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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ____________ TO ____________
COMMISSION FILE NUMBER 1-13375
TOWER REALTY TRUST, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
Maryland 13-3938558
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State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
292 Madison Ave, 3rd Floor, New York, New York 10017
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(Address of Principal Executive Offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code (212) 448-1864
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Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
Title of each class Name of each exchange on which registered
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<S> <C>
Common Stock, par value $.01 per New York Stock Exchange
share
</TABLE>
Securities registered pursuant to Section 12(g) of the Act:
None
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(Title of class)
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 such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicates by check mark if disclosures of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of the voting shares held by non-affiliates of
the registrant, as of March 25, 1998 was approximately $402,027,610 million.
The number of common shares, $.01 par value, outstanding was 16,920,455 as
of March 25, 1998.
DOCUMENTS INCORPORATED BY REFERENCE
Proxy Statement for 1998 Annual Meeting of Stockholders -- Part III
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CAUTIONARY STATEMENT
THIS ANNUAL REPORT ON FORM 10-K CONTAINS FORWARD-LOOKING STATEMENTS WITHIN
THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995, WHICH
INVOLVE CERTAIN RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS IN FUTURE
PERIODS MAY BE MATERIALLY DIFFERENT FROM ANY FUTURE PERFORMANCE ANTICIPATED
HEREIN. EACH FORWARD-LOOKING STATEMENT THAT THE COMPANY BELIEVES IS MATERIAL IS
ACCOMPANIED BY A CAUTIONARY STATEMENT OR STATEMENTS IDENTIFYING IMPORTANT
FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE
DESCRIBED IN THE FORWARD-LOOKING STATEMENT. IN THE CONTEXT OF FORWARD-LOOKING
INFORMATION PROVIDED IN THIS ANNUAL REPORT ON FORM 10-K AND IN OTHER REPORTS,
PLEASE REFER TO THE DISCUSSION OF RISK FACTORS DETAILED IN, AS WELL AS THE OTHER
INFORMATION CONTAINED IN, THE COMPANY'S FILINGS WITH THE SECURITIES AND EXCHANGE
COMMISSION DURING THE PAST 12 MONTHS.
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PART I
ITEM 1. BUSINESS.
Background and Formation Transactions
Tower Realty Trust, Inc., a Maryland corporation (collectively with its
subsidiaries, the "Company") was organized in March 1997 and was formed to
continue and expand the commercial real estate business of Tower Equities &
Realty Corp. (collectively, with its predecessor entities and affiliates, "Tower
Equities"). The Company operates as a fully integrated, self-administered, and
self-managed real estate company and operates in a manner with the expectation
of qualifying as a real estate investment trust ("REIT") for federal income tax
purposes.
Through its controlling interest in Tower Realty Operating Partnership,
L.P., a Delaware limited partnership (the "Operating Partnership"), the Company
is engaged in developing, acquiring, owning, renovating, managing and leasing
office properties primarily in the Manhattan, Phoenix/Tucson and Orlando
markets. As of December 31, 1997, the Company's portfolio of properties included
22 office buildings (collectively, the "Properties") encompassing approximately
4.0 million rentable square feet. The Company also owns or has an option to
acquire four parcels of land adjacent to four of the Properties (the
"Development Parcels") which can support 2.2 million rentable square feet of
development.
On October 16, 1997, the Company consummated an initial public offering
(the "Offering") of 13,817,250 shares of common stock, par value $0.01 per share
(the "Common Stock") (including the exercise of the underwriters' over-allotment
option of 1,802,250 shares) at a price of $26.00 per share (the "Offering
Price"), and effected concurrent private placements (the "Concurrent Private
Placements") of 1,153,845 shares of Common Stock to certain private investment
funds at the Offering Price and realized net proceeds therefrom of approximately
$353.35 million. The net proceeds from the Offering were contributed to the
Operating Partnership in exchange, in part, for the Company's approximate 91.4%
interest therein (which includes a 90.4% limited partner interest and a 1%
general partner interest). The Operating Partnership used the proceeds received
from the Company, the $107.0 million net cash proceeds from the Company's term
loan facility (the "Term Loan") borrowed concurrent with and subsequent to the
Offering and approximately $12.3 million of proceeds received from Morgan
Stanley Asset Management Inc. ("MSAM") from the conversion of convertible notes
of the Company held by certain private investment funds and separate accounts
advised by MSAM ("the MSAM Notes") into common stock, as follows: (i)
approximately $281.0 million for repayment of certain indebtedness (including
associated prepayment penalties) relating to the Properties and the partnerships
that own the Properties (the "Property Partnerships"); (ii) approximately $137.0
million to acquire certain equity, debt and fee interests in the Properties;
(iii) approximately $3.1 million to pay for commitment fees and expenses
relating to the Term Loan and the Company's $200.0 million unsecured line of
credit (the "Line of Credit"); (iv) approximately $3.0 million to pay transfer
taxes and other expenses associated with the acquisitions of the Properties; and
(v) the remaining approximately $48.6 million for working capital.
Formation Transactions
The principal transactions made in connection with the formation of the
Company and the acquisition of the Properties (the "Formation Transactions")
included the following:
- The Company has acquired, directly or indirectly, a 100% interest in each
of the Company's initial 21 properties and a 10% interest in the 2800
North Central Property (the "Initial Properties")and the ground lease
encumbering the Maitland Forum Property for an aggregate of 1,128,160
shares of restricted Common Stock, 1,583,640 units of limited partnership
interest in the Operating Partnership (the "OP Units"), approximately
$118.7 million in cash, and the assumption of approximately $244.6
million in mortgage indebtedness and approximately $13 million of
non-interest-bearing deferred tax liabilities payable over 10 years
(which have been discounted as of the date of the Offering
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to approximately $9.8 million as described in the Company's financial
statements included herein) as follows:
- The Operating Partnership acquired directly or indirectly from certain
officers and directors of the Company interests in each of the Initial
Properties (including an interest in the Maitland Forum ground lease),
two parcels of land adjacent to two of the Initial Properties which
can support 370,000 square feet of development, and substantially all
the assets of the Tower Equities and another management company
(Properties Atlantic, Inc.) in exchange for 1,509,490 OP Units; and
- The Company acquired from certain third parties, directly or
indirectly, debt, equity and fee interests in the Initial Properties
(including an interest in the Maitland Forum ground lease) in exchange
for 1,128,160 shares of restricted Common Stock, 74,150 OP Units and
$118.7 million in cash.
- The Operating Partnership entered into the $107.0 million seven-year Term
Loan with Merrill Lynch Credit Corporation and borrowed approximately
$54.0 million under such facility at the closing of the Offering.
Subsequent to the Offering, The Company borrowed an additional
approximately $53.0 million under the Term Loan, the proceeds of which
were used to repay certain indebtedness encumbering one of the Initial
Properties and for working capital purposes.
- The Operating Partnership utilized $246.5 million of the net proceeds of
the Offering, the Concurrent Private Placements and the $54.0 million
initial draw on the Term Loan to repay mortgage indebtedness (including
$1.9 million of prepayment penalties) encumbering the Initial Properties
and the Property Partnerships concurrent with the closing of the
Offering.
- The Tower Equities and Properties Atlantic, Inc. management and leasing
companies (that were owned entirely by certain officers of the Company)
have contributed substantially all of the assets of such companies to the
Operating Partnership and the Operating Partnership, in turn,
recontributed such assets to Tower Equities Management, Inc., a Delaware
corporation (the "Management Company") in exchange for 100% of the
non-voting common stock and 5% of the voting common stock in the
Management Company (which collectively is entitled to receive
approximately 95% of the dividends). This structure is designed to assist
the Company in maintaining its status as a REIT.
- The Company issued 886,200 shares of restricted Common Stock in exchange
for the cancellation of indebtedness outstanding under the MSAM Notes.
- The Management Company and certain entities that held interests in
certain retail properties controlled directly or indirectly by Tower
Equities (the "Excluded Properties") entered into management agreements
with respect to each of the Excluded Properties. Four of the Excluded
Properties are controlled by certain officers and directors and have
non-cancellable management contracts (except upon a sale of such
property). The remaining three properties are under management contracts
which may be terminated upon payment of two years of management fees or
upon a sale of such property. In consideration for the services to be
provided under the management agreements, the Management Company is
entitled to receive market rate property and construction management
fees, as well as applicable leasing commissions.
- The Operating Partnership acquired, at no cost, an option to acquire from
an unaffiliated third party for approximately $10.3 million (exclusive of
certain closing costs) approximately 43 acres of undeveloped land in
Phoenix that can support 1.0 million square feet of office development.
This option was exercised by the Company in November 1997. In addition,
the Operating Partnership acquired from certain officers and directors
for no additional consideration an option to acquire for approximately
$3.8 million (approximately $4.75 per buildable square foot) (75% of the
appraised value of the land as of May 9, 1997) approximately 3.6 acres of
land adjacent to the Company's One Orlando Center Property that can
support approximately 800,000 square feet of development.
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- The Company has established the three-year $200.0 million unsecured
revolving Line of Credit which will continue to be used primarily to
finance the acquisition of, and investment in, office properties, to
refinance existing indebtedness, and for general working capital needs.
- The Company has paid to an affiliate of The Carlyle Group, a Washington,
D.C. based merchant banking firm ("Carlyle"), $925,000 in consideration
of obtaining the consent to transfer certain interests in the 2800 North
Central Avenue Property ("2800 North Central") to the Company.
- As part of the Formation Transactions, the Company acquired certain
interests in the Property Partnerships from certain officers and
directors and certain third parties. Certain of the interests in three of
the Property Partnerships were acquired from Edward Feldman, the father
of Lawrence H. Feldman, Chairman of the Board, Chief Executive Officer
and President of the Company, pursuant to a bankruptcy proceeding under
Chapter 7 of United States Bankruptcy Code. In conjunction with the
transfer of those interests to the Company, the Company entered into a
court-approved settlement agreement whereby the Company has obtained a
release of all potential claims of the bankruptcy trustee and any
creditor of the bankruptcy estate relating directly or indirectly to the
Company in exchange for a cash payment of $2.0 million. Accordingly, the
Company believes that this bankruptcy proceeding will have no impact on
Company operations.
Financial Information About Industry Segments
The Company is involved in only one industry, namely real estate.
Therefore, all of the financial statements contained herein relate to this
industry segment.
Narrative Description of the Company
Business and Growth Strategies
The Company operates from its midtown Manhattan headquarters and its two
full service regional offices in Orlando and Phoenix. The Company is a fully
integrated real estate company with in-house expertise in acquisition,
development, construction, property management and leasing. As of December 31,
1997, the 22 office buildings owned by the Company contain approximately 4.0
million square feet and had a weighted average occupancy rate of 95.32%.
Substantially all of the Properties are located either in Manhattan, Orlando or
Phoenix.
The Company will continue its turnaround strategy of acquiring office
properties at a significant discount to replacement cost that are attractively
priced due to physical, leasing and/or operational deficiencies. Consistent with
this strategy, the Company will seek to acquire office properties that present
an attractive opportunity to create value and enhance cash flow through the
Company's hands-on approach to property repositioning, including the
implementation of property specific renovation programs for underperforming
assets. The Company believes that the significant expertise of its management in
property development, redevelopment, construction, management and leasing
provides it with the expertise necessary to identify, acquire, upgrade, renovate
and reposition underperforming office properties.
The Company initially intends to focus its turnaround strategy in Manhattan
because the Company believes that the current supply/demand fundamentals in that
office market provide an attractive environment for owning office properties.
Consistent with this strategy, the Company's first completed acquisition
following the Offering was the purchase of an approximately 700,000 square foot
office tower located at 810 Seventh Avenue in Midtown Manhattan.
The Company will also pursue the strategic acquisition of office properties
located in the Phoenix and Orlando markets that are consistent with its
turnaround strategy, as well as the development of the Company's Development
Parcels in those markets. The Company believes that these office markets
generally have significant growth potential due to employment growth, declining
vacancies and limited new construction activity.
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Recent Developments
On December 31, 1997, the Company acquired the office property located at
810 Seventh Avenue ("810 Seventh Avenue") in New York City. The 42-story glass
tower consists of approximately 700,000 square feet and includes office space
and parking facilities. As of December 31, 1997, the building was 91% leased.
The total cost of the building was approximately $150 million, including closing
costs.
On January 13, 1998, the Company acquired two two-story office properties
located at 2444 Las Palmeritas Drive in Phoenix ("Blue Cross"), bringing the
total number of properties in the Company's portfolio to 24. The two buildings
combined contain approximately 126,000 square feet and, as of the date of
acquisition, were 100% leased pursuant to a triple net lease to Blue Cross/Blue
Shield of Arizona, Inc. The properties were acquired for approximately $16.9
million in cash.
On December 31, 1997, the Company signed an agreement to acquire the office
property located at 90 Broad Street in New York City ("90 Broad"). The 25-story
building contains approximately 335,000 square feet and will be acquired for
approximately $34.0 million in cash. The Company expects that the acquisition
will be completed in the second quarter of 1998.
Competition
The Company may be competing with other owners and developers that have
greater resources and more experience than the Company. Additionally, the number
of competitive properties in any particular market in which the Company's
Properties are located could have a material adverse effect on both the
Company's ability to lease space at the Properties or any newly acquired
property and on the rents charged at the Properties. The Company believes its
major competitors are local real estate companies in its markets that specialize
in the redevelopment and development of office buildings and (i) in the New York
City office market; SL Green Realty Corp., (ii) in the Metropolitan Orlando
office market; Highwoods Properties, Inc., and (iii) in the Metropolitan Phoenix
office market; Prentiss Properties Trust and CarrAmerica Realty Corporation. The
Company believes, however, that the Line of Credit and its access as a public
company to the capital markets to raise funds during periods when conventional
sources of financing may be unavailable or prohibitively expensive will provide
the Company with substantial competitive advantages.
Possible Environmental Liabilities
Under various federal, state, and local environmental laws, ordinances and
regulations, a current or previous owner or operator of real property may be
liable for the costs of removal or remediation of hazardous or toxic substances
on, under or in such property. Such laws often impose liability whether or not
the owner or operator knew of, or was responsible for, the presence of such
hazardous or toxic substances. In addition, the presence of hazardous or toxic
substances, or the failure to remediate such property properly, may adversely
affect the owner's ability to borrow using such real property as collateral.
Persons who arrange for the disposal or treatment of hazardous or toxic
substances may also be liable for the costs of removal or remediation of
hazardous substances at the disposal or treatment facility, whether or not such
facility is or ever was owned or operated by such person. In connection with the
ownership (direct or indirect), operation, management and development of real
properties, the Company may be considered an owner or operator of such
properties or as having arranged for the disposal or treatment of hazardous or
toxic substances and, therefore, potentially liable for removal or remediation
costs, as well as certain other related costs, including governmental fines and
injuries to persons and property. Certain environmental laws and common law
principles could be used to impose liability for release of an exposure to
hazardous substances, including asbestos-containing materials ("ACMs") into the
air, and third parties may seek recovery from owners or operators of real
properties for personal injury or property damage associated with exposure to
released hazardous substances, including ACMs. As the owner of the Properties,
the Company may be potentially liable for any such costs.
The Company engaged an independent consulting firm to perform Phase I
Environmental Site Assessments, or updates on Environmental Site Assessments
performed within the last 12 months, on all of the Properties. The purpose of
Phase I Environmental Site Assessments to identify potential sources of
contamination for which the Company may be responsible and to assess the status
of environmental regulatory
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compliance. For a number of the Properties, the Phase I Environmental Site
Assessments reference prior Phase II Environmental Site Assessments obtained on
such Properties. Phase II Environmental Site Assessments generally involve more
invasive procedures than Phase I Environmental Site Assessments, such as soil
sampling and testing or the installation and monitoring of groundwater wells.
The Environmental Site Assessments have not revealed any environmental
condition, liability or compliance concern that the Company believes would have
a material adverse affect on the Company's business, assets or results of
operations nor is the Company aware of any such condition, liability or concern.
Insurance
The Operating Partnership carries comprehensive liability, fire, extended
coverage and rental loss insurance covering all of the Properties, with policy
specifications and insured limits which the Company believes are adequate and
appropriate under the circumstances. There are, however, certain types of losses
that are not generally insured because they are either uninsurable or not
economically feasible to insure. Should an uninsured loss or a loss in excess of
insured limits occur, the Company could lose its capital invested in the
Property, as well as the anticipated future revenues from the Property and, in
the case of debt which is with recourse to the Company, would remain obligated
for any mortgage debt or other financial obligations related to the property.
Any such loss would adversely affect the Company. Moreover, the Company will
generally be liable for any unsatisfied obligations other than non-recourse
obligations. Company management believes that the Properties are adequately
insured. No assurance can be given that material losses in excess of insurance
proceeds will not occur in the future.
Employees
As of December 31, 1997, the Company had approximately 75 full-time
employees.
Foreign Operations
The Company does not engage in any foreign operations or derive revenues
from foreign sources.
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ITEM 2. PROPERTIES.
As of December 31, 1997, the Company owned or held interests in 22 office
properties comprising approximately 4.0 million net rentable square feet. The
Properties are wholly owned by the Company (through its subsidiaries), except
2800 North Central, which is owned by a joint venture in which the Company owns
a 10% limited partnership interest. The Company also owns or has an option to
acquire the Development Parcels, which can support 2.2 million of rentable
square feet of development.
