or Defeasance Agent in connection with Borrower's giving of
such notice and revocation).
(I) Borrower hereby irrevocably appoints Defeasance Agent as
Borrower's agent and attorney-in-fact, which appointment is coupled
with an interest and with full power of substitution, for the
purpose of purchasing the Defeasance Collateral with the Proceeds
and delivering the Partial Defeasance Collateral to Lender pursuant
to Sections 9(b)(ii)(A) and (B). Borrower hereby ratifies and
confirms all acts done or omitted to be done by Defeasance Agent
under the authority of such power of attorney.
(J) Notwithstanding any release of any Security Instrument or
any Partial Defeasance hereunder, the Defeasance Obligor shall, and
hereby agrees to be, bound by and obligated under Sections 3.1
(Payment of Debt), 7.2 (Further Acts Etc.), 7.4(a) (Estoppel
Certificates), 11.2 (Application of Proceeds), 11.7 (Other Rights
Etc.) and 14.2 (Marshalling and Other Matters) and Article 13
(Indemnification) of the Security Instruments; provided, however
(a) all references therein to "PROPERTY" or "PERSONAL PROPERTY"
shall be deemed to refer only to the Partial Defeasance Collateral
delivered to Lender, and (b) the Defeasance Obligor shall be only
obligated to pay a portion of the Debt equal to the Partial
Defeasance Portion.
(K) It shall be an event of default under this Note (a "PARTIAL
DEFEASANCE DEFAULT") if (a) Borrower fails to strictly comply with
all of the requirements of the preceding clauses (A) through (J) of
this Section 9(b)(ii) on or before the Release Date, (b) the
disposition of a Property pursuant to the exercise of any Purchase
Option is consummated (whether in accordance with the terms of the
lease, by order of any court, or otherwise), and (c) Lender
receives or is required to receive the Purchase Price. If a Partial
Defeasance Default shall occur, Lender may declare the entire Debt,
including the principal balance of the Loan (deducting therefrom
the amount of the Purchase Price actually received by Lender, which
shall be applied to the Outstanding Principal Balance), all accrued
interest, and all costs, expenses, charges and fees payable under
any Loan
16
<PAGE> 17
Document, together with any applicable Default Prepayment Consideration (which
shall be calculated on the entire Outstanding Principal Balance without
deduction for the amount of the Purchase Price), immediately due and payable.
(c) DEFAULT PREPAYMENT. If a Default Prepayment (as hereinafter
defined) occurs, such Default Prepayment shall be deemed to be a voluntary
prepayment under this Note and in such case the applicable Default Prepayment
Consideration (as hereinafter defined) shall be due and payable to Lender in
connection with such Default Prepayment. The Default Prepayment Consideration
shall be secured by all security and collateral for the Loan and shall be added
to the Outstanding Principal Balance for all purposes including accrual of
interest, judgment on the Note, foreclosure (whether through power of sale,
judicial proceeding, or otherwise), redemption, and bankruptcy (including
pursuant to Section 506 of the United States Bankruptcy Code). The term "DEFAULT
PREPAYMENT" shall mean a prepayment of the principal amount of this Note made
after occurrence of a Default or Event of Default under any circumstances
including a prepayment in connection with reinstatement of any Security
Instrument provided by statute under foreclosure proceedings or exercise of
power of sale, any statutory right of redemption exercised by Borrower or any
other party having a statutory right to redeem or prevent foreclosure or power
of sale, any sale in foreclosure or under exercise of a power of sale or
otherwise (including pursuant to a credit bid made by Lender in connection with
such sale), or any other collection action by Lender. Classification and
treatment of Lender's claim pursuant to a plan of reorganization in bankruptcy
shall also be deemed to be a Default Prepayment hereunder. The "DEFAULT
PREPAYMENT CONSIDERATION" (as the term is used in this Note) shall mean the
present value, as of the date of the occurrence of the Default, of the remaining
scheduled payments of principal and interest from the date of the occurrence of
the Default through the Maturity Date (including any balloon payment), which
shall be determined by discounting such payments (using simple discounting) at
the Discount Rate less the amount of principal being prepaid.