<TABLE>
<CAPTION>
ANNUALIZED
NET
ANNUALIZED EFFECTIVE
RENT PERCENT OF RENT PER
YEAR BUILT/ RENTABLE PER LEASED PORTFOLIO LEASED
PERCENT RENOVATED SQUARE PERCENT ANNUALIZED SQUARE ANNUALIZED SQUARE
MARKET/PROPERTY OWNED (1) FEET LEASED RENT(2) FOOT RENT FOOT(3)
- --------------- ------- ----------- --------- ------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NEW YORK CITY MARKETS
MANHATTAN MARKETS
Tower 45 (4)............... 100% 1989 443,114 97.70% $20,319,701 $46.94 20.84% $42.66
286 Madison Avenue (5)..... 100% 1918 111,999 97.00 2,634,133 24.25 27.00% 25.65
290 Madison Avenue (5)..... 100% 1950 38,512 100.00 1,080,197 28.05 1.11% 28.79
292 Madison Avenue......... 100% 1920/86 186,901 100.00 5,335,308 28.55 5.47% 29.20
100 Wall Street............ 100% 1969/94 458,848 94.46 12,308,112 28.40 12.63% 30.03
810 Seventh Avenue......... 100% 1970/90 692,023 91.00 19,194,301 30.42 19.69% 33.22
LONG ISLAND MARKET
120 Mineola Boulevard...... 100% 1984/92 100,810 91.20 2,748,280 29.89 2.82 27.14
--------- ------ ----------- ------ ------ ------
Market Subtotal/Weighted
Average.................. 2,032,207 94.58% $63,620,032 $33.55 65.26% $34.34
--------- ------ ----------- ------ ------ ------
METROPOLITAN ARIZONA MARKETS
METROPOLITAN PHOENIX MARKET
Corporate Center Building
10010-30................. 100% 1976/86 188,614 100.00% $ 2,945,528 15.62 3.02% $16.33
Corporate Center Building
10040.................... 100% 1976/86 23,155 92.70 357,809 16.67 0.37% 16.67
Corporate Center Building
10050.................... 100% 1976/86 42,398 100.00 705,690 16.64 0.72% 16.64
Corporate Center Building
10210.................... 100% 1976/86 45,100 100.00 695,208 15.41 0.71% 15.41
Corporate Center Building
10220.................... 100% 1976/86 24,128 100.00 410,644 17.02 0.42% 17.02
Corporate Center Building
9630 (6)................. 100% 1976/86 130,164 97.38 2,305,897 18.19 2.37% 18.19
2800 North Central (7)..... 10% 1987 357,923 97.00 5,678,388 16.36 5.83% 16.07
Century Plaza.............. 100% 1974/90 219,769 90.20 2,819,820 14.22 2.89% 14.24
METROPOLITAN TUCSON MARKET
5151 E. Broadway........... 100% 1975/89/96 246,486 85.70 $ 3,424,728 $16.21 3.51% $17.84
--------- ------ ----------- ------ ------ ------
Market Subtotal/Weighted
Average.................. 1,277,737 95.89% $19,343,712 $16.12 19.84% $16.46
--------- ------ ----------- ------ ------ ------
METROPOLITAN ORLANDO MARKET
One Orlando Center......... 100% 1989 357,184 100.00% 8,198,412 22.95 8.41% 24.96
5750 Major Boulevard....... 100% 1973/97 82,815 86.30 1,225,284 17.14 1.26% 16.72
Maitland Forum............. 100% 1985/96 266,060 99.10 4,237,248 16.07 4.35% 15.74
Maitland West (8).......... 100% 1982 59,610 100.00 857,184 14.38 0.88% 13.04
--------- ------ ----------- ------ ------ ------
Market Subtotal/Weighted
Average.................. 765,669 96.35 $14,518,128 $19.95 14.90% $17.61
--------- ------ ----------- ------ ------ ------
Consolidated Total/Weighted
Average.................... 4,075,613 95.32% $97,481,872 $25.09 100.00% $22.80
=== ========== ========= ====== =========== ====== ====== ======
</TABLE>
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(1) Data does not include years in which tenant improvements were made to the
Properties.
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(2) Annualized Rent represents the annualized monthly Base Rent in effect plus
estimated annualized monthly tenant pass-throughs of increases in operating
and other expenses (but excluding electricity costs paid by tenants) under
each lease executed as of December 31, 1997, or, if such monthly rent has
been reduced by a rent concession, the monthly rent that would have been in
effect at such date in the absence of such concession. Base Rent represents
the fixed base rental amount paid by a tenant under the terms of the related
lease Agreement, which amount generally does not include payments on account
of real estate taxes, operating expense escalations and utility charges.
Annualized Rent represents actual payments attributable to leases executed
as of December 31, 1997 with adjustments for rent concessions as reflected
above and normal year-end adjustments. The Company believes that Annualized
Rent is helpful to investors as a measure of the revenues the Company could
expect to receive from its leases. Annualized Rent should not be considered
an alternative to Annualized Net Effective Rent as an indication of the
financial performance of a lease nor is it indicative of the Company's
ability to generate cash flow, including its ability to make cash
distributions.
(3) Annualized Net Effective Rent per Leased Square Foot represents the Base
Rent for the month of December 1997 under each lease executed as of December
31, 1997, presented on a straight-line basis in accordance with GAAP, taking
into account the amortization of tenant improvement costs and leasing
commissions, if any, paid or payable by the Company during such period,
annualized.
(4) During the first quarter of 1998 leases have been signed for 100% of the
rentable square feet with tenants scheduled to move in by the end of the
first quarter of 1998.
(5) In 1996 the Company completed certain mechanical upgrades with respect to
this Property.
(6) Includes two free-standing restaurants adjacent to the Property which
account for, in the aggregate, 17,000 rentable square feet (100% of which is
leased).
(7) Data are presented without proration on account of the Company's partial
ownership interest. The Company's interest in the cash flow from this
Property increases to up to 27.5% if certain performance criteria are
achieved.
(8) Consists of three properties located at Maitland Center Parkway.
ITEM 3. LEGAL PROCEEDINGS.
As a result of the acquisition of the Properties, the Company has become a
successor party-in interest to certain legal proceedings arising in the ordinary
course of the business of Tower Equities and the other third-party predecessor
entities. The Company does not expect that these proceedings, in the aggregate,
will have a material adverse effect on the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of stock holders during the fourth
quarter of the year ended December 31, 1997.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Market Information
The Company's Common Shares commenced trading on The New York Stock
Exchange ("NYSE") on October 16, 1997 under the symbol "TOW." The following
table sets forth the high and low sale prices for the Common Shares as traded
from October 16, 1997 through December 31, 1997.
<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
October 16, 1997 through December 31, 1997................ 26 3/16 23 1/4
</TABLE>
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Shareholder Information
At March 25, 1998, the Company had approximately 50 holders of record and
approximately 5,155 beneficial owners of its Common Shares. In addition, the OP
Units (which are redeemable for Common Shares subject to certain limitations)
were held by 25 entities and or persons.
Dividend Information
The Company has adopted a policy of paying regular quarterly distributions
on its Common Shares and OP Units and cash distributions have been paid on the
Company's Common Shares and OP Units with respect to the period since its
inception. The following table sets forth information regarding the declaration
and payment of distributions by the Company since its commencement of operations
on October 16, 1997.
<TABLE>
<CAPTION>
DISTRIBUTION DISTRIBUTION PER SHARE
PERIOD WHICH DISTRIBUTION RELATES RECORD DATE PAYMENT DATE DISTRIBUTION AMOUNT
- --------------------------------- ------------ ------------ -------------------
<S> <C> <C> <C>
October 16, 1997 -- December 31, 1997.... 12/31/97 1/15/98 $.3536(1)
</TABLE>
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(1) Represents the pro rata portion (for the period from October 16, 1997 (date
of Offering) through December 31, 1997) of a quarterly distribution of
$.4225 per share.
Approximately 84.53% of the foregoing distribution represents a return of
capital in 1997. In order to maintain its qualification as a REIT, the Company
must make annual distributions to its shareholders of at least 95% of its
taxable income (which does not include net capital gains). Under certain
circumstances the Company may be required to make distributions in excess of
cash available for distribution in order to meet such REIT distribution
requirements. In such event, the Company presently would expect to borrow funds,
or to sell assets for cash, to the extent necessary to obtain cash sufficient to
make the distributions required to retain its qualification as a REIT for
federal income tax purposes.
The Company declared a cash distribution for the fourth quarter of 1997 in
the amount of $.3536 per share, which was paid on January 15, 1998 to holders of
record on December 31, 1997. This distribution represents a pro rata portion of
the Company's regular quarterly distribution of $.4225 per share ($1.69 per
share on an annual basis). The Company currently anticipates that it will
maintain at least the current distribution rate for the immediate future, unless
actual results of operations, economic conditions or other factors differ from
its current expectations. Future distributions, if any, paid by the Company will
be at the discretion of the Board of Directors of the Company and will depend on
the actual cash flow of the Company, its financial condition, capital
requirements, the annual distribution requirements under the REIT provisions of
the internal revenue code and such other factors as the Board of Directors of
the Company deem relevant.
Recent Sales of Unregistered Securities
Concurrently with the consummation of the Offering and pursuant to the
Formation Transactions, the Company issued (i) 1,153,845 shares of Common Stock
in the Concurrent Private Placements, (ii) 886,200 shares of Common Stock in
connection with the cancellation of the MSAM Notes, and (iii) 1,128,160 shares
of Common Stock in connection with the acquisition of certain interests in the
Initial Properties. In addition, Operating Partnership issued 1,583,640 OP Units
to certain "accredited" investors (including certain officers and directors) in
consideration for their contribution to the Operating Partnership of ownership
interests in the Initial Properties. Subsequent to December 31, 1997, the
Operating Partnership issued 129,032 OP Units as partial consideration in the
acquisition of a certain management contract in connection with acquisition of
the 810 Seventh Avenue property (the "810 Seventh Avenue Acquisition").
The issuance of shares of Common Stock and OP Units pursuant to the
Formation Transactions and the 810 Seventh Avenue Acquisition constitutes a
private placement of securities which is exempt from the registration
requirements of the Securities Act of 1933, as amended, pursuant to Section 4(2)
and Rule 506 of Regulation D promulgated thereunder.
10
<PAGE> 11
ITEM 6. SELECTED FINANCIAL DATA.
The following sets forth selected financial and operating data for the
Company on a pro forma and historical consolidated basis and for Tower
Predecessor (as defined in Item 7, "Management's Discussion and Analysis of
Financial Condition and Results of Operations") on a historical combined basis.
The following data should be read in conjunction with the financial statements
and notes thereto and Management's Discussion and Analysis of Financial
Condition and Results of Operations included elsewhere in this Annual Report on
Form 10-K. The pro forma statement of operations and other data for the year
ended December 31, 1997 include the historical results of the Company's
operations from its commencement of operations on March 27, 1997 to December 31,
1997, and the historical results of Tower Predecessor's operations for the
period of January 1, 1997 to October 15, 1997, adjusted to assume that the
Offering and related Formation Transactions and the application of the net
proceeds therefrom and the acquisition of properties had occurred as of January
1, 1997. The pro forma financial information is not necessarily indicative of
what the financial position and results of operations of the Company would have
been as of the dates and for the periods indicated, nor does it purport to
represent or project the financial position and results of operations for future
periods.
Historical operating results of the Company and Tower Predecessor,
including net income, may not be comparable to future operating results. In
addition, the Company believes that the book value of the Properties, which
reflects the historical cost of such real estate assets less accumulated
depreciation, is not indicative of the fair value of the Properties.
<TABLE>
<CAPTION>
COMPANY TOWER PREDECESSOR HISTORICAL
------------------------ -------------------------------------------------------
HISTORICAL
MARCH 27, JANUARY 1,
1997 - 1997 - YEAR ENDED DECEMBER 31,
PRO FORMA DECEMBER 31 OCTOBER 15, -----------------------------------------
1997 1997 1997 1996 1995 1994 1993
--------- ------------ ----------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Statements of Operations Data:
Rental income....................... $ 92,677 $ 16,409 $21,908 $ 26,138 $ 25,202 $ 25,994 $ 23,496
Management fees..................... -- 1,090 318 1,261 961 82 221
Construction, leasing and other
income............................ 1,430 861 576 1,335 1,041 320 604
-------- ---------- ------- -------- -------- -------- --------
Total revenues(1)................... 94,107 18,360 22,802 28,734 27,204 26,396 24,321
-------- ---------- ------- -------- -------- -------- --------
Property operating and maintenance
expenses(1)....................... 24,287 3,941 4,538 5,481 5,332 5,278 5,938
Real estate taxes................... 14,110 2,266 3,792 4,722 4,571 3,971 4,409
General and administrative.......... 4,513 2,844 2,189 3,494 3,497 2,512 2,591
Interest expense.................... 15,709 2,369 11,725 15,511 15,150 12,751 12,756
Depreciation and amortization....... 15,624 2,813 5,541 6,853 6,897 7,415 7,982
Ground rent/air rights expense...... 642 126 473 599 599 599 599
-------- ---------- ------- -------- -------- -------- --------
Total Expenses.................... 74,885 14,359 28,258 36,660 36,046 32,526 34,275
-------- ---------- ------- -------- -------- -------- --------
Equity in joint venture and
unconsolidated subsidiaries(1).... 454 353 134 461 193 1 --
-------- ---------- ------- -------- -------- -------- --------
Income (loss) before minority
interest and extraordinary gain on
early extinguishment of debt...... 19,676 4,354 (5,322) (7,465) (8,649) (6,129) (9,954)
Minority Interest(2).............. (1,692) (373) -- -- -- -- --
-------- ---------- ------- -------- -------- -------- --------
Net income (loss) before
extraordinary gain on early
extinguishment of debt............ 17,984 3,981 (5,322) (7,465) (8,649) (6,129) (9,954)
Extraordinary gain on early
extinguishment of debt............ -- -- 6,475 -- -- -- --
-------- ---------- ------- -------- -------- -------- --------
Net income (loss)................... 17,984 3,981 1,153 (7,465) (8,649) (6,129) (9,954)
======== ========== ======= ======== ======== ======== ========
Net income per common share (basic
and dilutive)..................... 1.06 0.24
Weighted average number of shares
outstanding....................... 16,920 16,920
Effect of Dilutive Securities....... -- --
Weighted average number of shares
outstanding....................... 16,920 16,920
</TABLE>
11
<PAGE> 12
<TABLE>
<CAPTION>
COMPANY TOWER PREDECESSOR HISTORICAL
------------------------ -------------------------------------------------------
HISTORICAL
MARCH 27, JANUARY 1,
1997 - 1997 - YEAR ENDED DECEMBER 31,
PRO FORMA DECEMBER 31 OCTOBER 15, -----------------------------------------
1997 1997 1997 1996 1995 1994 1993
--------- ------------ ----------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance Sheet Data (end of period):
Real estate, net of accumulated
depreciation...................... -- $ 618,113 -- $129,064 $128,138 $132,904 $137,662
Total assets........................ -- 656,096 -- 172,967 173,889 184,174 188,742
Debt on real estate................. -- 228,990 -- 202,892 199,962 202,454 204,853
Total liabilities................... -- 259,759 -- 234,857 230,977 235,343 236,211
Minority interest in Operating
Partnership....................... -- 33,920 --
Shareholders' equity/Owners'
deficit........................... -- 382,417 -- (61,870) (57,088) (51,169) (47,469)
Cash dividends declared per common
share............................. -- 0.35 --
Other Data:
EBITDA Available for Common
Shares(3)......................... $ 45,360 $ 7,975 $17,864 $ 15,496 $ 13,695 $ 13,834 $ 10,268
======== ========== ======= ======== ======== ======== ========
Funds from Operations Available for
Common Shares(4).................. $ 32,271 $ 6,581 $ 219 $ 129 $ (1,449) $ 1,292 $ (1,972)
======== ========== ======= ======== ======== ======== ========
Cash flow from operating
activities........................ -- $ 6,526 $ 5,290 $ 951 $ 1,762 $ 4,118 $ --
Cash flow from investing
activities........................ -- $ (540,188) $(3,771) $ (6,787) $ (3,440) $ (3,137) --
Cash flow from financing
activities........................ -- $ 535,008 $(1,785) $ 5,613 $ 238 $ 30 $ --
Property Data (end of period):
Number of Properties................ 22 22 -- 7 6 6 3
</TABLE>
- ---------------
(1) The Management Company's operations are combined with the property
operations in the historical statements of Tower Predecessor for the years
ended December 31, 1993 through 1996 and for the period from January 1, 1997
through March 26, 1997, and are accounted for under the equity method in the
Company's historical and pro forma statements, therefore, the historical
statements of Tower Predecessor include the Management Company's revenues
and expenses on a gross basis in the respective income and expense line
items for the years ended December 31, 1993 through 1996 and for the period
from January 1, 1997 through March 26, 1997 and the historical and pro forma
statements of the Company present the Management Company's net operations in
the line item titled "Equity in joint venture and unconsolidated
subsidiaries." The historical statements of the Company from March 27, 1997
through December 31, 1997 and the pro forma statements reflect the
elimination of all revenues and expenses for management fees, construction,
leasing and other services performed by the Company for its consolidated
properties.
Equity in joint venture and unconsolidated subsidiaries also includes the
Company's 10% interest (subject to an increase to up to 27.5% if certain
performance criteria are achieved) in the partnership owning 2800 North
Central on a historical and pro forma basis, and Tower Predecessor's 18%
interest in the partnerships (the "DRA Joint Ventures") that owned, prior to
the Offering, the following Properties: 286 Madison Avenue, 290 Madison
Avenue, 292 Madison Avenue, the six Corporate Center Properties, 5151 East
Broadway and One Orland Center, which is accounted for on the equity method
for all periods presented through October 15, 1997.
On a pro forma basis, the Company owns 10% of 2800 North Central and 95% of
the economic interest in the Management Company. On a historical basis,
Tower Predecessor owned, at December 31, 1996, 3.8% of 2800 North Central
and approximately 18% of the DRA Joint Ventures (which represents Lawrence
H. Feldman's effective ownership interest).
(2) Represents an approximate 8.6% interest in the Operating Partnership which
is owned by the minority interest holders on a historical and pro forma
basis.
(3) EBITDA means operating income before mortgage and other interest, income
taxes, depreciation and amortization. The Company believes EBITDA is useful
to investors as an indicator of the Company's ability to service debt and
pay cash distributions. EBITDA, as calculated by the Company, is not
12
<PAGE> 13
comparable to EBITDA reported by other REITs that do not define EBITDA
exactly as the Company defines that term, EBITDA does not represent cash
generated from operating activities in accordance ]with GAAP, and should not
be considered as an alternative to operating income or net income,
determined in accordance with GAAP, as an indicator of performance or as an
alternative to cash flows from operating activities, determined in
accordance with GAAP, as an indicator of liquidity. The Company's EBITDA for
the respective periods is calculated as follows:
<TABLE>
<CAPTION>
COMPANY TOWER PREDECESSOR HISTORICAL
------------------------ -------------------------------------------------------
HISTORICAL
MARCH 27, JANUARY 1,
1997 - 1997 - YEAR ENDED DECEMBER 31,
PRO FORMA DECEMBER 31 OCTOBER 15, -----------------------------------------
1997 1997 1997 1996 1995 1994 1993
--------- ------------ ----------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
EBITDA Net income (loss).............. $ 17,984 $ 3,981 $ 1,153 $ (7,465) $ (8,649) $ (6,129) $ (9,954)
Add:
Interest expense.................... 15,709 2,369 11,725 15,511 15,150 12,751 12,756
Real estate depreciation and
amortization...................... 15,624 2,813 5,541 6,853 6,897 7,415 7,982
Real estate depreciation and
amortization of unconsolidated
joint ventures.................... 50 33 741 303 6 --
Minority interest................... 1,692 373 -- -- -- -- --
Less:
Interest income..................... (1,430) (843) (555) (144) (6) (209) (516)
-------- ---------- ------- -------- -------- -------- --------
EBITDA................................ $ 49,629 $ 8,726 $17,864 $ 15,496 $ 13,695 $ 13,834 $ 10,268
======== ========== ======= ======== ======== ======== ========
EBITDA Available for Common Shares.... $ 45,360 $ 7,975
======== ==========
</TABLE>
- ---------------
(4) The Company generally considers funds from operations an appropriate measure
of liquidity of an equity REIT because industry analysts have accepted it as
a performance measure of equity REITs. "Funds from Operations," as defined
by the National Association of Real Estate Investment Trusts ("NAREIT"),
means net income (loss) (computed in accordance with GAAP) excluding gains
(or losses) from debt restructuring and sales of property, plus depreciation
and amortization on real estate assets, and after adjustments for
unconsolidated partnerships and joint ventures. The Company's Funds from
Operations are not comparable to Funds from Operations reported by other
REITs that do not define that term using the current NAREIT definition. The
Company believes that in order to facilitate a clear understanding of the
combined historical operating results of Tower Predecessor and the Company,
Funds from Operations should be considered in conjunction with net income
(loss) as presented in the audited consolidated and combined financial
statements and notes thereto of the Company and Tower Predecessor included
elsewhere in this Form 10-K. Funds from Operations does not represent cash
generated from operating activities in accordance with GAAP and should not
be considered as an alternative to net income, determined in accordance with
GAAP, as an indication of the Company's performance or to cash flows from
operating activities, determined in accordance with GAAP, as a
13
<PAGE> 14
measure of liquidity or ability to make distributions. The Company's and
Tower Predecessor's Funds from Operations for the respective periods is
calculated as follows:
<TABLE>
<CAPTION>
COMPANY TOWER PREDECESSOR HISTORICAL
------------------------ -------------------------------------------------------
HISTORICAL
MARCH 27, JANUARY 1,
1997 - 1997 - YEAR ENDED DECEMBER 31,
PRO FORMA DECEMBER 31 OCTOBER 15, -----------------------------------------
1997 1997 1997 1996 1995 1994 1993
--------- ------------ ----------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Funds from Operations Net income
(loss).............................. $ 17,984 $ 3,981 $ 1,153 $ (7,465) $ (8,649) $ (6,129) $ (9,954)
Add:
Real estate depreciation and
amortization...................... 15,624 2,813 5,541 6,853 6,897 7,415 7,982
Real estate depreciation and
amortization of unconsolidated
joint ventures.................... 50 33 -- 741 303 6 --
Minority interest................... 1,692 373 -- -- -- -- --
Less:
Gain on extinguishment of debt...... -- -- (6,475) -- -- -- --
-------- ---------- ------- -------- -------- -------- --------
Funds from Operations................. $ 35,350 $ 7,200 $ 219 $ 129 $ (1,449) $ 1,292 $ (1,972)
======== ========== ======= ======== ======== ======== ========
Funds from Operations Available for
Common Shares....................... $ 32,271 $ 6,581
======== ==========
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION.
The following discussion should be read in conjunction with the "Selected
Financial and Operating Data" and the historical consolidated and combined
financial statements and related notes thereto for the Company and for Tower
Predecessor (as defined below), respectively, appearing elsewhere in this Form
10-K. The following discussion is based primarily on the consolidated financial
statements of the Company for the period subsequent to the Offering and on the
combined financial statements of Tower Predecessor for the periods prior to the
Offering. The combined financial statements include the assets, liabilities and
operations of the Properties and predecessor management companies acquired by
the Company in the Formation Transactions from entities controlled and managed
by Tower Equities as follows (collectively known as "Tower Predecessor"): Tower
45, 120 Mineola Boulevard, Maitland Forum, and three Maitland Center Parkway
Properties, 5750 Major Boulevard and the predecessor management companies,
including Tower Equities and Realty Corp., CXX Mineola Management Corp., Forum
Realty and Management Corp., and Tower Equities of Arizona L.L.C. In addition,
Tower Predecessor includes interests in 2800 North Central and the Properties
held by the DRA Joint Ventures, on the equity basis of accounting.
Historical results set forth in the "Selected Financial and Operating
Data," the combined financial statements of Tower Predecessor, and the
consolidated financial statements of the Company should not be taken as an
indication of future operations of the Company.
Overview
The Company was organized in the State of Maryland on March 27, 1997. The
Company operates in a manner so as to qualify as a REIT for federal income tax
purposes. Upon consummation of the Company's Offering, the Company acquired a
sole 1% general partner interest in the Operating Partnership, and a 90.4%
limited partner interest in the Operating Partnership.
The Company has been formed to continue and expand the commercial real
estate business of Tower Equities, including developing, acquiring, owning,
renovating, managing, and leasing office properties in the Manhattan, Phoenix,
Tucson, and Orlando markets.
On March 31, 1997 interests in certain partnerships, properties and limited
liability companies were contributed to the Operating Partnership in exchange
for OP Units in the Operating Partnership. Certain of these interests were owned
by the Operating Partnership after consummation of the Offering. Simultaneously
14
<PAGE> 15
with such contribution of interests and through the date of the Offering, the
Company issued $12.3 million of notes to certain investors advised by MSAM. The
interest rate on the notes was 15% per annum, payable quarterly, in arrears.
Upon completion of the Offering, all notes were converted into shares of Common
Stock of the Company.
Results of Operations
The Company operations include the management company operations from March
27, 1997 through December 31, 1997 and the property operations from October 16,
1997, the date of the closing of the Offering, through December 31, 1997. Tower
Predecessor's operations included the management companies' operations from
January 1, 1997 through March 26, 1997, at which time the Company was formed,
and the operations of the Tower Predecessor properties from January 1, 1997
through October 15, 1997. Results of Operations of the Company and Tower
Predecessor are not directly comparable between periods as a result of the
effects of valuation of assets and liabilities recorded in accordance with
Accounting Principles Board Opinion No. 16.
The following table sets forth selected Statement of Operations data for
the Company and Tower Predecessor for the periods indicated:
<TABLE>
<CAPTION>
TOWER TOWER
COMPANY PREDECESSOR PREDECESSOR
HISTORICAL HISTORICAL HISTORICAL
MARCH 27, 1997- JANUARY 1, 1997- YEAR ENDED
DECEMBER 31, OCTOBER 15, COMBINED DECEMBER 31,
1997 1997 1997 1996
--------------- ---------------- -------- ------------
<S> <C> <C> <C> <C>
Statement of Operations Data:
Rental income............................. $16,409 $21,908 $38,317 $26,138
Management fees........................... 1,090 318 1,408 1,261
Construction, leasing and other fees 861 576 1,437 1,335
------- ------- ------- -------
Total revenues......................... 18,360 22,802 41,162 28,734
Expenses:
Property operating and maintenance..... 3,941 4,538 8,479 5,481
Real estate taxes...................... 2,266 3,792 6,058 4,722
General and administrative............. 2,844 2,189 5,033 3,494
Interest expense....................... 2,369 11,725 14,094 15,511
Depreciation and amortization.......... 2,813 5,541 8,354 6,853
Ground rent/air rights expense......... 126 473 599 599
------- ------- ------- -------
Total expenses......................... 14,359 28,258 42,617 36,660
Equity in income of joint ventures........ 353 134 487 461
Net income (loss) before extraordinary gain
on early extinguishment of debt........... 4,354 (5,322) (968) (7,465)
Extraordinary gain on early extinguishment
of debt................................... -- 6,475 6,475 --
------- ------- ------- -------
Net income (loss)........................... 4,354 1,153 5,507 (7,465)
Less: minority interests.................... (373) -- (373) --
------- ------- ------- -------
Net income (loss)........................... $ 3,981 $ 1,153 $ 5,134 $(7,465)
======= ======= ======= =======
</TABLE>
COMPARISON OF YEAR ENDED DECEMBER 31, 1997 TO YEAR ENDED DECEMBER 31, 1996
Total revenues increased by $12.4 million, or 43.3%, to $41.2 million in
1997 as compared to $28.7 million in 1996. Rental income increased by $12.2
million, or 46.6%, to $38.3 million in 1997 as compared to $26.1 million in 1996
primarily due to (i) $6.3 million of rental income from the Properties held by
the DRA Joint Ventures properties from October 16, 1997 through December 31,
1997 (these properties are reflected as an 18% investment on the equity method
of accounting by Tower Predecessor) and (ii) the purchase of 100 Wall Street and
Century Plaza at the time of the Offering and the related rental revenues from
those
15
<PAGE> 16
properties from October 16, 1997 through December 31, 1997 of $3.2 million. The
remaining increase in rental income can be attributed to an increase in base
rent, primarily resulting from the effect of re-straightlining the lease
payments over the remaining lease terms, as of October 16, 1997, of
approximately $2 million, and other increases from properties which were owned
by Tower Predecessor.
Management fee income increased by $0.1 million, or 11.7%, to $1.4 million
in 1997 as compared to $1.3 million in 1996. These fees are now reflected in the
Management Company upon consummation of the Offering. Construction, leasing, and
other fees relating to seven retail properties as well as the DRA Joint Ventures
and 2800 North Central also increased by $0.1 million, or 7.6%, to $1.4 million
in 1997 as compared to $1.3 million in 1996. These construction, leasing and
other fees are earned by the Management Company upon consummation of the
Offering. The Management Company and 2800 North Central are accounted for under
the equity method in the Company's financial statements. Fees related to the DRA
joint venture properties are now eliminated.
Total expenses in 1997 increased by $6.0 million, or 16.3%, to $42.6
million as compared to $36.6 million in 1996. Expenses excluding interest and
depreciation and amortization increased from $14.3 million in 1996 to $20.2
million in 1997 due to the inclusion of the Properties held by the DRA Joint
Ventures subsequent to the Offering and the purchase of 100 Wall Street and
Century Plaza. Expenses, excluding interest and depreciation and amortization as
a percentage of total revenue decreased slightly from 49.8% in 1996 to 48.9% in
1997 reflecting economies realized through spreading fixed costs over larger
total revenues. The components of expenses excluding interest and depreciation
and amortization as a percentage of total revenue are as follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Property operating and maintenance.......................... 20.6% 19.1%
Real estate taxes........................................... 14.7 16.4
General and administrative.................................. 12.2 12.2
Ground rent and air rights.................................. 1.5 2.1
---- ----
49.0% 49.8%
==== ====
</TABLE>
The increase in property operating and maintenance expenses as a percentage
of revenue has been offset by a decrease in real estate taxes and ground rent
and air rights. The increase in property operating and maintenance as a
percentage of revenue is primarily attributed to the inclusion of certain DRA
Properties located in Arizona, which have higher operating costs, subsequent to
the Offering. The decrease in real estate taxes as a percentage of revenue is
primarily due to the inclusion of 100 Wall Street, which has a lower real estate
tax assessment as compared to the Company's other New York properties, and the
decrease in ground rent and air rights, which are fixed costs, as a percentage
of revenue, is due to the increase in the Company's revenue base.
Interest expense decreased by $1.4 million to $14.1 million in 1997 as
compared to $15.5 million in 1996 due to the repayment of debt with the proceeds
of the Offering.
Depreciation and amortization increased $1.5 million or 22.0% to $8.3
million in 1997 as compared to $6.8 million in 1996 due to depreciation of
additional properties in 1997 as compared to 1996 (primarily subsequent to the
Offering).
Equity in joint ventures and unconsolidated subsidiaries remained
relatively constant from year to year.
Minority interest pertains to interests in certain partnerships,
properties, and Properties Atlantic which were contributed to the Operating
Partnership in exchange for OP Units. The percentage of minority interest for
the period subsequent to the Offering through December 31, 1997 is approximately
8.6%.
Net income increased by $12.6 million to $5.1 million in 1997 as compared
to a net loss of $7.5 million in 1996, reflecting the reasons previously
discussed and a $6.5 million extraordinary gain on the extinguishment of debt by
Tower Predecessor.
16
<PAGE> 17
COMPARISON OF YEAR ENDED DECEMBER 31, 1996 TO YEAR ENDED DECEMBER 31, 1995
Total revenues increased by $1.5 million, or 5.6%, to $28.7 million in 1996
as compared to $27.2 million in 1995. Rental income increased by $0.9 million,
or 3.7%, to $26.1 million in 1996 as compared to $25.2 million in 1995 due to
the following: base rents increased $0.5 million, or 2.5%, to $19.9 million in
1996 as compared to $19.4 million in 1995, primarily due to (i) the resolution
of a tenant dispute that reduced 1995 base rent by approximately $0.9 million,
(ii) the purchase of 5750 Major Boulevard in October 1996 which increased base
rents by $0.1 million, and (iii) a decrease of approximately $0.4 million
related to tenant turnover at Maitland Forum. Escalation income (primarily for
common area maintenance and real estate taxes) remained constant from 1995 to
1996 at $5.4 million for each year. Miscellaneous rental revenues increased $0.5
million to $0.8 million in 1996 as compared to $0.3 million in 1995 due to early
lease termination fees received from tenants.
Management fee income increased $0.3 million, or 31.2%, to $1.3 million in
1996 as compared to $1.0 million in 1995 due to a full year of management fees
in 1996 from the properties held by the DRA Joint Ventures versus a partial year
of management fees in 1995. Construction, leasing, and other fees relating to
one office and seven retail properties as well as the properties held by the DRA
Joint Ventures and 2800 North Central Property increased $0.3 million, or 28.2%,
to $1.3 million in 1996 as compared to $1.0 million in 1995. The increase is
attributable to fees received from the properties held by the DRA Joint
Ventures.
Total expenses in 1996 increased by $0.6 million, or 1.7%, to $36.6 million
as compared to $36.0 million in 1995. Expenses excluding interest and
depreciation and amortization increased from $14.0 million in 1995 to $14.3
million in 1996 due to an increase in occupancy and the purchase of the 5750
Major Boulevard Property. Expenses, excluding interest, depreciation and
amortization as a percentage of total revenue decreased from 51.5% in 1995 to
49.8% in 1996 reflecting economies realized through spreading fixed costs over
larger total revenues. Each component of expenses excluding interest,
depreciation and amortization decreased as a percentage of total revenue as
follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Property operating and maintenance.......................... 19.1% 19.6%
Real estate taxes........................................... 16.4 16.8
General office and administration........................... 12.2 12.9
Ground rent and air rights.................................. 2.1 2.2
---- ----
49.8% 51.5%
==== ====
</TABLE>
Interest expense increased by $0.4 million, or 2.4%, to $15.5 million in
1996 as compared to $15.1 million in 1995 due to additional borrowings in 1996
of $1.5 million related to the three Maitland Center Parkway Properties, $2.4
million related to Maitland Forum and $2.5 million related to the purchase of
5750 Major Boulevard.
Equity in joint ventures increased $0.3 million primarily due to a full
year of ownership in 1996 of the DRA Joint Ventures versus a partial year of
ownership in 1995.
Net loss decreased by $1.2 million, or 13.7%, to $7.4 million in 1996 as
compared to $8.6 million in 1995, primarily reflecting economies realized
through the spreading of fixed costs over the larger total revenues as discussed
previously.
COMPARISON OF THE YEAR ENDED DECEMBER 31, 1997 (PRO FORMA) TO THE YEAR ENDED
DECEMBER 31, 1997 (HISTORICAL COMBINED)
For the year ended December 31, 1997, pro forma net income is $17.9 million
compared to a historical combined 1997 net loss of the Company and Tower
Predecessor of ($1.3) million, before the extraordinary gain on extinguishment
of debt of $6.5 million. The pro forma operating results for 1997 include rental
revenues and property expenses (operating, maintenance, real estate taxes and
depreciation) of the Properties held by the DRA Joint Ventures on a consolidated
basis whereas the historical financial statements of Tower Predecessor include
the DRA Joint Ventures on the equity method of accounting. Likewise, pro forma
operating results include twelve months of operations for the Century Plaza and
100 Wall Street properties,
17
<PAGE> 18
the results of which are only included in the historical operations from October
16, 1997 through December 31, 1997, and twelve months of operations for 810
Seventh Avenue, the acquisition of which was completed on December 31, 1997 and
therefore was not included in the historical operations of the Company.
The decrease in the pro forma management fees, and construction, leasing
and other fees of $.5 million primarily results from the Company's transfer, in
connection with the offering, of certain management contracts and predecessor
management companies and personnel to the Management Company, which is accounted
for on the equity basis of accounting. General and administrative expenses in
the pro forma results decreased by $.5 million as compared to the combined
Company and Tower Predecessor. This decrease can be attributed to estimated
reduction in certain costs (such as partnership accounting fees and reduction in
salaries of certain officers) that are no longer required, offset by additional
costs of operating as a public company.
For the year ended December 31, 1997 as compared with the historical
operations for the same period, interest expense decreased by $1.6 million, or
11.3%, in the pro forma statement of operations due to mortgage loans repaid
concurrent with the Offering and lower interest rates on the remaining debt. The
$100.0 million mortgage note on 810 Seventh Avenue, which bears interest at a
variable interest rate equal to 1% in excess of the Treasury Rate during the
period to and including the scheduled maturity date was included in the pro
forma statements at 6.72%.
The increase in minority interest in the pro forma 1997 results of
operations as compared with the historical operations is due to the assumption
for pro forma purposes that OP Units, not owned by the Company, were outstanding
as of the beginning of the period, whereas such OP Units were only included in
the determination of historical operations from the date of the Offering through
December 31, 1997.
Liquidity and Capital Resources
Cash and cash equivalents were $1.3 million and $5.0 million at December
31, 1997 and December 31, 1996, respectively. The decrease in cash and cash
equivalents is primarily a result of cash flows used by investing activities
related to the Offering and acquisition of real estate at and subsequent to the
Offering. In addition the Company has $6.4 million in escrow funds, primarily
for real estate taxes and mortgage interest costs. Of the total cash and cash
equivalents and escrow funds of $7.7 million, $2.3 million is restricted as to
use by contractual agreement. These funds are restricted for the payment of
mortgage interest and real estate taxes.
For the 1997 Company operations, cash flows from operating activities were
$6.5 million. This is an increase of $5.6 million over operating cash flows of
$.9 million for the period ending December 31, 1996. This increase is primarily
attributed to an increase in net income of $12.5 million, due to the operations
of the Properties acquired in conjunction with the Offering from October 16,
1997 through December 31, 1997, offset by a $6.5 million extraordinary gain on
early extinguishment of debt.
Cash flows used in investing activities for the Company's 1997 operations
increased by $533.4 million from $6.8 million for the year ended December 31,
1996 to $540.2 million. The primary uses of cash included the acquisition of
real estate, joint venture and deferred charges of $534.4 million in connection
with the Formation Transactions. In addition, the Company expended an additional
$1.1 million for improvements to real estate and $3.9 million for deposits on
acquisition properties (Blue Cross and 90 Broad).
Cash flows from financing activities for the Company's 1997 operations
increased $529.4 million from $5.6 million at December 31, 1996 to $535.0
million at December 31, 1997. The most significant inflows of cash relate to the
net proceeds from the Offering of $353.3 million, proceeds from real estate debt
of $217.9 million, which includes $100.0 million for a mortgage note on 810
Seventh Avenue, approximately $107.0 million from the Term Loan, and
approximately $12.3 million borrowed under the MSAM Notes, which were repaid
with stock in conjunction with the Offering. In addition, the Company has
declared a $.3536 per share or $6.5 million distribution payable as of December
31, 1997. This amount was paid on January 15, 1998.