10. MAXIMUM RATE PERMITTED BY LAW. All agreements in this Note and all
other Loan Documents are expressly limited so that in no contingency or event
whatsoever, whether by reason of acceleration of maturity of the indebtedness
evidenced hereby or otherwise, shall the amount agreed to be paid hereunder for
the use, forbearance, or detention of money exceed the highest lawful rate
permitted under applicable usury laws. If, from any circumstance whatsoever,
fulfillment of any provision of this Note or any other Loan Document at the time
performance of such provision shall be due shall involve exceeding any usury
limit prescribed by law that a court of competent jurisdiction may deem
applicable hereto, then, ipso facto, the obligations to be fulfilled shall be
reduced to allow compliance with such limit, and if, from any circumstance
whatsoever, Lender shall ever receive as interest an amount that would exceed
the highest lawful rate, the receipt of such excess shall be deemed a mistake
and shall be canceled automatically or, if theretofore paid, such excess shall
be credited against the principal amount of the indebtedness evidenced hereby to
which the same may lawfully be credited, and any portion of such excess not
capable of being so credited shall be refunded immediately to Borrower.
17
<PAGE> 18
11. EVENTS OF DEFAULT; ACCELERATION OF AMOUNT DUE. Lender may in its
sole discretion, without notice to Borrower, declare the entire Debt, including
the principal balance of the Loan, all accrued interest, and all costs,
expenses, charges and fees payable under any Loan Document, together with any
applicable Default Prepayment Consideration, immediately due and payable, and
Lender shall have all remedies available to it at law or equity for collection
of the amounts due, if any of the following (the "EVENTS OF DEFAULT") occurs and
continues beyond any applicable cure period:
(a) Borrower fails to make full and punctual payment of any amount
payable on a monthly basis hereunder, under any Security Instrument, or under
any other Loan Document, which failure is not cured on or before the fifth (5th)
day after the date of written notice from Lender to Borrower of such failure;
(b) Borrower fails to make full payment of the Debt when due, whether
on the Maturity Date, upon acceleration or prepayment, or otherwise, following
the expiration of any applicable grace period provided in the Security
Instrument or any other Loan Document;
(c) Borrower fails to make full and punctual payment of any Late
Charges, costs and expenses due hereunder, or any other sum of money required to
be paid hereunder (other than any payment described in subclauses (a) and (b)
immediately above) or under the Security Instruments or any other Loan Document
which failure is not cured on or before the twentieth (20th) day after Lender's
written notice to Borrower that such payment is required; or
(d) a Prepayment Purchase Option Default or a Partial Defeasance
Default shall occur; or
(e) an Event of Default occurs under any Security Instrument or any
other Loan Document.
12. TIME OF ESSENCE. Time is of the essence with regard to each
provision contained in this Note.
13. TRANSFER AND ASSIGNMENT. This Note may be freely transferred and
assigned by Lender. Borrower's right to transfer its rights and obligations with
respect to the Debt, and to be released from liability under this Note, shall be
governed by the Security Instruments.
14. AUTHORITY OF PERSONS EXECUTING NOTE. Borrower warrants and
represents that the persons or officers who are executing this Note and the
other Loan Documents on behalf of Borrower have full right, power and authority
to do so, and that this Note and the other Loan Documents constitute valid and
binding documents, enforceable against Borrower in accordance with their terms,
and that no other person, entity, or party is required to sign, approve, or
consent to, this Note.
15. SEVERABILITY. The terms of this Note are severable, and should any
provision be declared by a court of competent jurisdiction to be invalid or
unenforceable, the remaining provisions shall, at the option of Lender, remain
in full force and effect and shall in no way be impaired.
16. BORROWER'S WAIVERS. Borrower and all others liable hereon hereby
waive presentation
18
<PAGE> 19
for payment, demand, notice of dishonor, protest, and notice of protest, notice
of intent to accelerate, and notice of acceleration, stay of execution and all
other suretyship defenses to payment generally. No release of any security held
for the payment of this Note, or extension of any time periods for any payments
due hereunder, or release of collateral that may be granted by Lender from time
to time, and no alteration, amendment or waiver of any provision of this Note or
of any of the other Loan Documents, shall modify, waive, extend, change,
discharge, terminate or affect the liability of Borrower and any others that may
at any time be liable for the payment of this Note or the performance of any
covenants contained in any of the Loan Documents.