At December 31, 1997, the Company had total outstanding indebtedness of
approximately $228.9 million (exclusive of the Company's 10% portion of the debt
on 2800 North Central of $2.7 million at December 31,
18
<PAGE> 19
1997) (the "Mortgage Debt"). The Mortgage Debt was collateralized by 9 of the
Properties. The Mortgage Debt represents 35.5% of the Company's total market
capitalization (based on the $24.625 closing price of the shares of Common Stock
at December 31, 1997). The following table sets forth certain information
regarding the Mortgage Debt at December 31, 1997:
MORTGAGE DEBT
<TABLE>
<CAPTION>
PRINCIPAL INTEREST
DESCRIPTION AMOUNT RATE MATURITY
- ----------- --------- -------- ----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Term Loan..................................... $107,000 6.82% October 16, 2027
Corporate Center.............................. 21,000 7.55% January 1, 2006
Corporate Center.............................. 990 8.37% January 1, 2006
810 Seventh Avenue............................ 100,000 * June 30, 1998**
2800 North Central............................ 2,696 9.41% May 31, 1999
</TABLE>
- ---------------
* 1% in excess of the Treasury Rate during the period to and including the
scheduled maturity date or 6.72% as of December 31, 1997.
** The Company has the option to extend the maturity date to December 31, 1998.
The Company expects to refinance the $100.0 million mortgage payable
related to 810 Seventh Avenue with a fixed rate mortgage in the amount of
approximately $75.0 million, payable at rates approximating 120 basis points
over the 10-year treasury rate, together with a drawdown on the Company's Line
of Credit in the amount of approximately $25.0 million which will be subject to
an earn out for the Company's benefit over a six to nine month period subject to
certain conditions.
In addition to the above mortgage notes, the Company has obtained a Line of
Credit with Merrill Lynch Capital Corporation. No amounts were outstanding on
the Line of Credit as of December 31, 1997. In conjunction with the Line of
Credit the Company must maintain certain financial ratios as follow:
(i) Total outstanding indebtedness must not exceed 55% of Total Value
(as defined in the Line of Credit Agreement) during the first year of the
facility and must not exceed 50% thereafter
(ii) Collateralized indebtedness must not exceed 40% of Total Value
(as defined) during the first year of the facility and 35% thereafter
(iii) Recourse Indebtedness can not exceed 5% of Total Value (as
defined)
(iv) Other financial covenants that must be met by the Company include
interest expense and fixed charges to debt ratios, among others.
At December 31, 1997, the Company has complied with the financial debt
covenants.
As a general policy the Company intends to maintain a debt policy limiting
the Company's total consolidated indebtedness plus its pro rata share of joint
venture debt to 50% of the Company's total market capitalization. As of December
31, 1997 the debt to total market capitalization, including the Company's 10%
interest in the debt of 2800 North Central, was 36%.
The Company believes that its principal short-term liquidity needs are to
fund normal recurring expenses, debt service requirements and deferred real
estate taxes. The Properties require periodic investment of capital for
tenant-related capital expenditures and for general capital improvements. In
addition, the Company has adopted a policy of paying regular quarterly
distributions on its common shares and OP Units to maintain the Company's REIT
qualification under the Code. Based upon its cash and cash equivalents as of
December 31, 1997, its expected cash flows from operations and the funds
available under the Line of Credit, the Company expects to meet its cash
requirements for the foreseeable future.
19
<PAGE> 20
Funds from Operations
The Company generally considers Funds from Operations an appropriate
measure of liquidity of an equity REIT because industry analysts have accepted
it as a performance measure of equity REITs. "Funds from Operations", as defined
by the NAREIT, means net income (computed in accordance with GAAP), excluding
gains (or losses) from debt restructuring and sales (loss) of property, plus
depreciation and amortization on real estate assets, and after adjustments for
unconsolidated partnerships and joint ventures. The Company believes that in
order to facilitate a clear understanding of the combined historical operating
results of Tower Predecessor and the Company, Funds from Operations should be
considered in conjunction with net income (loss), determined in accordance with
GAAP, as presented in the audited consolidated and combined financial statements
of the Company and Tower Predecessor, respectively, and notes thereto included
elsewhere in the Form 10-K. Funds from Operations does not represent cash
generated from operating activities in accordance with GAAP and should not be
considered as an alternative to net income, determined in accordance with GAAP,
as an indication of the Company's performance or to cash flows from operating
activities, determined in accordance with GAAP, as a measure of liquidity or
ability to make distributions.
<TABLE>
<CAPTION>
TOWER PREDECESSOR HISTORICAL
COMPANY -------------------------------
HISTORICAL
MARCH 27, JANUARY 1, YEAR ENDED
1997 1997 - 1997 - DECEMBER 31,
-------- DECEMBER 31, OCTOBER 15, -----------------
COMBINED 1997 1997 1996 1995
-------- ------------ ----------- ------- -------
(DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
FUNDS FROM OPERATIONS
Net Income (loss)............................ $ 5,134 $3,981 $ 1,153 $(7,465) $(8,649)
Add:
Real estate depreciation and
amortization............................ 8,354 2,813 5,541 6,853 6,897
Real estate depreciation and amortization
of unconsolidated joint venture......... 33 33 -- 741 303
Minority interest(1)....................... 373 373 -- -- --
Less:
Gain on extinguishment of debt............. $(6,475) -- (6,475) -- --
------- ------ ------- ------- -------
Funds from Operations...................... $ 7,419 $7,200 $ 219 $ 129 $(1,449)
======= ====== ======= ======= =======
</TABLE>
- ---------------
(1) Represents the minority interest applicable to the holders of OP Units.
On a combined basis, Funds from Operations increased by $7.3 million for
the year ended December 31, 1997 from the year ended December 31, 1996, and
increased by $1.6 million for the year ended December 31, 1996 from the year
ended December 31, 1995 as a result of the factors discussed in the analysis of
operating results.
Inflation
The Company's leases with the majority of its tenants require the tenants
to pay most operating expenses, including insurance and real estate taxes, and
increases in common area maintenance expenditures which partially offsets the
Company's exposure to increases in costs and operating expenses resulting from
inflation.
Year 2000
The year 2000 issue is the result of computer programs being written using
two digits rather than four digits to define the applicable year. Any of the
Company's computer programs, or computer programs of the Company's vendors,
suppliers, tenants, or lenders, that have date-sensitive software may recognize
a date using "00" as the year 1900 rather than the year 2000. This could result
in a system failure, delays, or
20
<PAGE> 21
miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions, send invoices, or engage
in similar normal business activity.
The Company is currently in the process of completing its assessment of the
impact of the year 2000 on its computer systems and property operations. Based
on the results of their preliminary assessment, the Company does not believe
that the year 2000 will have a material impact on the results of operations,
cash flows or financial position of the Company.
Environmental Matters
The Company is not aware of any environmental issues at any of its
Properties. The Company believes it has sufficient insurance coverage at each of
its properties.
Subsequent Events
On January 13, 1998, the Company completed its acquisition of Blue Cross
for a purchase price of $16.9 million. The Company funded this purchase through
a draw down on its Line of Credit of $15.9 million. In addition on December 31,
1997, the Company entered into an agreement to purchase 90 Broad for
approximately $34.0 million.
The Company also drew down an additional $4.5 million on the Line of Credit
to pay closing costs on its acquisition of 810 Seventh Avenue. Subsequent to
December 31, 1997 the Operating Partnership issued 129,032 OP Units as partial
consideration in the acquisition of a certain management contract in connection
with the 810 Seventh Avenue Acquisition.
Other Accounting Matters
During 1997, the Financial Accounting Standards Board ("SFAS") issued
Statement of Financial Accounting Standards No. 130 "Reporting Comprehensive
Income" ("SFAS 130") and No. 131 "Disclosures About Segments of an Enterprise
and Related Information ("SFAS 131"), which are effective for fiscal years
beginning after December 15, 1997.
SFAS 130 specifies the presentation and disclosure requirements for
reporting comprehensive income which includes those items which have been
formerly reported as a component of shareholders' equity. Management believes
that when adopted SFAS 130 will not have a significant impact on the Company's
financial statements.
SFAS 131 establishes the disclosure requirements for reporting segment
information. Management believes that when adopted, SFAS 131 will require the
Company to report additional geographic information based on the Company's major
geographic areas of focus.
During 1998, the SFAS issued Statement of Financial Accounting Standard No.
132, "Employers Disclosures About Pensions and Other Postretirement Benefits"
("SFAS 132"). This statement changes the current financial statement disclosure
requirements related to pensions, settlements and curtailments of pensions and
postretirement benefits other than pensions. The statement is effective for
fiscal years beginning after December 15, 1997. Management believes that when
adopted, SFAS 132 will not have a significant impact on the Company's financial
statements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The financial statements filed as part of the Annual Report on Form-10K are
provided under Item 14 below.
21
<PAGE> 22
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
There have been no disagreements on accounting and financial disclosure
matters.
PART III
Certain information required by Part III is omitted from this Annual Report
on Form 10-K in that the Company will file a definitive Proxy Statement within
120 days after the end of its fiscal year pursuant to Regulation 14A for its
Annual Meeting of Stockholders to be held on May 26, 1998 (the "Proxy
Statement"), and the information included therein is incorporated herein by
reference.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information contained in the section captioned "Proposal I; Election of
Directors" of the Proxy Statement is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION.
The information contained in the section captioned "Executive Compensation"
of the Proxy Statement is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information contained in the section captioned "Principal and
Management Stockholders" of the Proxy Statement is incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information contained in the section captioned "Certain Relationships
and Related Transactions" of the Proxy Statement is incorporated herein by
reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a)(1) Financial Statements
The Consolidated and Combined Financial Statements of the Company
and Tower Predecessor as of December 31, 1997 (and for each of the
three years in the period ended December 31, 1997). See pages F-1
through F-26, which are included herein.
(a)(2) Financial Statement Schedules
All schedules are omitted because they are inapplicable, not
required or the information is included in the consolidated and
combined financial statements or the notes thereto.
(a)(3) Exhibits
The exhibits listed below are filed as part of this report or
incorporated by reference to the Company's Registration Statement on
Form S-11, as amended (File No. 333-33011) or Current Report on Form
8-K, dated December 31, 1997, as amended.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
1.1** Form of Underwriting Agreement
2.1+ Sale-Purchase Agreement, dated December 31, 1997, between
810 Partners LLC and BHONE Corp., as sellers, and 810 7th
Avenue, L.P., as purchaser
2.2+ Loan Agreement, dated December 31, 1997, by and between
Credit Suisse First Boston Mortgage Capital LLC, as lender,
and 810 7th Avenue, L.P., as borrower
2.3+ Consolidated, Amended and Restated Mortgage Note, dated
December 31, 1997, between Credit Suisse First Boston
Mortgage Capital LLC and 810 7th Avenue, L.P.
2.4+ Agreement of Principal, dated December 31, 1997, by Tower
Realty Operating Partnership, L.P. and Credit Suisse First
Boston Mortgage Capital LLC
</TABLE>
22
<PAGE> 23
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
3.1** Form of Amended and Restated Articles of Incorporation of
the Company
3.2** Form of Amended and Restated By-Laws of the Company
4.1** Form of Common Stock Certificate for the Company
10.1* Form of Amendment and Restatement of Agreement of Limited
Partnership of Tower Realty Operating Partnership, L.P., by
and among Tower Realty Trust, Inc., as general partner,
Lawrence H. Feldman, as initial Limited Partner, and the
Persons set forth in Exhibit A thereto
10.2* Form of Exchange Rights Agreement
10.3* Form of Registration Rights Amendment
10.4* Form of Lock-up Agreement
10.5** Form of Tower Realty Trust, Inc. 1997 Incentive Plan
10.6** Form of Tower Realty Trust, Inc. Non-Employee Directors'
Incentive Plan
10.7*** Form of Employment Agreement between the Company and
Lawrence H. Feldman
10.8*** Form of Employment Agreement between the Company and Robert
L. Cox
10.9*** Form of Employment Agreement between the Company and Joseph
D. Kasman
10.10** Form of Indemnification Agreement between the Company and
its executive officers and directors
10.11** Purchase Agreement, dated as of March 31, 1997, among Tower
Realty Trust, Inc., Tower Realty Operating Partnership, L.P.
and each of the investors signatory thereto, as amended by
the Purchase Agreement Supplement dated as of May 15, 1997,
Purchase Agreement Supplement No. 2, dated as of May 29,
1997, Purchase Agreement Supplement No. 3, dated as of May
29, 1997, Purchase Agreement Supplement No. 4, dated as of
July 9, 1997, Purchase Agreement Supplement No. 5, dated as
of July 31, 1997
10.12** Contribution Agreement (OP Units-CXX Mineola Limited
Partnership) by and among Tower Realty Operating
Partnership, L.P. and Jeffrey Feldman
10.13** Amendment to Contribution Agreement by and among Tower
Realty Operating Partnership, L.P. and Jeffrey Feldman
10.14** Second Amendment to Contribution Agreement by and between
Tower Realty Operating Partnership, L.P. and Jeffrey Feldman
10.15** Contribution Agreement (Cash-Stellar Associates) by and
among Tower Realty Operating Partnership, L.P. and Laurie
Jacoby
10.16** First Amendment to Contribution Agreement by and between
Tower Realty Operating Partnership, L.P. and Laurie Jacoby
10.17** Contribution Agreement (OP Units) by and among Tower Realty
Operating Partnership, L.P. and Bama Equities, Inc.
10.18** Amendment to Contribution Agreement by and among Tower
Realty Operating Partnership, L.P. and Bama Equities, Inc.
10.19** Second Amendment to Contribution Agreement by and between
Tower Realty Operating Partnership, L.P. and Bama Equities,
Inc.
10.20** Contribution Agreement (Cash-Stellar Associates) by and
among Tower Realty Operating Partnership, L.P. and Valerie
Herts Kalnitzky
10.21** First Amendment to Contribution Agreement by and between
Tower Realty Operating Partnership, L.P. and Valerie Hertz
Kalnitzky
10.22** Assignment Agreement by Charles M. Kotick, as nominee (CXX)
10.23** Contribution Agreement by and between Tower Realty Operating
Partnership, L.P. and Allan B. Mendelsohn, as Chapter 7
Trustee of Edward Feldman
10.24** Option Agreement, dated as of July 28, 1997, by and between
Tower Realty Operating Partnership, L.P. and Dana II
Associates Limited Partnership
10.25** Option Agreement, dated July 28, 1997, by and between Tower
Realty Operating Partnership, L.P. and Tower 45 Ventures
Limited Partnership
</TABLE>
23
<PAGE> 24
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
10.26** Option Agreement, dated July 31, 1997, by and between Tower
Realty Operating Partnership, L.P. and Feldman Tower 45,
Inc.
10.27** Contribution Agreement between Maitland Property Investors,
Limited and Tower Realty Operating Partnership, L.P., dated
as of August 4, 1997
10.28** Non-Competition Agreement, dated as of August 4, 1997 among
Tower Realty Operating Partnership L.P., Properties
Atlantic, Inc., Clifford Stein and Reid Berman
10.29** Assets Contribution Agreement, dated as of August 4, 1996,
between Tower Realty Operating Partnership, L.P., and
Properties Atlantic, Inc., Clifford Stein, and Reid Berman
10.30** Option Agreement, dated as of July 28, 1997, by and between
Tower Realty Operating Partnership, L.P. and Stellar
Associates
10.31** Option Agreement, dated as of July 28, 1997, by and between
Tower Realty Operating Partnership, L.P. and Carlyle
Industries, Inc.
10.32** Option Agreement, dated as of July 31, 1997, by and between
Tower Realty Operating Partnership, L.P. and 120 West 45th
Street Associates
10.33** Option Agreement, dated as of July 29, 1997, by and between
Tower Realty Operating Partnership, L.P. and Richard Cooke,
Craig Cooke and Brian Cooke
10.34** Option Agreement, dated as of July 28, 1997, by and between
Tower Realty Operating Partnership, L.P. and Charles B.
Hickcox
10.35** Option Agreement, dated as of July 31, 1997, by and between
Tower Realty Operating Partnership, L.P. and Hazama T-45
10.36** Option Agreement, dated as of July 25, 1997, by and between
Tower Realty Operating Partnership, L.P. and Leo V. Berger
10.37** Omnibus Option Agreement, dated as of July 31, 1997, by and
between Tower Realty Operating Partnership, L.P. and Shoen
U.S.A. Inc.
10.38** Option Agreement, dated as of July 28, 1997, by and among
Tower Realty Operating Partnership, L.P., Tower Equities
Management, Inc. and Tower Equities and Realty Corp., CXX
Mineola Management Corp., Forum Management and Realty Corp.,
Madison 40/41 Management Corp., Tower 45 Asset Management
Corp. and SJP Realty Corp.
10.39** Contribution Agreement by and between Reid Berman and Tower
Realty Operating Partnership, L.P. dated as of July 31, 1997
10.40** Purchase Agreement by and among Tower Realty Operating
Partnership, L.P. and Anthony DiLeonardo dated as of July
31, 1997, as amended by Amendment No. 1 to Anthony
DiLeonardo Purchase Agreement, dated as of September 18,
1997
10.41** Purchase Agreement by and among Tower Realty Operating
Partnership, L.P. and Carmela Carrano dated as of July 31,
1997, as amended by Amendment No. 1 to Carmela Carrano
Purchase Agreement, dated as of September 18, 1997
10.42** Contribution Agreement by and between Richard Wisely and
Tower Realty Operating Partnership, L.P. dated as of July
31, 1997
10.43** Contribution Agreement by and between Lawrence Stein and
Tower Realty Operating Partnership, L.P. dated as of July
31, 1997
10.44** Contribution Agreement by and between Lawrence H. Feldman
and Tower Realty Operating Partnership, L.P. dated as of
July 31, 1997
10.45** Contribution Agreement by and between Clifford L. Stein and
Tower Realty Operating Partnership, L.P. dated as of July
31, 1997
10.46** Contribution Agreement by and between Robert Adams and Tower
Realty Operating Partnership, L.P. dated as of July 31, 1997
10.47** Contribution Agreement by and between Eric Reimer and Tower
Realty Operating Partnership, L.P. dated as of July 31, 1997
10.48** Contribution Agreement by and between Reuben Friedberg and
Tower Realty Operating Partnership, L.P. dated as of July
31, 1997
</TABLE>
24
<PAGE> 25
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
10.49** Contribution Agreement by and between Joseph Kasman and
Tower Realty Operating Partnership, L.P. dated as of July
31, 1997
10.50** Contribution Agreement by and between Robert Cox and Tower
Realty Operating Partnership, L.P. dated as of July 31, 1997
10.51** Contribution Agreement, dated as of July 31, 1997, by and
among Tower Realty Operating Partnership, L.P. and Joseph
Kasman
10.52** Option Agreement, dated as of May 8, 1997, by and among
Tower Realty Operating Partnership, L.P. and Stanley B. Grey
10.53** Option Agreement, dated as of May 8, 1997, by and among
Tower Realty Operating Partnership, L.P. and Michael C.
Zerner
10.54** Letter Agreement, dated as of July 28, 1997, between Tower
Realty Trust, Inc., Tower Realty Operating Partnership,
L.P., General Electric Capital Corporation, General Electric
Real Estate Equities, Inc., GENEL Company, Inc. and GEBAM,
Inc.
10.55** Contribution Agreement by and among Tower Realty Trust,
Inc., Tower Realty Operating Partnership, L.P. and DRA
Opportunity Fund
10.56** Contribution Agreement by and among Tower Realty Trust,
Inc., Tower Realty Operating Partnership, L.P. and Office
Invest Sub LLC
10.57** Supplement and Amendment, dated as of September 11, 1997, to
the Contribution Agreement by and among Tower Realty Trust,
Inc., Tower Realty Operating Partnership, L.P. and Office
Invest Sub LLC, as parties to the original Contribution
Agreement, and Feldman MOT Portfolio Corp., Feldman FSA
Corp., FSA Associates, L.P. and Lawrence H. Feldman
10.58** Purchase and Sale Agreement, dated as of March 31, 1997, by
and between Tower Equities and Realty Corp. and Tower Realty
Operating Partnership, L.P.
10.59** Purchase and Sale Agreement, dated as of September 11, 1997,
by and between 100 Wall LLC and Tower Realty Operating
Partnership, L.P.
10.60*** Mortgage Loan Commitment, dated as of October 4, 1997, by
and between Merrill Lynch Credit Corporation and one or more
subsidiaries of Tower Realty Operating Partnership, L.P.
10.61*** Form of Financial Advisory Fee Agreement by and between
Merrill Lynch, Pierce, Fenner & Smith Incorporated, Tower
Realty Trust, Inc. and Tower Realty Operating Partnership,
L.P.
10.62*** Form of Supplemental Representations, Warranties and
Indemnity Agreement by and among Lawrence H. Feldman, Robert
L. Cox, Joseph D. Kasman, Eric S. Reimer, Reuben Friedberg
and Tower Realty Operating Partnership, L.P. and Tower
Realty Trust, Inc.
10.63*** Line of Credit Commitment, dated as of October 4, 1997, by
and between Merrill Lynch Capital Corporation and Tower
Realty Operating Partnership, L.P. and Tower Realty Trust,
Inc.
10.64** Purchase and Sale Agreement, dated as of July 25, 1997, by
and between RSH Associates, Joel Wiener, and Lawrence H.
Feldman
10.65** Option Agreement, dated as of July 31, 1997, by and between
Tower Realty Operating Partnership, L.P. and Carmela
Carrano, as amended by Amendment No. 1 to Option Agreement,
dated as of September 18, 1997
10.66** Option Agreement, dated as of July 31, 1997, by and between
Tower Realty Operating Partnership, L.P. and Anthony
DiLeonardo, as amended by Amendment No. 1 to Option
Agreement, dated as of September 18, 1997
10.67*** Option Agreement, dated as of September 27, 1997, by and
between Orlando Option Holding, L.L.C. and Tower Realty
Operating Partnership. L.P.
10.68*** Assignment of Real Estate Agreement, dated as of September
24, 1997, by and between Tower Equities and Realty Corp. and
Tower Realty Operating Partnership, L.P.
</TABLE>
25
<PAGE> 26
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
10.69*** Third Amendment to Escrow Instructions and Addendum thereto
and Option Agreement, dated as of July 23, 1997, by and
between Beardsley and I-17, L.L.C and Deer Valley Towne
Center L.L.C and Crystal, Inc.
10.70*** Phoenix Land Parcel Option Contract, dated as of September
12, 1997, by and between Crystal, Inc. and Tower Realty
Operating Partnership, L.P.
10.71*** Form of Acquisition Advisory Fee Agreement
10.72**** Stock Purchase Agreement, dated as of September 19, 1997, by
and among Tower Realty Trust, Inc. and Carlyle Realty
Partners, L.P. Carlyle Realty Qualified Partners, L.P.,
Carlyle Realty Partners Sunrise, L.P. and Carlyle Realty
Coinvestment, L.P.
10.73 Revolving Credit Agreement, dated as of October 20, 1997, by
and among Tower Realty Operating Partnership, L.P., the
banks listed therein, Fleet National Bank, as administrative
agent, Merrill Lynch & Co., as syndication agent and
arranger, and Nationsbank, N.A., as documentation agent
10.74 Consolidated, Amended and Restated Mortgage Note, dated as
of November 26, 1997, made by Magnolia Associates, Ltd., 286
Madison, L.P., 290 Madison, L.P. and 292 Madison, L.P.
(collectively, the "Maker") in favor of Merrill Lynch
Mortgage Capital Inc., as payee
10.75 Consolidated, Amended and Restated Fee and Subleasehold
Mortgage, Security Agreement, Financing Statement, Fixture
Filing and Assignment of Leases, Rents and Security
Deposits, dated as of November 26, 1997, from Magnolia
Associates, Ltd., 286 Madison, L.P., 290 Madison, L.P. and
292 Madison, L.P., collectively as mortgagor, to Merrill
Lynch Mortgage Capital Inc., as mortgagee
10.76 Amended and Restated Assignment of Leases, Rents and
Security Deposits, dated as of November 26, 1997, from
Magnolia Associates, Ltd., 286 Madison, L.P., 290 Madison,
L.P., and 292 Madison, L.P., collectively as assignor, to
Merrill Lynch Mortgage Capital Inc., as assignee
10.77 Amended and Restated Cash Collateral Account Security,
Pledge and Assignment Agreement, dated as of November 26,
1997, among Magnolia Associates, Ltd., as borrower, Chase
Manhattan Bank, as agent, and Merrill Lynch Mortgage Capital
Inc., as lender
10.78 First Amendment to Mortgage, dated December 30, 1997, among
Magnolia Associates, Ltd., as mortgagor and Merrill Lynch
Mortgage Capital Inc., as mortgagee
21.1 Subsidiaries of the Company, as amended
27.1 Financial Data Schedule
</TABLE>
- ---------------
+ Incorporated by reference to the Company's Current Report on Form 8-K,
dated December 31, 1997.
* Incorporated by reference to the Company's Registration Statement on Form
S-11, dated August 6, 1997.
** Incorporated by reference to Amendment No. 1 to the Company's Registration
Statement on Form S-11, dated September 23, 1997.
*** Incorporated by reference to Amendment No. 2 to the Company's Registration
Statement on Form S-11, dated October 6, 1997.
**** Incorporated by reference to Amendment No. 4 to the Company's Registration
Statement on Form S-11, dated October 9, 1997.
(b) Current Reports on Form 8-K and/or Form 8-K/A
A current report on Form 8-K and Form 8-K/A, dated December 31, 1997,
was filed by the Company with respect to the acquisition by a
wholly-owned subsidiary of the Company of an office building located at
810 Seventh Avenue in New York City.
26
<PAGE> 27
TOWER REALTY TRUST, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
FINANCIAL STATEMENTS PAGE
Report of Independent Accountants........................... F-2
Consolidated Balance Sheet of Tower Realty Trust Inc. (the
"Company") as of December 31, 1997 and Combined Balance
Sheet of Tower Predecessor as of December 31, 1996........ F-3
Consolidated Statement of Operations of the Company for the
period from March 27, 1997 (inception of the Company) to
December 31, 1997 and Combined Statements of Operations
for Tower Predecessor for the Period January 1, 1997 to
October 15, 1997, and the Years Ended December 31, 1996
and 1995.................................................. F-4
Consolidated Statement of Changes in Shareholders' Equity of
the Company for the Period from March 27, 1997 (inception
of the Company) to December 31, 1997 and Combined
Statements of Changes in Owners' Deficit of Tower
Predecessor for the Period January 1, 1997 to October 15,
1997 and the Years Ended December 31, 1996 and 1995....... F-5
Consolidated Statement of Cash Flows of the Company for the
Period March 27, 1997 (inception of the Company) to
December 31, 1997 and Combined Statements of Cash Flows of
Tower Predecessor for the Period January 1, 1997 to
October 15, 1997, and the Years Ended December 31, 1996
and 1995.................................................. F-6
Notes to Consolidated and Combined Financial Statements..... F-7-F-20
FINANCIAL STATEMENT SCHEDULE
Schedule III: Real Estate and Accumulated Depreciation...... F-21-F-22
</TABLE>
F-1
<PAGE> 28
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders
of Tower Realty Trust, Inc.
We have audited the accompanying consolidated and combined financial
statements and the financial statement schedule of Tower Realty Trust, Inc. and
its subsidiaries (the "Company") and Tower Predecessor as listed on page F-1 of
this Form 10-K. These consolidated and combined financial statements and the
financial statement schedule are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements and
financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Tower Realty
Trust, Inc. as of December 31, 1997 and the combined financial position of Tower
Predecessor as of December 31, 1996, and the consolidated results of operations
and cash flows of Tower Realty Trust, Inc. for the period from March 27, 1997
through December 31, 1997, and the combined results of operations and cash flows
of Tower Predecessor for the period from January 1, 1997 through October 15,
1997, and the years ended December 31, 1996 and 1995, in conformity with
generally accepted accounting principles. In addition, in our opinion, the
financial statement schedule referred to above, when considered in relation to
the basic financial statements taken as a whole, presents fairly, in all
material respects, the information required to be set forth therein.
COOPERS & LYBRAND L.L.P.
New York, New York
February 26, 1998.
F-2
<PAGE> 29
TOWER REALTY TRUST, INC.
AND TOWER PREDECESSOR
CONSOLIDATED AND COMBINED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
THE COMPANY TOWER PREDECESSOR
(CONSOLIDATED) (COMBINED)
DECEMBER 31, DECEMBER 31,
1997 1996
-------------- -----------------
<S> <C> <C>
ASSETS
Assets:
Real estate................................................. $620,557 $169,619
Less: accumulated depreciation............................ (2,444) (40,555)
-------- --------
618,113 129,064
Deferred charges, net....................................... 11,495 11,636
Receivables, net............................................ 3,820 18,018
Cash and cash equivalents................................... 1,347 4,985
Escrowed cash............................................... 6,373 413
Other assets................................................ 12,537 3,555
Investments in joint venture and unconsolidated
subsidiaries.............................................. 2,411 5,316
-------- --------
Total assets...................................... $656,096 $172,987
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Debt on real estate....................................... $228,990 $202,892
Accounts payable and other liabilities.................... 7,494 12,867
Distributions payable..................................... 6,543
Deferred real estate taxes................................ 9,758 12,951
Other liabilities and amounts due to affiliates........... 6,974 6,147
-------- --------
Total liabilities................................. 259,759 234,857
-------- --------
Minority interest in Operating Partnership.................. 33,920 --
Commitments and Contingencies (See Note 13)
Shareholders' equity (owners deficit):
Preferred shares 50,000,000 shares authorized, none issued
and outstanding........................................ -- --
Common shares $.01 par value, 150,000,000 shares
authorized, 16,920,455 shares issued and outstanding... 169 --
Additional paid-in capital................................ 364,250 --
Owners' deficit........................................... -- (61,870)
Distributions in excess of accumulated earnings........... (2,002) --
-------- --------
Total shareholders equity/(owners' deficit)....... 362,417 (61,870)
-------- --------
Total liabilities and shareholders'
equity/(owners' deficit)........................ $656,096 $172,987
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE> 30
TOWER REALTY TRUST, INC.
AND TOWER PREDECESSOR
CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS
(DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THE COMPANY TOWER PREDECESSOR
(CONSOLIDATED) (COMBINED)
-------------- ----------------------------------
MARCH 27, JANUARY 1, YEARS ENDED
1997 THROUGH 1997 THROUGH DECEMBER 31,
DECEMBER 31, OCTOBER 15, ------------------
1997(1) 1997(1) 1996 1995
-------------- ------------ ------- -------
<S> <C> <C> <C> <C>
Revenues:
Rental income............................ $ 16,409 $21,908 $26,138 $25,202
Management fees.......................... 1,090 318 1,261 961
Construction, leasing and other fees..... 861 576 1,335 1,041
----------- ------- ------- -------
Total revenues................... 18,360 22,802 28,734 27,204
----------- ------- ------- -------
Expenses:
Property operating and maintenance....... 3,941 4,538 5,481 5,332
Real estate taxes........................ 2,266 3,792 4,722 4,571
General and administrative............... 2,844 2,189 3,494 3,497
Interest expense......................... 2,369 11,725 15,511 15,150
Depreciation and amortization............ 2,813 5,541 6,853 6,897
Ground rent/air rights expense........... 126 473 599 599
----------- ------- ------- -------
Total expenses................... 14,359 28,258 36,660 36,046
----------- ------- ------- -------
Equity in joint venture and
unconsolidated subsidiaries........... 353 134 461 193
----------- ------- ------- -------
Income (loss) before minority interest and
extraordinary gain early extinguishment
of debt.................................. 4,354 (5,322) (7,465) (8,649)
Minority interest........................ (373)
----------- ------- ------- -------
Net income (loss) before extraordinary
gain on early extinguishment of
debt.................................. 3,981 (5,322) (7,465) (8,649)
Extraordinary gain on early
extinguishment of debt................ -- 6,475 -- --
----------- ------- ------- -------
Net income (loss)........................ $ 3,981 $ 1,153 $(7,465) $(8,649)
=========== ======= ======= =======
Net income per common share -- basic and
dilutive.............................. $ 0.24
===========
Weighted average number of common shares
outstanding........................... 16,920,455
Effect of dilutive securities............ --
-----------
Weighted average number of dilutive
shares outstanding.................... $16,920,455
===========
</TABLE>
- ---------------
(1) The Company operations include the results of the Operating Partnership
(including the Management Company on the equity basis of accounting) from
March 27, 1997 through December 31, 1997 and the property operations from
October 16, 1997, the Offering date, through December 31, 1997. Tower
Predecessor's operations included the management companies' operations from
January 1, 1997 through March 26, 1997, at which time the Company was
formed, and the operations of the Tower Predecessor properties from January
1, 1997 through October 15, 1997.
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 31
TOWER REALTY TRUST, INC.
AND TOWER PREDECESSOR
CONSOLIDATED AND COMBINED STATEMENTS OF CHANGES
IN SHAREHOLDERS' EQUITY AND OWNERS' DEFICIT
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
THE COMPANY -- SHAREHOLDERS' EQUITY TOWER
(CONSOLIDATED) PREDECESSOR
------------------------------------------------ (COMBINED)
ADDITIONAL DIST. IN EXCESS -----------
COMMON PAID-IN ACCUMULATED OWNERS'
TOTAL SHARES CAPITAL EARNINGS DEFICIT
-------- ------ ---------- --------------- -----------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1994............... $ -- -- -- -- $(51,169)
Net loss................................... -- -- -- -- (8,649)
Contributions, net......................... -- -- -- -- 2,730
-------- ---- -------- ------- --------
Balance at December 31, 1995............... -- -- -- -- (57,088)
Net loss................................... -- -- -- -- (7,465)
Contributions, net......................... -- -- -- -- 2,683
-------- ---- -------- ------- --------
Balance at December 31, 1996............... -- -- -- -- (61,870)
Net income 1/1/97 -- 10/15/97.............. -- -- -- -- 1,153
March 27, 1997, opening equity of the
Company.................................. 1 -- 1 -- --
-------- ---- -------- ------- --------
Balance at October 16, 1997................ 1 -- 1 -- (60,717)
Acquisition of Tower Predecessor's Interest
(including the issuance of 1,949,455
common shares)........................... 11,073 -- $ 11,073 -- 60,717
Net proceeds from issuance of common shares
(14,971,000 common shares)............... 353,345 $169 353,176 -- --
Distributions declared (.3536 per common
share)................................... (5,983) -- -- $(5,983) --
Net income................................. 3,981 -- -- 3,981 --
-------- ---- -------- ------- --------
Balance at December 31, 1997............... $362,417 $169 $364,250 $(2,002) --
======== ==== ======== ======= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 32
TOWER REALTY TRUST, INC.
AND TOWER PREDECESSOR
CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THE TOWER
COMPANY PREDECESSOR
(CONSOLIDATED) (COMBINED)
-------------- ------------
MARCH 27, JANUARY 1, YEARS ENDED
1997 THROUGH 1997 THROUGH DECEMBER 31,
DECEMBER 31, OCTOBER 15, ------------------
1997 1997 1996 1995
-------------- ------------ ------- -------
<S> <C> <C> <C> <C>
Cash Flows from Operating Activities:
Net income (loss)........................... $ 3,981 $ 1,153 $(7,465) $(8,649)
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities:
Depreciation and amortization............ 2,813 4,590 6,853 6,897
Amortization of deferred financing
costs.................................. 84 906 504 575
Unbilled rental income................... (936) 1,012 1,205 3,084
Equity income in joint venture and
unconsolidated subsidiaries............ (353) -- (461) (193)
Gain on disposal of assets............... -- -- (39) (30)
Extraordinary gain of early
extinguishment of debt................. -- (6,475) -- --
Changes in assets and liabilities:
Deferred Charges....................... -- (867) (373)
Receivables............................ (2,529) (1,593) 345 2,673
Escrowed cash.......................... (5,765) (352) (116) 268
Other assets........................... (5,610) 907 42 (616)
Deferred real estate taxes............. -- 566 -- 366
Accounts payable and other
liabilities......................... 14,096 -- 1,267 90
Minority interest...................... 373 -- -- --
Other liabilities and amounts due
to/from affiliates.................. 372 4,576 (317) (2,330)
-------- ------- ------- -------
Net cash provided by operating activities..... 6,526 5,290 951 1,762
-------- ------- ------- -------
Cash Flows from Investing Activities:
Additions to real estate.................... (1,103) (3,362) (2,659) (967)
Acquisition of real estate, joint venture
and deferred charges..................... (534,393) (409) (3,850) --
Contribution to Management Company.......... (400) (317) (2,503)
Deposits on future acquisitions............. (3,937) -- -- --
Due from affiliated Company................. (355) -- -- --
Proceeds from disposal of assets............ 39 30
-------- ------- ------- -------
Net cash used in investing activities......... (540,188) (3,771) (6,787) (3,440)
-------- ------- ------- -------
Cash Flows from Financing Activities:
Partner's contributions, net................ (6) 2,683 2,730
Net proceeds from issuance of common
shares................................... 353,345 -- -- --
Escrow for Mortgage Interest................ (608) -- -- --
Loan Origination Fees....................... (1,052) -- -- --
Proceeds from debt on real estate and other
debt..................................... 219,300 15,581 7,039 424
Repayments of debt on real estate........... (35,977) (17,360) (4,109) (2,916)
-------- ------- ------- -------
Net cash provided by (used in) financing
activities.................................. 535,008 (1,785) 5,613 238
-------- ------- ------- -------
Net increase (decrease) in cash and cash
equivalents................................. 1,346 (266) (223) (1,440)
Cash and cash equivalents, beginning of
periods..................................... 1 4,985 5,208 6,648
-------- ------- ------- -------
Cash and cash equivalents, end of periods..... $ 1,347 $ 4,719 $ 4,985 $ 5,208
======== ======= ======= =======
Supplemental Cash Flow Information:
Cash paid for interest...................... $ 1,621 $ 9,753 $15,007 $14,575
======== ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE> 33
TOWER REALTY TRUST, INC.