17. GOVERNING LAW. This Note has been delivered to and accepted by
Lender in the State of Missouri, and shall be governed and construed generally
according to the laws of the State of Missouri without regard to the conflicts
of law provisions thereof ("GOVERNING STATE").
18. JURISDICTION AND VENUE. BORROWER HEREBY CONSENTS TO PERSONAL
JURISDICTION IN THE GOVERNING STATE AND IN EACH JURISDICTION IN WHICH ANY
PROPERTY IS LOCATED (EACH A "SITUS STATE"). VENUE OF ANY ACTION BROUGHT TO
ENFORCE THIS NOTE OR ANY OTHER LOAN DOCUMENT OR ANY ACTION RELATING TO THE LOAN
OR THE DEBT OR THE RELATIONSHIPS CREATED BY OR UNDER THE LOAN DOCUMENTS
("ACTION") SHALL, AT THE ELECTION OF LENDER, BE IN (AND IF ANY ACTION IS
ORIGINALLY BROUGHT IN ANOTHER VENUE, THE ACTION SHALL AT THE ELECTION OF LENDER
BE TRANSFERRED TO) EITHER A STATE OR FEDERAL COURT OF APPROPRIATE JURISDICTION
LOCATED IN THE GOVERNING STATE OR IN EACH SITUS STATE. BORROWER HEREBY CONSENTS
AND SUBMITS TO THE PERSONAL JURISDICTION OF THE STATE COURTS OF THE GOVERNING
STATE AND EACH SITUS STATE AND OF FEDERAL COURTS LOCATED IN THE GOVERNING STATE
AND EACH SITUS STATE IN CONNECTION WITH ANY ACTION AND HEREBY WAIVES ANY AND ALL
PERSONAL RIGHTS UNDER THE LAWS OF ANY OTHER STATE TO OBJECT TO JURISDICTION
WITHIN SUCH STATE FOR PURPOSES OF ANY ACTION. Borrower hereby waives and agrees
not to assert, as a defense to any Action or a motion to transfer venue of any
Action, (i) any claim that it is not subject to such jurisdiction, (ii) any
claim that any Action may not be brought against it or is not maintainable in
those courts or that this Note or any of the other Loan Documents may not be
enforced in or by those courts, or that it is exempt or immune from execution,
(iii) that the Action is brought in an inconvenient forum, or (iv) that the
venue for the Action is in any way improper.
19. NOTICES. Any notice required or permitted to be given hereunder
must be in writing and given (a) by depositing same in the United States mail,
addressed to the party to be notified, postage prepaid and registered or
certified with return receipt requested; (b) by delivering the same in person to
such party; (c) by transmitting a facsimile copy to the correct facsimile phone
number of the intended recipient (with a second copy sent by registered or
certified regular mail); or (d) by depositing the same into the custody of a
nationally recognized overnight delivery service addressed to the party to be
notified. In the event of mailing, notices shall be deemed
19
<PAGE> 20
effective three (3) days after posting; in the event of overnight delivery,
notices shall be deemed effective on the next Business Day following deposit
with the delivery service; in the event of personal service or facsimile
transmissions, notices shall be deemed effective when delivered. For purposes of
notice, the addresses of the parties shall be as set forth in the Table. From
time to time either party may designate another address than the address set
forth for all purposes of this Note by giving the other party no less than ten
(10) days' advance notice of such change of address in accordance with the
notice provisions hereof.
20. AVOIDANCE OF DEBT PAYMENTS. To the extent that any payment to
Lender and/or any payment or proceeds of any collateral received by Lender in
reduction of the Debt is subsequently invalidated, declared to be fraudulent or
preferential, set aside and/or required to be repaid to a trustee, to Borrower
(or Borrower's successor) as a debtor in possession, or to a receiver or any
other party under any bankruptcy law, state or federal law, common law or
equitable cause, then the portion of the Debt intended to have been satisfied by
such payment or proceeds shall remain due and payable hereunder, be evidenced by
this Note, and shall continue in full force and effect as if such payment or
proceeds had never been received by Lender whether or not this Note has been
marked "paid" or otherwise cancelled or satisfied and/or has been delivered to
Borrower, and in such event Borrower shall be immediately obligated to return
the original Note to Lender and any marking of "paid" or other similar marking
shall be of no force and effect.