AND TOWER PREDECESSOR
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
(1) ORGANIZATION AND BASIS OF PRESENTATION
Tower Realty Trust, Inc.
Tower Realty Trust, Inc. (collectively with its subsidiaries, the
"Company") was organized in the state of Maryland on March 27, 1997. The Company
intends to operate so as to qualify as a real estate investment trust ("REIT")
for federal income tax purposes, commencing with its taxable year ending
December 31, 1997. Upon consummation of the Company's initial public offering on
October 16, 1997 (the "Offering"), the Company acquired a sole 1% general
partner interest in Tower Realty Operating Partnership, L.P., a Delaware limited
partnership (the "Operating Partnership"), and a 90.4% limited partner interest
in the Operating Partnership.
The Company has been formed to continue and expand the commercial real
estate business of Tower Equities & Real Estate Corp. and its affiliates
(collectively with its predecessor entities and affiliates, "Tower Equities"),
including developing, acquiring, owning, renovating, managing, and leasing
office properties in the Manhattan, Phoenix, Tucson, and Orlando markets. Upon
consummation of the Offering and certain related transactions (collectively, the
"Formation Transactions"), the Operating Partnership owned or had interests in
21 office properties. The Company also owns or has an option to acquire four
parcels of land adjacent to four of the Properties (the "Development Parcels"),
which can support 2.2 million of rentable square feet of development. On
December 31, 1997, the Company purchased 810 Seventh Avenue for approximately
$150.0 million, including closing costs. The properties are collectively
referred to as the "Properties".
On March 31, 1997 interests in certain partnerships, properties and limited
liability companies were contributed to the Operating Partnership in exchange
for units of limited partnership interest in the Operating Partnership ("OP
Units"). Certain of these interests are owned by the Operating Partnership after
consummation of the Offering. Simultaneously with such contribution of
interests, the Company issued $4.0 million of notes to certain investors advised
by Morgan Stanley Asset Management, Inc. ("MSAM") which were collateralized by
certain of the Properties. Upon completion of the Offering on October 16, 1997,
the balance on borrowings under the notes of approximately $12.3 million was
converted into shares of common stock of the Company.
As of October 16, 1997, the Company consummated an initial public offering
of 13,817,250 shares of Common Stock (including the exercise of the
underwriters' over-allotment option of 1,802,250 shares), effected concurrent
private placements (the "Concurrent Private Placements") of 1,153,845 shares of
Common Stock and issued 1,949,360 shares of Common Stock in connection with the
purchase of certain properties at a price of $26.00 per share and realized net
proceeds therefrom of approximately of $353.35 million.
Such net proceeds were contributed to the Operating Partnership in
exchange, in part, for the Company's approximate 91.4% interest therein. The
Operating Partnership used the proceeds received from the Company, the $107.0
million net cash proceeds from the Company's term loan facility (the "Term
Loan"), borrowed concurrent with and subsequent to the Offering and
approximately $12.3 million of proceeds received from Morgan Stanley Asset
Management ("MSAM") from the conversion of the Notes into common stock, as
follows: (i) approximately $281.0 million for repayment of certain indebtedness
(including associated prepayment penalties) relating to the Properties and the
partnerships that own the Properties (the "Property Partnerships"); (ii)
approximately $137.0 million to acquire certain equity, debt and fee interests
in the Properties; (iii) approximately $3.1 million to pay for commitment fees
and expenses relating to the Term Loan and the Company's $200.0 million
unsecured line of credit (the "Line of Credit"); (iv) approximately $3.0 million
to pay transfer taxes and other expenses associated with the acquisitions of the
Properties; and (v) the remaining approximately $48.6 million for working
capital.
The Tower Equities management and leasing companies and Properties
Atlantic, Inc. management and leasing company (which, prior to the Offering, was
controlled and operated by Clifford Stein, Managing
F-7
<PAGE> 34
TOWER REALTY TRUST, INC.
AND TOWER PREDECESSOR
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Director, Southeast Region of the Company) contributed an undivided 95% interest
in the assets of such companies to the Operating Partnership which, in turn,
recontributed such assets to Tower Equities Management, Inc. (the "Management
Company") in exchange for 100% of the non-voting stock and 5% of the voting
stock in the Management Company (which entitles the Company to receive 95% of
the dividends of the Management Company).
The Management Company and each of the members of Tower Equities that hold
interests in seven retail properties that continue to be owned by Tower Equities
after the consummation of the Offering (the "Excluded Properties") entered into
management agreements with respect to each of the Excluded Properties. In
consideration for the services to be provided under the management agreements,
the Management Company will receive a property management fee and applicable
construction fees and leasing commissions which will be determined by reference
to existing market rates for similar transactions.
Tower Predecessor
The following entities comprising the Tower Predecessor were controlled and
managed by Tower Equities and Real Estate Corp. and its affiliates (collectively
with its predecessor entities and affiliates, "Tower Equities"), all of which
were controlled by Lawrence H. Feldman, Chairman of the Board, Chief Executive
Officer and President of the Company:
<TABLE>
<CAPTION>
LAWRENCE H.
FELDMAN'S
OWNERSHIP INTEREST LOCATION
------------------ -----------------
<S> <C> <C>
Tower 45........................................ 6% New York City
120 Mineola Boulevard........................... 5% Long Island, NY
Maitland Forum.................................. 15% Maitland, Fl
Maitland Center Parkway (3 properties).......... 90% Maitland, Fl
5750 Major Boulevard (purchased in October
1996)......................................... 6% Orlando, Fl
Management Companies............................ 90% New York City and
Maitland, Fl
</TABLE>
Lawrence H. Feldman owned a majority general partner interest in the
partnerships owning these properties. Accordingly, the Tower Predecessor
financial statements reflect, on a combined basis, 100% of the assets,
liabilities and operations of these properties.
Lawrence H. Feldman held a non-controlling interest in the partnerships
that own the following properties listed in the following table. Lawrence H.
Feldman was a general partner and an affiliate of DRA Advisors, Inc. ("DRA")
which was the managing general partner in each partnership (the "DRA Joint
Ventures"). The Tower Predecessor financial statements reflect the investments
in the DRA Joint Ventures using the equity method of accounting. Upon
consummation of the Offering, the Company purchased all of the partnership
interests in the DRA Joint Ventures.
<TABLE>
<CAPTION>
LAWRENCE H.
FELDMAN'S
OWNERSHIP INTEREST LOCATION
------------------ -----------------
<S> <C> <C>
286 Madison..................................... 3% New York City
290 Madison..................................... 3% New York City
292 Madison..................................... 3% New York City
Corporate Center Building (6 properties)........ 20% Phoenix, AZ
5151 East Broadway.............................. 3% Tucson, AZ
One Orlando Center.............................. 3% Orlando, FL
</TABLE>
F-8
<PAGE> 35
TOWER REALTY TRUST, INC.
AND TOWER PREDECESSOR
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Lawrence H. Feldman also held a 3.8% non-controlling interest in a
partnership controlling the 2800 North Central Avenue Property ("2800 North
Central"). The Tower Predecessor financial statements reflect this investment
using the equity method of accounting. The Company, upon consummation of the
Offering, acquired this interest and the interests of Tower Equities (10%
aggregate interest).
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Principles of Consolidation/Combination
The accompanying consolidated financial statements of the Company reflect
the accounts of the Operating Partnership and its wholly-owned subsidiaries and
majority owned partnerships from March 27, 1997 to December 31, 1997 including
the entities comprising the Tower Predecessor and the DRA Joint Ventures from
the date of acquisition, October 16, 1997. All significant inter-company
balances and transactions have been eliminated in consolidation.
The Company's investments in non-controlled entities and the Company's
investment in the Management Company are reflected using the equity method of
accounting.
The accompanying combined financial statements of Tower Predecessor have
been presented on a combined historical cost basis because of common ownership
and management, and because the assets and liabilities and operations of Tower
Predecessor were the subject of a business combination with the Company and the
Operating Partnership. All significant inter-company transactions have been
eliminated in the combined financial statements.
Basis of Presentation
The Company operations include the results of the Operating Partnership
(including the Management Company on the equity basis of accounting) from March
27, 1997 through December 31, 1997 and the Property operations from October 16,
1997, the date of the Offering, through December 31, 1997. Tower Predecessor's
operations included the management companies operations from January 1, 1997
through March 26, 1997, at which time the Company was formed, and the operations
of the Tower Predecessor Properties from January 1, 1997 through October 15,
1997.
Real Estate
Real estate and leasehold improvements are stated at cost less accumulated
depreciation. Whenever events or changes in circumstances indicate that the
carrying value of an asset may not be recoverable, the Company's and Tower
Predecessor's policy is to assess any impairment in value by making a comparison
of the current and projected cash flows of each property over its remaining
useful life (undiscounted and without interest charges) to the carrying amount
of each property. In cases where the Company and Tower Predecessor do not expect
to recover its carrying costs, the Company and Tower Predecessor recognize an
impairment loss to reflect the property at its estimated fair value. No such
impairment losses have been recognized in these financial statements.
Depreciation on buildings and improvements is provided under the
straight-line method over an estimated useful life of 40 years. Depreciation on
tenant improvements is provided over the lesser of the useful life or the terms
of the related leases. Depreciation on furniture and fixtures is provided under
the straight-line method over an estimated useful life of five to seven years.
Maintenance and repairs are charged to operations as incurred; major
renewals and betterments are capitalized. When assets are sold or retired, their
costs and related accumulated depreciation are removed from the accounts with
the resulting gains or losses reflected in net income (loss).
F-9
<PAGE> 36
TOWER REALTY TRUST, INC.
AND TOWER PREDECESSOR
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Deferred Charges
Deferred financing costs are recorded at cost and are being amortized using
the interest method over the life of the related debt. Leasing commissions are
deferred and amortized over the lesser of the useful life or the terms of the
related leases.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash on hand and short-term, highly
liquid investments that have original maturities of 3 months or less when
purchased. At December 31, 1997 and 1996, the Company and Tower Predecessor had
on deposit with a major financial institution substantially all of its cash and
cash equivalents, which balances at times exceeded insurable limits.
Escrowed Cash
Escrowed cash as of December 31, 1997 and 1996 are comprised of funds held
for the payment of real estate taxes, mortgage interest and other. Of the total
funds held in escrow, approximately $2.3 million are restricted by agreement.
Deferred Real Estate Taxes
Deferred real estate taxes represent a portion of real estate taxes accrued
from 1988 through 1995 for the Tower 45 property which are payable to the taxing
authority commencing on July 1, 1998 in payments of approximately $1.3 million
per year. This liability has been reflected in the Company's balance sheet at
its present value as of the date of the Offering.
Revenue Recognition
The Company and Tower Predecessor, each as lessor, have retained
substantially all of the risks and benefits of the rental Properties and account
for the leases as operating leases.
Rental income is recognized ratably over the terms of the leases. Unbilled
rental revenue (unbilled receivables) represents the excess rental income
recognized on a straight-line basis over minimum rent payments received pursuant
to the terms of individual lease agreements. The unbilled receivable related to
base rental income amounted to $0.9 million and $15.2 million at December 31,
1997 and 1996, respectively, and is included in receivables.
The Company's lease agreements with its tenants provide for tenants to pay
their pro rata share of escalations (including real estate taxes and other
operating expenses) in excess of base amounts, as defined. Total escalations
included in rental income amounted to approximately $1.9 million for the Company
in 1997, and $7.4 million and $8.9 million for Tower Predecessor in 1997 and
1996, respectively.
Management fee income from third party or joint venture properties is
recognized as earned under the terms of the related agreements. Construction
fees are recognized ratably over each project's construction period and leasing
fees are generally recognized upon tenant occupancy of the leased premises
unless such fees are irrevocably due and payable upon lease execution, in which
case recognition occurs on the lease execution date.
Income Taxes
The Company has elected to be taxed as a REIT under Sections 856 through
860 of the Internal Revenue Code of 1986, as amended (the "Code"), commencing
with its short taxable year ended December 31, 1997. As a REIT, the Company
generally will not be subject to federal corporate income tax on its taxable
income
F-10
<PAGE> 37
TOWER REALTY TRUST, INC.
AND TOWER PREDECESSOR
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
that is distributed to its shareholders. A REIT is subject to a number of
organizational and operational requirements, including a requirement that it
currently distribute at least 95% of its annual taxable income.
No provision for income taxes is included in the combined financial
statements of Tower Predecessor since Tower Predecessor's statements combine the
operations and balances of partnerships, which are not directly subject to
income tax. The tax effect of its activities accrues to the individual partners
and/or principals of the respective entity. The Management Company is a legal
entity subject to federal income tax on its taxable income at regular corporate
rates.
Net Income Per Common Share -- Basic and Dilutive
The Company has adopted the provisions of Statement of Financial Accounting
Standard No. 128 ("SFAS 128") "Earnings Per Share". Net income per common share
has been computed by dividing net income applicable to common shareholders by
the weighted average number of common shares outstanding (16,920,455 at December
31, 1997). For the period from the Offering through December 31, 1997, there
were no dilutive securities. The Company has issued stock options at $26 per
share. These options were antidilutive at December 31, 1997.
The OP Units have been excluded from the diluted earnings per share
calculation as there would be no effect on the amounts since the minority
interests' share of income would also be added back to net income.
Distributions
The Company expects to make regular quarterly distributions. Earnings and
profits, which will determine the taxability of distributions to shareholders,
will differ from income reported for financial reporting purposes due to the
differences for federal tax purposes primarily in the estimated useful lives
used to compute depreciation. Distributions declared in 1997 represent an
approximate 84.53% return of capital for federal income tax purposes.
On December 31, 1997, the Company declared a distribution payable in
January 1998 equal to $.3536 per common share and OP Units outstanding at
December 31, 1997. The common shares and OP Units outstanding at December 31,
1997, totaled 16,920,455 and 1,583,640, respectively.
Minority Interest
Minority interest in the Operating Partnership represents the limited
partners' proportionate share of the equity in the Operating Partnership. Income
is allocated to minority partners based on the weighted average percentage
ownership of OP Units throughout the year.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. The most significant estimates and assumptions are related to
the recoverability and depreciable lives of real estate. Actual results could
differ from those estimates.
Recently Issued Accounting Standards
During 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130 "Reporting Comprehensive Income" ("SFAS
130") and No. 131 "Disclosures About
F-11
<PAGE> 38
TOWER REALTY TRUST, INC.
AND TOWER PREDECESSOR
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Segments of an Enterprise and Related Information" ("SFAS 131"), which are
effective for fiscal years beginning after December 15, 1997.
SFAS 130 specifies the presentation and disclosure requirements for
reporting comprehensive income, which includes those items which have been
formerly reported as a component of shareholders' equity. Management believes
that when adopted SFAS 130 will not have a significant impact on the Company's
financial statements.
SFAS 131 establishes the disclosure requirements for reporting segment
information. Management believes that when adopted, SFAS 131 will require the
Company to report additional geographic information based on the Company's major
geographic areas of focus.
During 1998, the SFAS issued Statement of Financial Accounting Standard No.
132, "Employers' Disclosures About Pensions and Other Postretirement Benefits"
("SFAS 132"). This statement changes the current financial statement disclosure
requirements related to pensions, settlements and curtailments of pensions and
postretirement benefits other than pensions. The statement is effective for
fiscal years beginning after December 15, 1997. Management believes that when
adopted, SFAS 132 will not have a significant impact on the Company's financial
statements.
Reclassifications
Certain prior year amounts have been reclassified to conform to the 1997
financial statement presentation.
(3) REAL ESTATE
Real estate consisted of the following at December 31, 1997 and 1996 (in
thousands):
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Land................................................... $140,030 $ 25,662
Building and improvements.............................. 462,842 143,838
Tenant improvements.................................... 17,658 119
Furniture, fixtures, and equipment..................... 27 --
-------- --------
Total............................................. 620,557 169,619
Less: Accumulated depreciation......................... (2,444) (40,555)
-------- --------
$618,113 $129,064
======== ========
</TABLE>
(4) DEFERRED CHARGES AND OTHER ASSETS, NET
Deferred charges and Other Assets consisted of the following at December
31, 1997 and 1996 (in thousands):
<TABLE>
<CAPTION>
1997 1996
------- --------
<S> <C> <C>
Deferred leasing and tenant charges..................... $ 2,939 17,018
Deferred financing costs................................ 4,301 1,049
Brokerage commissions................................... 4,499 7,330
Less: Accumulated amortization.......................... (244) (13,761)
------- --------
$11,495 $ 11,636
======= ========
</TABLE>
F-12
<PAGE> 39
TOWER REALTY TRUST, INC.
AND TOWER PREDECESSOR
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Other assets consisted of the following at December 31, 1997 and 1996 (in
thousands):
<TABLE>
<CAPTION>
1997 1996
------- ------
<S> <C> <C>
Deposits on future acquisitions........................... $ 3,937 $ --
Goodwill, net............................................. 2,990 --
Prepaid real estate tax and other prepaid expenses........ 5,610 --
Other..................................................... -- 3,555
------- ------
$12,537 $3,555
======= ======
</TABLE>
Deposits on future acquisitions at December 31, 1997 consisted of amounts
related to the acquisition of the Blue Cross Building in Arizona which occurred
in January of 1998, and 90 Broad Street, which is currently under contract. Upon
consummation of the acquisitions, these costs will be recorded as part of the
costs of the Properties (see Note 17).
Goodwill relates to the Company's purchase of Properties Atlantic, Inc., a
brokerage and leasing company, as part of the Formation Transactions and is
being amortized over 5 years. The Company has assessed the recoverability of
this goodwill based on the estimated undiscounted cash flows, and has determined
that no impairment write-down is necessary.
(5) RECEIVABLES, NET
Receivables consisted of the following at December 31, 1997 and 1996 (in
thousands):
<TABLE>
<CAPTION>
1997 1996
------ -------
<S> <C> <C>
Due from tenants.......................................... $2,080 $ 2,776
Unbilled rent receivable.................................. 936 15,242
Other miscellaneous receivables........................... 804 --
------ -------
Total................................................ $3,820 $18,018
====== =======
</TABLE>
Included within other miscellaneous receivables is an amount due from an
affiliated Company of $.35 million.
(6) INVESTMENT IN JOINT VENTURE AND UNCONSOLIDATED SUBSIDIARIES
Included in Investments in joint venture and unconsolidated subsidiaries at
December 31, 1997 are the Company's investments in 2800 North Central and the
Management Company. The Company accounts for its 95% investment in the
Management Company and its 10% investment in 2800 North Central using the equity
method of accounting, and thus reports its share of income and losses based on
its ownership interest in the respective entities. Additionally, prior to the
date of the Offering, the Company recorded its 18% investment in the DRA Joint
Ventures using the equity method of accounting.
At December 31, 1997 and 1996 these investments have the following carrying
amounts (in thousands):
<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
Investment in TEMI......................................... $ 400 $ --
Investment in 2800 North Central........................... 2,011 764
Investment in the DRA Joint Ventures....................... -- 4,552
------ ------
Total................................................. $2,411 $5,316
====== ======
</TABLE>
F-13
<PAGE> 40
TOWER REALTY TRUST, INC.
AND TOWER PREDECESSOR
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(7) DEBT ON REAL ESTATE
Debt on real estate consisted of the following at December 31, 1997 and
1996 (in thousands):
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Term loan.............................................. $107,000 --
Corporate Center....................................... 21,000 --
Corporate Center....................................... 990 --
810 Seventh Avenue..................................... 100,000 --
Various mortgage debt.................................. -- $202,982
-------- --------
Total Mortgage Debt Payable............................ $228,990 $202,982
======== ========
</TABLE>
The Operating Partnership has entered into a $107.0 million seven-year Term
Loan with Merrill Lynch Credit Corporation and borrowed approximately $54.0
million under such facility at the closing of the Offering and an additional
$53.0 million subsequent to the Offering but prior to December 31, 1997.
Interest on the Term Loan was fixed at a rate equal to .9% in excess of
seven-year United States Treasury Notes at the closing of the Offering or 6.82%
as of December 31, 1997. Interest is due monthly. This debt is collateralized by
the One Orlando and Tower 45 properties. Mortgage fees to obtain such Term Loan
amounted to approximately $2.0 million, which are being amortized on a straight
line basis which approximates the interest method over the term of the loan.
The year end interest rates on the Corporate Center debt is 7.55% and
8.37%, related to the $21.0 million and $.990 million, respectively. Interest is
due monthly and principal is due on January 1, 2006. This debt is collateralized
by the Corporate Center properties.
The mortgage debt on 810 Seventh Avenue is collateralized by the property.
The interest rate is 6.72% as of December 31, 1997. This debt matures on June
30, 1998. The Company intends to refinance this debt prior to the maturity date.
Mortgage fees to obtain such term loan amounted to approximately $1.2 million,
which are being amortized on a straight line basis, which approximates the
interest method, over the one-year term.
The Company has entered into the $200.0 million unsecured Line of Credit
with Merrill Lynch Capital Corporation. The Line of Credit may be used, among
other things, to finance its acquisition of additional office properties, to
refinance existing indebtedness and for general working capital requirements. No
amounts were outstanding on the Line of Credit as of December 31, 1997.
Commitment fees to obtain such line amounted to approximately $1.1 million,
which are being amortized on a straight-line basis, which approximates the
interest method, over the three-year term of the credit facility.
In conjunction with the line of credit, the Company must maintain certain
financial ratios:
i. Total outstanding indebtedness must not exceed 55% of Total Value
(as defined in the Line of Credit Agreement) during the first year of the
facility and must not exceed 50% thereafter.
ii. Collateral indebtedness must not exceed 40% of Total Value (as
defined) during the first year of the facility and 35% thereafter;
iii. Recourse Indebtedness cannot exceed 5% of Total Value (as
defined).
iv. Other financial covenants that must be met by the Company include
interest expense and fixed charges to debt ratios, among others.
As of December 31, 1997, the Company has complied with the financial debt
covenants.
As a general policy, the Company intends to maintain a debt policy limiting
the Company's total consolidated indebtedness plus its pro rata share of joint
venture debt to 50% of the Company's total market
F-14
<PAGE> 41
TOWER REALTY TRUST, INC.
AND TOWER PREDECESSOR
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
capitalization. As of December 31, 1997 the debt to total market capitalization,
including the Company's 10% interest in the debt of 2800 North Central, was 36%.
Principal repayments of debt on real estate at December 31, 1997, are due
approximately as follows (in thousands):
<TABLE>
<S> <C>
Years ending December 31:
1998.............................................. $100,298
1999.............................................. 319
2000.............................................. 342
2001.............................................. 366
2002.............................................. 391
Thereafter........................................ 127,274
--------
$228,990
========
</TABLE>
The mortgage debt as of December 31, 1996 related to mortgage debt at
interest rates ranging from 5.50% to 9.51%. This debt was collateralized by
certain assets of Tower Predecessor and was primarily extinguished prior to or
in conjunction with the Offering.
(8) ACCOUNTS PAYABLE AND OTHER LIABILITIES
Accounts payable and other liabilities consisted of the following at
December 31, 1997 and 1996 (in thousands):
<TABLE>
<CAPTION>
1997 1996
------ -------
<S> <C> <C>
Accrued interest.......................................... $ 748 $ 6,022
Accounts payable.......................................... 4,498 3,336
Advanced rent and deposits................................ 836 2,322
Deferred income........................................... 1,412 1,187
------ -------
$7,494 $12,867
====== =======
</TABLE>
Included within accounts payable is $.37 million due to an affiliated
Company.
(9) LEASING ACTIVITIES AND CONCENTRATION OF CREDIT AND MARKET RISK
The future minimum lease payments to be received by the Company as of
December 31, 1997, under non-cancelable operating leases, which expire on
various dates through 2011, are as follows:
<TABLE>
<CAPTION>
YEARS ENDING DECEMBER 31:
-------------------------
<S> <C>
1998.............................................. $ 80,388
1999.............................................. 78,116
2000.............................................. 69,705
2001.............................................. 61,476
2002.............................................. 52,622
Thereafter........................................ 139,183
--------
$481,490
========
</TABLE>
F-15
<PAGE> 42
TOWER REALTY TRUST, INC.
AND TOWER PREDECESSOR
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The geographic concentration of the future minimum lease payments to be
received is detailed as follows:
<TABLE>
<CAPTION>
LOCATION AMOUNT
-------- --------
<S> <C>
New York, New York................................ $349,811
Phoenix/Tucson, Arizona........................... 51,512
Orlando, Florida.................................. 80,167
--------
$481,490
========
</TABLE>
Of the Company's total future minimum lease payments as of December 31,
1997, approximately 73% will be derived from New York properties. Approximately
61% of the Company's rental income for the period October 16, 1997 through
December 31, 1997 was generated from the New York Properties.
No one tenant represents more than 5% of the Company's future minimum
rentals.
(10) SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
In connection with the Formation Transactions the Company entered into the
following non-cash investing and financing activities:
<TABLE>
<CAPTION>
AMOUNT
-------
<S> <C>
Mortgage debt assumed....................................... $56,624
OP units and restricted stock issued for acquisitions of the
Tower Predecessor properties and the DRA Joint Venture
properties................................................ $40,954
OP units issued for the purchase of Properties Atlantic,
Inc....................................................... $ 3,120
OP units issued for a portion of the Company's 10% interest
in 2800 North Central..................................... $ 1,173
Assumption of deferred real estate tax liability related to
Tower 45.................................................. $ 9,758
Conversion of MSAM debt to restricted stock................. $12,299
</TABLE>
In addition to the above non-cash activities related to the formation
transactions, during 1997, the Company declared a dividend of approximately
$6,543,000 which was paid on January 15, 1998.
(11) RELATED PARTY TRANSACTIONS
Under the terms of various management agreements, the Company and Tower
Predecessor receive cost reimbursements and property management, leasing and
tenant service fees from certain affiliates in which Tower Equities have
ownership interests. Cost reimbursements are comprised primarily of salary and
employee benefit recoveries and reimbursements of certain administrative costs.
Fees and cost reimbursements derived from these agreements totaled approximately
$0.2 million and $2.2 million for the period from January 1, 1997 through
October 15, 1997 and for the year ended December 31, 1996, respectively.
(12) SHAREHOLDERS' EQUITY
Preferred Stock
The Board of Directors is authorized to provide for the issuance of
50,000,000 preferred shares in one or more series, to establish the number of
shares in each series and to fix the designation, powers, preferences, and
rights of each such series and the qualifications, limitations or restrictions
thereof. As of December 31, 1997 no preferred shares were issued.
F-16
<PAGE> 43
TOWER REALTY TRUST, INC.
AND TOWER PREDECESSOR
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Partnership Operating Units
The outstanding OP Units are redeemable at the option of the holder for a
like number of common shares, or at the option of the Company, the cash
equivalent thereof. Total OP Units outstanding at December 31, 1997, were
1,583,640.
Share-Based Compensation Plans
The Company has two fixed option plans which reserve shares of Common Stock
for issuance to executives, key employees, and directors.
During 1997 the Company adopted the disclosure-only provision of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS
123"). Accordingly, no compensation cost has been recognized for the options
described above because the exercise price of the options equaled the fair
market value on the date of the grant. Had the compensation cost for these
options been determined based on the fair value at the grant date consistent
with the provisions of SFAS No. 123, the Company's net income and net income per
common share for 1997 would have been reduced to the following pro forma
amounts:
<TABLE>
<CAPTION>
NET INCOME PER
NET INCOME COMMON SHARE
---------- --------------
<S> <C> <C>
Period from March 27, 1997 through December 31, 1997....... $3,796 $0.22
</TABLE>
The fair value of each share option granted is estimated on the date of
grant using the Black-Scholes option-pricing model with the following
weighted-average assumptions: dividend yield of 6.4%; different risk-free
interest rate of 5.94%, options with expected lives of 4 years; and volatility
of 15.0% for all grants.
The effects of applying SFAS 123 in this pro forma disclosure are not
indicative of future amounts. The Company anticipates making awards in the
future under its share-based compensation plans.
A summary of the status of the Company's share options as of December 31,
1997, and the changes during the period ended on December 31, 1997 is presented
below:
<TABLE>
<CAPTION>
1997
-----------------------------
# SHARES OF WEIGHTED
UNDERLYING AVERAGE
OPTIONS EXERCISE PRICE
----------- --------------
<S> <C> <C>
Outstanding at beginning of the year................ -- --
Granted............................................. 975,000 $26
Exercised........................................... -- --
Forfeited........................................... -- --
Expired............................................. -- --
------- ---
Outstanding at end of year.......................... 975,000 $26
======= ===
Weighted-average fair value of options granted
during the year................................ 2.27
</TABLE>
1997 Plan
The 1997 plan provides for the granting of stock options, restricted stock
and performance shares and incentive awards from time to time with respect to up
to a number of shares of Common Stock equal to 9.5% of the total number of
issued and outstanding shares of Common Stock (on a fully diluted basis the
exchange of all OP Units for shares of Common Stock) to executive or other key
employees of the Company. Stock options may be granted in the form of "incentive
stock options" or non-statutory stock options, and are
F-17
<PAGE> 44
TOWER REALTY TRUST, INC.
AND TOWER PREDECESSOR
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
exercisable for up to 10 years following the date of the grant. The exercise
price of each option must be equal to or greater than the fair value of the
Common Stock on the grant date. These options vest in three annual instalments
beginning on the first anniversary of the date of grant.
Directors' Plan
A maximum of 200,000 shares of Common Stock will be issuable under the
Directors' Plan to non-employee directors. The Directors' Plan will provide for
the grant of options to purchase Common Stock.
The Directors' Plan provides that each eligible director who is a member of
the Board of Directors as of the date that the registration statement relating
to the Offering is declared effective by the Securities and Exchange Commission
(the "Commission") will be awarded nonqualified options to purchase 20,000
shares of Common Stock on the closing date of the Offering (each such director,
a "Founding Director"). Each eligible director who is not a Founding Director (a
"Non-Founding Director") will receive non-qualified options to purchase 20,000
shares of Common Stock on the date of the commencement of the term of office of
such Non-Founding Director. The options granted Founding Directors upon
effectiveness of the registration statement relating to the Offering will have
an exercise price equal to the initial public offering price and will vest in
three annual instalments beginning on the first anniversary of the date of
grant, subject to the Director's continuous service through such vesting date.
The exercise price of options under future grants will be 100% of the fair
market value of the Common Stock on the date of grant. Upon termination of
service as a director, options which have not vested will be forfeited and
vested options may be exercised until they expire.
As of December 31, 1997, there were 975,000 options outstanding with a
weighted-average remaining contractual life of 9.7 years and a weighted-average
exercise price of $26. None of these options were exercisable as of December 31,
1997.
(13) COMMITMENTS AND CONTINGENCIES
Legal Matters
As a result of its acquisition of the Properties, the Company is party to
and has become a successor party-in-interest to certain legal proceedings
arising in the ordinary course of the business. The Company believes it has
adequate insurance and does not expect that these proceedings, in the aggregate,
will have a material adverse effect on the financial position, operating
results, or cash flows of the Company.
Air Rights and Ground Leases
On November 30, 1980 Tower Predecessor entered into an air rights lease
agreement with the Village of Minneola which expires in May 2012, subject to the
Company's right to extend the term pursuant to two 30-year renewal options. The
lease provides for a current annual lease payment of $33,000, increasing to
$46,500 in 2001.
On November 30, 1986, Tower Predecessor entered into an agreement to lease
for 250 years the air and corresponding development rights adjacent to one of
the properties. The Operating Partnership has an option that is exercisable from
November 1, 1996 through October 31, 2001 to acquire the lessor's site for a
price, as of July 31, 1997, of $11 million. This price increases through the
expiration of the option on October 31, 2001, at a rate of 50% of the percentage
increase in the consumer price index as defined in the lease (approximately $13
million as of July 31, 1997). Upon the Company's exercise of this option, its
obligation to pay rent under the air rights lease would automatically be
eliminated.
F-18
<PAGE> 45
TOWER REALTY TRUST, INC.
AND TOWER PREDECESSOR
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Year 2000
The year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Any of the Company's
computer programs that have date-sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000. This could result in a system
failure or miscalculations causing disruptions of operations, including, among
other things a temporary inability process transactions, send invoices, or
engage in similar normal business activity.
The Company is currently in the process of completing its assessment of the
impact of the year 2000 on its computer systems and property operations. Based
on the results of their preliminary assessment, the Company does not believe
that the year 2000 will have a material impact on the results of operations,
cash flows or financial position of the Company.
Environmental Matters
The Company is not aware of any environmental issues at any of its
properties. The Company believes it has sufficient insurance coverage at each of
its properties.
Other
The Company is obligated, in accordance with its lease provisions, to
provide certain tenants with tenant improvements.
(14) SAVINGS PLAN
Effective January 1, 1994, Tower Predecessor adopted a 401(k) Savings Plan
(the "Plan") for its employees. Under the Plan, as amended, employees, age 21
and older, are eligible to participate in the Plan immediately upon employment.
Base salary and wages are eligible for contribution to the Plan.
Participants may make salary deferral contributions from 1% to 15% per payroll
period.
The Plan provides that matching employer contributions are to be determined
at the discretion of Tower Predecessor. Pursuant to the Offering, the Plan was
transferred to the Company. There were no discretionary matching contributions
for the years ended December 31, 1997, 1996 and 1995.
Participants are immediately vested in their pre-tax contributions, and are
vested in the Company's and Tower Predecessor's discretionary matching
contributions after two years of service.
(15) FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company is required to disclose the fair value of financial instruments
for which it is practicable to estimate that value. The Company determines the
fair value based on the discounted future cash flows at a discount rate that
approximates the Company's effective current borrowing rate. Except for the
items noted below, the fair value of the Company's financial instruments is not
significantly different than their carrying values at December 31, 1997.
<TABLE>
<CAPTION>
DECEMBER 31, 1997 DECEMBER 31, 1997
FAIR VALUE CARRYING VALUE
----------------- -----------------
(IN THOUSANDS)
<S> <C> <C>
Term Loan.................................. $107,977 $107,000
</TABLE>
F-19
<PAGE> 46
TOWER REALTY TRUST, INC.
AND TOWER PREDECESSOR
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(16) PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
Due to the impact of the Offering, related formation transactions, and the
22 properties acquired in conjunction with and subsequent to the Offering, the
historical results of operations are not indicative of future results of
operations. The following Pro Forma Condensed Statements of Income for the years
ended December 31, 1997 and 1996 are presented as if the Offering and related
formation transactions and property acquisitions had occurred at January 1, 1997
and January 1, 1996. The pro forma information is based upon historical
information and does not purport to present what actual results would have been
had such transactions, in fact, occurred at January 1, 1997 and January 1, 1996,
or to project results for any future periods.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1997 1996
-------- --------
(IN THOUSANDS, EXCEPT
FOR PER SHARE DATA)
<S> <C> <C>
Total revenues.............................................. $94,107 $89,401
Net income.................................................. $17,984 $16,060
Net income per common share -- basic and dilutive........... $ 1.06 $ 0.95
</TABLE>
(17) SUBSEQUENT EVENTS
On January 15, 1998, the Company completed its acquisition of a building in
Arizona for a purchase price of $16.9 million. The Company funded this purchase
through a drawdown on its Line of Credit. In addition, the Company entered into
an agreement to purchase a Manhattan building for approximately $34.0 million.
In addition, the Company drew down an additional $4.5 million on the Line
of Credit to pay closing costs on its acquisition of 810 Seventh Avenue.
F-20
<PAGE> 47
SCHEDULE III
TOWER REALTY TRUST, INC.
AND PREDECESSOR COMPANY
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
INITIAL COST
--------------------------- GROSS AMOUNT
COSTS CARRIED AT CLOSE OF PERIOD
BUILDING CAPITALIZED ------------
AND SUBSEQUENT LAND AND
PROPERTY NAME LOCATION ENCUMBRANCES LAND IMPROVEMENTS TO ACQUISITION IMPROVEMENTS
------------- ------------------ ------------ ------------ ------------ -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
286 Madison Avenue New York, New York $ -- $ 2,226,307 $ 8,754,798 $ 44,793 $ 2,294,744
290 Madison Avenue New York, New York -- 1,137,721 4,550,886 2,001 1,137,721
292 Madison Avenue New York, New York -- 5,089,907 20,359,628 258,668 5,126,331
Tower 45 New York, New York 67,000,000 23,790,993 108,722,331 167,000 23,757,993
100 Wall Street New York, New York -- 11,793,632 47,074,876 0 11,818,013
810 Seventh Avenue New York, New York 100,000,000 30,317,000 119,826,465 0 30,317,000
120 Mineola Blvd. Mineola, New York -- 2,740,776 11,862,871 2,376 2,740,776
5151 East Broadway Tucson, Arizona -- 6,965,623 16,253,125 0 6,860,762
Corporate Center Phoenix, Arizona 21,989,769 9,730,139 38,920,556 2,765 9,730,139
Century Plaza Phoenix, Arizona -- 2,279,974 9,119,896 142,065 2,311,085
Black Canyon Loop Phoenix, Arizona -- 11,676,671 -- 0 11,676,671
One Orlando Center Orlando, Florida 40,000,000 23,849,316 55,648,405 62,637 23,849,316
5750 Major Blvd. Orlando, Florida -- 1,565,009 6,795,112 1,972,763 1,565,009
Maitland Forum Maitland, Florida -- 5,708,302 24,886,810 117,944 5,685,810
Maitland West Maitland, Florida -- 1,158,595 4,978,040 285 1,158,595
------------ ------------ ------------ ---------- ------------
$228,989,769 $140,029,965 $477,753,799 $2,773,297 $140,029,965
============ ============ ============ ========== ============
<CAPTION>
GROSS AMOUNT
CARRIED AT CLOSE OF PERIOD
---------------------------
BUILDING AND ACCUMULATED DATE OF DATE DEPRECIABLE
PROPERTY NAME IMPROVEMENTS TOTAL DEPRECIATION CONSTRUCTION ACQUIRED (YEARS)
------------- ------------ ------------ ------------ ------------ ----------------- -----------
<S> <C> <C> <C> <C> <C> <C>
286 Madison Avenue $ 8,799,591 $ 11,094,335 $ 46,381 1929 October 16, 1997 S/L 40
290 Madison Avenue 4,552,887 5,690,608 23,703 1929 October 16, 1997 S/L 40
292 Madison Avenue 20,618,296 25,744,627 106,146 1955 October 16, 1997 S/L 40
Tower 45 108,889,331 132,647,324 974,770 1987 October 16, 1997 S/L 40
100 Wall Street 47,074,876 58,892,889 245,229 1975 October 16, 1997 S/L 40
810 Seventh Avenue 119,826,465 150,143,465 0 1970 December 31,1997 S/L 40
120 Mineola Blvd. 11,865,247 14,606,023 111,955 1983 October 16, 1997 S/L 40
5151 East Broadway 16,253,125 23,113,887 84,760 1975 October 16, 1997 S/L 40
Corporate Center 38,923,321 48,653,460 202,862 1975 October 16, 1997 S/L 40
Century Plaza 9,261,961 11,573,046 48,277 -- October 16, 1997 S/L 40
Black Canyon Loop -- 11,676,671 0 N/A November 24,1997 N/A
One Orlando Center 55,711,042 79,560,358 289,835 1988 October 16, 1997 S/L 40
5750 Major Blvd. 8,767,875 10,332,884 60,988 1972 October 16, 1997 S/L 40
Maitland Forum 25,004,754 30,690,564 202,847 1986 October 16, 1997 S/L 40
Maitland West 4,978,325 6,136,920 46,393 1981 October 16, 1997 S/L 40
------------ ------------ ----------
$480,527,096 $620,557,061 $2,444,146
============ ============ ==========
</TABLE>
F-21
<PAGE> 48
TOWER REALTY TRUST, INC.