21. NONRECOURSE. Lender shall not be entitled to recover any deficiency
judgment against Borrower or any general partner or limited partner of Borrower
on this Note, provided, however, the foregoing shall not be interpreted to: (a)
impair or affect the right of Lender to enforce any of its rights or remedies
(other than any right to a deficiency judgment) provided for in any of the Loan
Documents or under applicable law in full accordance with the terms thereof
including but not limited to the right of Lender to name Borrower or any general
partner of Borrower as a party defendant in any action or suit for specific
performance, foreclosure, or sale (or similar remedy) under the Security
Instrument, or any other Loan Document; (b) impair or affect the validity or
enforceability of any guaranty, indemnity agreement (including but not limited
to any environmental indemnity agreement), letter of credit, or other similar
third party agreement or undertaking made in connection with this Note, the
Security Instrument, or any other Loan Document; (c) impair or affect Lender's
right to offset any and all amounts outstanding under any of the Loan Documents
against any claim or amount that may be asserted against Lender by Borrower or
any partners, members, shareholders, or other owners of legal or beneficial
interests in Borrower; (d) affect the validity or enforceability of or impair
the right of Lender to bring suit and obtain specific performance or personal,
recourse judgment to enforce the liability of Borrower or any other person or
entity to the extent of, and Borrower hereby agrees to be personally liable for,
any loss, damage, cost, expense, liability, or claim incurred by or made against
Lender (including all attorneys' fees and expenses and other collection and
litigation expenses) arising out of or in connection with any of the following:
(i) Borrower or any affiliate, agent, or employee of Borrower
misappropriates any rents or other Property income or collateral
proceeds including but not limited to insurance or condemnation
proceeds or awards;
20
<PAGE> 21
(ii) Borrower or any affiliate, agent, or employee of Borrower
fails to apply or pay over any tenant security deposits or other
refundable deposits in accordance with the terms of the applicable
lease or other agreement or the Security Instrument or any other Loan
Document;
(iii) Borrower or any affiliate, agent, or employee of Borrower
receives rents or other payments from tenants more than one month in
advance and fails to apply them in accordance with the Loan Documents;
(iv) following the occurrence and during the continuance of an
Event of Default, Borrower or any affiliate, agent, or employee of
Borrower (including Borrower in its capacity as a debtor or debtor in
possession in a bankruptcy proceeding) fails either to apply rents or
other Property income, whether collected before or after such Event of
Default, to the ordinary, customary, and necessary expenses of
operating the Property or, upon demand, to deliver such rents or other
Property income to Lender;
(v) waste is committed on the Property during a period while
Borrower or any affiliate, agent, or employee of Borrower is in
possession thereof ("waste" meaning the diminution in the Property's
value resulting from Borrower's negligent or willful failure to manage,
maintain, repair and otherwise operate the Property in a commercially
reasonable manner);
(vi) any damage to the Property or the Lender is caused as a
result of the intentional misconduct or gross negligence of Borrower or
any affiliate, agent, or employee of Borrower;
(vii) any Property is removed in violation of the terms of the
Loan Documents;
(viii) Borrower fails, in accordance with the terms of the Loan
Documents, to maintain insurance or to pay taxes, assessments, or other
liens or claims that could create liens affecting the Property (unless
Lender is escrowing funds therefor and fails to make such payments or
has taken possession of the Property following an Event of Default, has
received all rents from the Property applicable to the period for which
such insurance, taxes or other items are due, and thereafter fails to
make such payments);
(ix) there is any fraud or material misrepresentation by Borrower
or any of its affiliates, any guarantor, any indemnitor or any agent,
employee, or other person with actual or apparent authority to make
statements or representations on behalf of Borrower, any affiliate of
Borrower, or any guarantor or indemnitor ("apparent authority" meaning
such authority as the principal knowingly or negligently permits the
agent to assume, or which he holds the agent out as possessing); or
(x) Borrower fails, following the occurrence and during the
continuance of an Event of Default, to deliver to Lender on demand all
security deposits, books and records relating to the Property and in
the possession or control of Borrower or any affiliate, agent, or
employee of Borrower.
21
<PAGE> 22
Nothing herein shall be deemed to constitute a waiver by Lender of any right
Lender may have under Sections 506(a), 506(b), 1111(b) or any other provision of
the United States Bankruptcy Code to file a claim for the full amount of the
Debt (as defined in the Security Instrument) or to require that all collateral
shall continue to secure all of the Debt.
22. MISCELLANEOUS. Neither this Note nor any of the terms hereof may be
terminated, amended, supplemented, waived or modified orally, but only by an
instrument in writing executed by the party against which enforcement of the
termination, amendment, supplement, waiver or modification is sought. If
Borrower consists of more than one person or entity, then the obligations and
liabilities of each person or entity shall be joint and several. As used in this
Note, (i) the terms "include", "including" and similar terms shall be construed
as if followed by the phrase "without being limited to," (ii) words of
masculine, feminine, or neuter gender shall mean and include the correlative
words of the other genders, and words importing the singular number shall mean
and include the plural number, and vice versa, (iii) all captions to the
Sections hereof are used for convenience and reference only and in no way
define, limit or describe the scope or intent of, or in any way affect, this
Note, (iv) no inference in favor of, or against, Lender or Borrower shall be
drawn from the fact that such party has drafted any portion hereof or any other
Loan Document, and (v) the words "Lender" and "Borrower" shall include their
respective successors, assigns, heirs, personal representatives, executors and
administrators. In the event of a conflict between or among the terms,
covenants, conditions or provisions of the Loan Documents, the term(s),
covenant(s), condition(s) and/or provision(s) that Lender may elect to enforce
from time to time so as to enlarge the interest of Lender in its security,
afford Lender the maximum financial benefits or security for the Debt, and/or
provide Lender the maximum assurance of payment of the Debt in full shall
control. BORROWER ACKNOWLEDGES AND AGREES THAT IT HAS BEEN PROVIDED WITH
SUFFICIENT AND NECESSARY TIME AND OPPORTUNITY TO REVIEW THE TERMS OF THIS NOTE,
THE SECURITY INSTRUMENT, AND EACH OF THE LOAN DOCUMENTS, WITH ANY AND ALL
COUNSEL IT DEEMS APPROPRIATE, AND THAT NO INFERENCE IN FAVOR OF, OR AGAINST,
LENDER OR BORROWER SHALL BE DRAWN FROM THE FACT THAT EITHER SUCH PARTY HAS
DRAFTED ANY PORTION HEREOF, OR THE SECURITY INSTRUMENT, OR ANY OF THE LOAN
DOCUMENTS.
23. WAIVER OF COUNTERCLAIM AND JURY TRIAL. BORROWER HEREBY KNOWINGLY
WAIVES THE RIGHT TO ASSERT ANY COUNTERCLAIM, OTHER THAN A COMPULSORY
COUNTERCLAIM, IN ANY ACTION OR PROCEEDING BROUGHT AGAINST BORROWER BY LENDER OR
ITS AGENTS. ADDITIONALLY, BORROWER AND LENDER HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE ANY RIGHT THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION BASED ON THE LOAN OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH THE
LOAN, THIS NOTE, THE SECURITY INSTRUMENT, OR ANY OTHER LOAN DOCUMENT, OR ANY
COURSE OF CONDUCT, COURSE OF DEALING, STATEMENT (WHETHER VERBAL OR WRITTEN), OR
ACTION OF BORROWER OR LENDER. THIS PROVISION IS A MATERIAL INDUCEMENT FOR
LENDER'S MAKING OF THE LOAN.
22
<PAGE> 23
24. CONSOLIDATION, RENEWAL, AMENDMENT AND RESTATEMENT. This Note fully
and effectively consolidates, renews, amends, and restates (i) that certain
Promissory Note dated this same date herewith in the principal sum of
$2,621,019.00 from Borrower to the order of National Realty Funding L.C.
("Funding Note"), as endorsed to Lender and assigned under that certain
Assignment of Loan Documents dated this same date herewith from National Realty
Funding L.C. to Lender, and (ii) that certain Promissory Note dated this same
date herewith in the principal sum of $654,981.00 from Borrower to the order of
Lender ("Finance Note"). The Funding Note and the Finance Note have been
modified and consolidated under the terms of that certain Consolidation and
Modification Agreement executed this same date herewith between Lender and
Borrower. This Note fully consolidates, renews, amends, and restates the Funding
Note and the Finance Note for all purposes into one obligation and indebtedness
at law and does not constitute payment of the Funding Note or Finance Note, and
shall in no event be deemed to constitute a novation, waiver, release, discharge
or other extinguishment of the indebtedness evidenced by the Funding Note or the
Finance Note. The indebtedness evidenced by the Funding Note and Finance Note
henceforth shall be evidenced by this Note and payable on the terms and
conditions set forth herein, and such indebtedness is hereby ratified and
confirmed in all respects.
Intending to be fully bound, Borrower has executed this Note effective
as of the day and year first above written.
BORROWER: CAPTEC FRANCHISE CAPITAL PARTNERS
L.P. IV, a Delaware limited partnership
By: CAPTEC NET LEASE REALTY, INC., a
Delaware corporation, its General Partner
By:
Name:
Title:
Pay to the order of , without
recourse.
NATIONAL REALTY FINANCE L.C.,
Missouri limited liability company
By:
23
<PAGE> 24
Name:
Title:
24
<PAGE> 25
STATE OF ________________ )
) ss.
COUNTY OF _______________ )
On this day of , 1999, before me,
, a Notary Public in and for said state, personally appeared
, of Captec Net Lease
Realty, Inc., a Delaware corporation, general partner of Captec Franchise
Capital Partners L.P. IV, a Delaware limited partnership, known to be to be the
person who executed the within instrument on behalf of said limited partnership
and acknowledge to me that he executed the same for the purposes therein stated.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal, the day and year last above written.
-----------------------------------------------
Notary Public in and for Said County and State
-----------------------------------------------
(Type, print or stamp the Notary's name below
his or her signature.)
My Commission Expires:
---------------------------
25
<PAGE> 26
SCHEDULE A
LOCATION OF REAL PROPERTY COLLATERAL
1. Arby's, 4740 Cemetery Road, Hilliard, Ohio.
2. Taco Bell, 32270 Van Dyke, Warren, Michigan.
3. Taco Bell, 67555 Main Street, Richmond, Michigan.
4 Tony Roma's, 775 Vista Ridge Mall Drive, Lewisville, Texas.
5. Del Taco, 3624 California Avenue, Bakersfield, California
6. Winger's USA, 2336 E. Baseline Road, Mesa, Arizona.
26
<PAGE> 27
SCHEDULE B
CAPTEC IV
<TABLE>
<CAPTION>
Allocated Loan Partial Defeasance
Name/Address Amount Principal Amount(1)
- ------------ ------ -------------------
<S> <C> <C>
Taco Bell $385,541.00 $481,926.00
32270 Van Dyke
Warren, Michigan
Arby's $398,136.00 $497,670.00
4740 Cemetery Road
Hilliard, Ohio
Taco Bell $385,541.00 $481,926.00
6755 Main Street
Richmond, Michigan
Winger's USA $499,998.00 $624,997.00
2336 E. Baseline Road
Mesa, Arizona
</TABLE>
NEW / NEW
MRBEL 658758
- ----------------------
(1)125% of Allocated Loan Amount
27
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<EXCHANGE-RATE> 1
<CASH> 3,792,746
<SECURITIES> 0
<RECEIVABLES> 454,081
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,246,827
<PP&E> 31,241,150
<DEPRECIATION> (237,163)
<TOTAL-ASSETS> 35,801,565
<CURRENT-LIABILITIES> 401,930
<BONDS> 9,651,000
0
0
<COMMON> 0
<OTHER-SE> 25,748,635
<TOTAL-LIABILITY-AND-EQUITY> 35,801,565
<SALES> 806,675
<TOTAL-REVENUES> 810,482
<CGS> 0
<TOTAL-COSTS> 92,287
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 145,241
<INCOME-PRETAX> 572,954
<INCOME-TAX> 0
<INCOME-CONTINUING> 572,954
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 572,954
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