AND TOWER PREDECESSOR
A summary of activity for real estate and accumulated depreciation is as
follows:
<TABLE>
<CAPTION>
MARCH 27, JANUARY 1,
1997- 1997-
DECEMBER 31, OCTOBER 15,
1997 1997 1996 1995
------------ ----------- -------- --------
<S> <C> <C> <C> <C>
Real estate:
Balance at beginning of year............... -- $169,619 $163,879 $163,326
Additions to and improvement of real
estate.................................. 620,557 3,350 6,509 967
Disposition of real estate................. -- (769) (414)
------- -------- -------- --------
Balance at end of year.................. 620,557 $172,969 $169,619 $163,879
======= ======== ======== ========
Accumulated depreciation:
Balance at beginning of year............... -- $ 40,555 $ 35,741 $ 30,422
Depreciation expense....................... 2,444 4,590 5,583 5,733
Accumulated depreciation on real estate
sold.................................... -- (769) (414)
------- -------- -------- --------
Balance at end of year.................. 2,444 $ 45,145 $ 40,555 $ 35,741
======= ======== ======== ========
</TABLE>
F-22
<PAGE> 49
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
TOWER REALTY TRUST, INC.
(Registrant)
By: /s/ Lawrence H. Feldman
------------------------------------------
Lawrence H. Feldman, Chairman of the Board
Chief Executive Officer and President
Date: March 30, 1998
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ Lawrence H. Feldman Chairman of the Board, Chief March 30, 1998
- --------------------------------------------------- Executive Officer and President
Lawrence H. Feldman (principal executive officer)
/s/ Thomas Woodward Controller (principal financial March 30, 1998
- --------------------------------------------------- officer)
Thomas Woodward
/s/ Robert L. Cox Executive Vice President, Chief March 30, 1998
- --------------------------------------------------- Operating Officer and Director
Robert L. Cox
/s/ Stephen B. Siegel Director March 30, 1998
- ---------------------------------------------------
Stephen B. Siegel
/s/ Esko I. Korhonen Director March 30, 1998
- ---------------------------------------------------
Esko I. Korhonen
/s/ Robert M. Adams Director March 30, 1998
- ---------------------------------------------------
Robert M. Adams
/s/ Richard M. Wisely Director March 30, 1998
- ---------------------------------------------------
Richard M. Wisely
/s/ Lester S. Garfinkel Director March 30, 1998
- ---------------------------------------------------
Lester S. Garfinkel
/s/ Francis X. Tansey Director March 30, 1998
- ---------------------------------------------------
Francis X. Tansey
/s/ Russell C. Platt Director March 30, 1998
- ---------------------------------------------------
Russell C. Platt
</TABLE>
S-1
<PAGE> 50
EXHIBIT INDEX
The following exhibits are filed as part of this Annual Report on Form
10-K.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
1.1** Form of Underwriting Agreement
2.1+ Sale-Purchase Agreement, dated December 31, 1997, between
810 Partners LLC and BHONE Corp., as sellers, and 810 7th
Avenue, L.P., as purchaser
2.2+ Loan Agreement, dated December 31, 1997, by and between
Credit Suisse First Boston Mortgage Capital LLC, as lender,
and 810 7th Avenue, L.P., as borrower
2.3+ Consolidated, Amended and Restated Mortgage Note, dated
December 31, 1997, between Credit Suisse First Boston
Mortgage Capital LLC and 810 7th Avenue, L.P.
2.4+ Agreement of Principal, dated December 31, 1997, by Tower
Realty Operating Partnership, L.P. and Credit Suisse First
Boston Mortgage Capital LLC
3.1** Form of Amended and Restated Articles of Incorporation of
the Company
3.2** Form of Amended and Restated By-Laws of the Company
4.1** Form of Common Stock Certificate for the Company
10.1* Form of Amendment and Restatement of Agreement of Limited
Partnership of Tower Realty Operating Partnership, L.P., by
and among Tower Realty Trust, Inc., as general partner,
Lawrence H. Feldman, as initial Limited Partner, and the
Persons set forth in Exhibit A thereto
10.2* Form of Exchange Rights Agreement
10.3* Form of Registration Rights Amendment
10.4* Form of Lock-up Agreement
10.5** Form of Tower Realty Trust, Inc. 1997 Incentive Plan
10.6** Form of Tower Realty Trust, Inc. Non-Employee Directors'
Incentive Plan
10.7*** Form of Employment Agreement between the Company and
Lawrence H. Feldman
10.8*** Form of Employment Agreement between the Company and Robert
L. Cox
10.9*** Form of Employment Agreement between the Company and Joseph
D. Kasman
10.10** Form of Indemnification Agreement between the Company and
its executive officers and directors
10.11** Purchase Agreement, dated as of March 31, 1997, among Tower
Realty Trust, Inc., Tower Realty Operating Partnership, L.P.
and each of the investors signatory thereto, as amended by
the Purchase Agreement Supplement dated as of May 15, 1997,
Purchase Agreement Supplement No. 2, dated as of May 29,
1997, Purchase Agreement Supplement No. 3, dated as of May
29, 1997, Purchase Agreement Supplement No. 4, dated as of
July 9, 1997, Purchase Agreement Supplement No. 5, dated as
of July 31, 1997
10.12** Contribution Agreement (OP Units-CXX Mineola Limited
Partnership) by and among Tower Realty Operating
Partnership, L.P. and Jeffrey Feldman
10.13** Amendment to Contribution Agreement by and among Tower
Realty Operating Partnership, L.P. and Jeffrey Feldman
10.14** Second Amendment to Contribution Agreement by and between
Tower Realty Operating Partnership, L.P. and Jeffrey Feldman
10.15** Contribution Agreement (Cash-Stellar Associates) by and
among Tower Realty Operating Partnership, L.P. and Laurie
Jacoby
10.16** First Amendment to Contribution Agreement by and between
Tower Realty Operating Partnership, L.P. and Laurie Jacoby
</TABLE>
<PAGE> 51
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
10.17** Contribution Agreement (OP Units) by and among Tower Realty
Operating Partnership, L.P. and Bama Equities, Inc.
10.18** Amendment to Contribution Agreement by and among Tower
Realty Operating Partnership, L.P. and Bama Equities, Inc.
10.19** Second Amendment to Contribution Agreement by and between
Tower Realty Operating Partnership, L.P. and Bama Equities,
Inc.
10.20** Contribution Agreement (Cash-Stellar Associates) by and
among Tower Realty Operating Partnership, L.P. and Valerie
Herts Kalnitzky
10.21** First Amendment to Contribution Agreement by and between
Tower Realty Operating Partnership, L.P. and Valerie Hertz
Kalnitzky
10.22** Assignment Agreement by Charles M. Kotick, as nominee (CXX)
10.23** Contribution Agreement by and between Tower Realty Operating
Partnership, L.P. and Allan B. Mendelsohn, as Chapter 7
Trustee of Edward Feldman
10.24** Option Agreement, dated as of July 28, 1997, by and between
Tower Realty Operating Partnership, L.P. and Dana II
Associates Limited Partnership
10.25** Option Agreement, dated July 28, 1997, by and between Tower
Realty Operating Partnership, L.P. and Tower 45 Ventures
Limited Partnership
10.26** Option Agreement, dated July 31, 1997, by and between Tower
Realty Operating Partnership, L.P. and Feldman Tower 45,
Inc.
10.27** Contribution Agreement between Maitland Property Investors,
Limited and Tower Realty Operating Partnership, L.P., dated
as of August 4, 1997
10.28** Non-Competition Agreement, dated as of August 4, 1997 among
Tower Realty Operating Partnership L.P., Properties
Atlantic, Inc., Clifford Stein and Reid Berman
10.29** Assets Contribution Agreement, dated as of August 4, 1996,
between Tower Realty Operating Partnership, L.P., and
Properties Atlantic, Inc., Clifford Stein, and Reid Berman
10.30** Option Agreement, dated as of July 28, 1997, by and between
Tower Realty Operating Partnership, L.P. and Stellar
Associates
10.31** Option Agreement, dated as of July 28, 1997, by and between
Tower Realty Operating Partnership, L.P. and Carlyle
Industries, Inc.
10.32** Option Agreement, dated as of July 31, 1997, by and between
Tower Realty Operating Partnership, L.P. and 120 West 45th
Street Associates
10.33** Option Agreement, dated as of July 29, 1997, by and between
Tower Realty Operating Partnership, L.P. and Richard Cooke,
Craig Cooke and Brian Cooke
10.34** Option Agreement, dated as of July 28, 1997, by and between
Tower Realty Operating Partnership, L.P. and Charles B.
Hickcox
10.35** Option Agreement, dated as of July 31, 1997, by and between
Tower Realty Operating Partnership, L.P. and Hazama T-45
10.36** Option Agreement, dated as of July 25, 1997, by and between
Tower Realty Operating Partnership, L.P. and Leo V. Berger
10.37** Omnibus Option Agreement, dated as of July 31, 1997, by and
between Tower Realty Operating Partnership, L.P. and Shoen
U.S.A. Inc.
10.38** Option Agreement, dated as of July 28, 1997, by and among
Tower Realty Operating Partnership, L.P., Tower Equities
Management, Inc. and Tower Equities and Realty Corp., CXX
Mineola Management Corp., Forum Management and Realty Corp.,
Madison 40/41 Management Corp., Tower 45 Asset Management
Corp. and SJP Realty Corp.
</TABLE>
<PAGE> 52
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
10.39** Contribution Agreement by and between Reid Berman and Tower
Realty Operating Partnership, L.P. dated as of July 31, 1997
10.40** Purchase Agreement by and among Tower Realty Operating
Partnership, L.P. and Anthony DiLeonardo dated as of July
31, 1997, as amended by Amendment No. 1 to Anthony
DiLeonardo Purchase Agreement, dated as of September 18,
1997
10.41** Purchase Agreement by and among Tower Realty Operating
Partnership, L.P. and Carmela Carrano dated as of July 31,
1997, as amended by Amendment No. 1 to Carmela Carrano
Purchase Agreement, dated as of September 18, 1997
10.42** Contribution Agreement by and between Richard Wisely and
Tower Realty Operating Partnership, L.P. dated as of July
31, 1997
10.43** Contribution Agreement by and between Lawrence Stein and
Tower Realty Operating Partnership, L.P. dated as of July
31, 1997
10.44** Contribution Agreement by and between Lawrence H. Feldman
and Tower Realty Operating Partnership, L.P. dated as of
July 31, 1997
10.45** Contribution Agreement by and between Clifford L. Stein and
Tower Realty Operating Partnership, L.P. dated as of July
31, 1997
10.46** Contribution Agreement by and between Robert Adams and Tower
Realty Operating Partnership, L.P. dated as of July 31, 1997
10.47** Contribution Agreement by and between Eric Reimer and Tower
Realty Operating Partnership, L.P. dated as of July 31, 1997
10.48** Contribution Agreement by and between Reuben Friedberg and
Tower Realty Operating Partnership, L.P. dated as of July
31, 1997
10.49** Contribution Agreement by and between Joseph Kasman and
Tower Realty Operating Partnership, L.P. dated as of July
31, 1997
10.50** Contribution Agreement by and between Robert Cox and Tower
Realty Operating Partnership, L.P. dated as of July 31, 1997
10.51** Contribution Agreement, dated as of July 31, 1997, by and
among Tower Realty Operating Partnership, L.P. and Joseph
Kasman
10.52** Option Agreement, dated as of May 8, 1997, by and among
Tower Realty Operating Partnership, L.P. and Stanley B. Grey
10.53** Option Agreement, dated as of May 8, 1997, by and among
Tower Realty Operating Partnership, L.P. and Michael C.
Zerner
10.54** Letter Agreement, dated as of July 28, 1997, between Tower
Realty Trust, Inc., Tower Realty Operating Partnership,
L.P., General Electric Capital Corporation, General Electric
Real Estate Equities, Inc., GENEL Company, Inc. and GEBAM,
Inc.
10.55** Contribution Agreement by and among Tower Realty Trust,
Inc., Tower Realty Operating Partnership, L.P. and DRA
Opportunity Fund
10.56** Contribution Agreement by and among Tower Realty Trust,
Inc., Tower Realty Operating Partnership, L.P. and Office
Invest Sub LLC
10.57** Supplement and Amendment, dated as of September 11, 1997, to
the Contribution Agreement by and among Tower Realty Trust,
Inc., Tower Realty Operating Partnership, L.P. and Office
Invest Sub LLC, as parties to the original Contribution
Agreement, and Feldman MOT Portfolio Corp., Feldman FSA
Corp., FSA Associates, L.P. and Lawrence H. Feldman
10.58** Purchase and Sale Agreement, dated as of March 31, 1997, by
and between Tower Equities and Realty Corp. and Tower Realty
Operating Partnership, L.P.
</TABLE>
<PAGE> 53
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
10.59** Purchase and Sale Agreement, dated as of September 11, 1997,
by and between 100 Wall LLC and Tower Realty Operating
Partnership, L.P.
10.60*** Mortgage Loan Commitment, dated as of October 4, 1997, by
and between Merrill Lynch Credit Corporation and one or more
subsidiaries of Tower Realty Operating Partnership, L.P.
10.61*** Form of Financial Advisory Fee Agreement by and between
Merrill Lynch, Pierce, Fenner & Smith Incorporated, Tower
Realty Trust, Inc. and Tower Realty Operating Partnership,
L.P.
10.62*** Form of Supplemental Representations, Warranties and
Indemnity Agreement by and among Lawrence H. Feldman, Robert
L. Cox, Joseph D. Kasman, Eric S. Reimer, Reuben Friedberg
and Tower Realty Operating Partnership, L.P. and Tower
Realty Trust, Inc.
10.63*** Line of Credit Commitment, dated as of October 4, 1997, by
and between Merrill Lynch Capital Corporation and Tower
Realty Operating Partnership, L.P. and Tower Realty Trust,
Inc.
10.64** Purchase and Sale Agreement, dated as of July 25, 1997, by
and between RSH Associates, Joel Wiener, and Lawrence H.
Feldman
10.65** Option Agreement, dated as of July 31, 1997, by and between
Tower Realty Operating Partnership, L.P. and Carmela
Carrano, as amended by Amendment No. 1 to Option Agreement,
dated as of September 18, 1997
10.66** Option Agreement, dated as of July 31, 1997, by and between
Tower Realty Operating Partnership, L.P. and Anthony
DiLeonardo, as amended by Amendment No. 1 to Option
Agreement, dated as of September 18, 1997
10.67*** Option Agreement, dated as of September 27, 1997, by and
between Orlando Option Holding, L.L.C. and Tower Realty
Operating Partnership. L.P.
10.68*** Assignment of Real Estate Agreement, dated as of September
24, 1997, by and between Tower Equities and Realty Corp. and
Tower Realty Operating Partnership, L.P.
10.69*** Third Amendment to Escrow Instructions and Addendum thereto
and Option Agreement, dated as of July 23, 1997, by and
between Beardsley and I-17, L.L.C and Deer Valley Towne
Center L.L.C and Crystal, Inc.
10.70*** Phoenix Land Parcel Option Contract, dated as of September
12, 1997, by and between Crystal, Inc. and Tower Realty
Operating Partnership, L.P.
10.71*** Form of Acquisition Advisory Fee Agreement
10.72**** Stock Purchase Agreement, dated as of September 19, 1997, by
and among Tower Realty Trust, Inc. and Carlyle Realty
Partners, L.P. Carlyle Realty Qualified Partners, L.P.,
Carlyle Realty Partners Sunrise, L.P. and Carlyle Realty
Coinvestment, L.P.
10.73 Revolving Credit Agreement, dated as of October 20, 1997, by
and among Tower Realty Operating Partnership, L.P., the
banks listed therein, Fleet National Bank, as administrative
agent, Merrill Lynch & Co., as syndication agent and
arranger, and Nationsbank, N.A., as documentation agent
10.74 Consolidated, Amended and Restated Mortgage Note, dated as
of November 26, 1997, made by Magnolia Associates, Ltd., 286
Madison, L.P., 290 Madison, L.P. and 292 Madison, L.P.
(collectively, the "Maker") in favor of Merrill Lynch
Mortgage Capital Inc., as payer
</TABLE>
<PAGE> 54
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
10.75 Consolidated, Amended and Restated Fee and Subleasehold
Mortgage, Security Agreement, Financing Statement, Fixture
Filing and Assignment of Leases, Rents and Security
Deposits, dated as of November 26, 1997, from Magnolia
Associates, Ltd., 286 Madison, L.P., 290 Madison, L.P. and
292 Madison, L.P., collectively as mortgagor, to Merrill
Lynch Mortgage Capital Inc., as mortgagee
10.76 Amended and Restated Assignment of Leases, Rents and
Security Deposits, dated as of November 26, 1997, from
Magnolia Associates, Ltd., 286 Madison, L.P., 290 Madison,
L.P., and 292 Madison, L.P., collectively as assignor, to
Merrill Lynch Mortgage Capital Inc., as assignee
10.77 Amended and Restated Cash Collateral Account Security,
Pledge and Assignment Agreement, dated as of November 26,
1997, among Magnolia Associates, Ltd., as borrower, Chase
Manhattan Bank, as agent, and Merrill Lynch Mortgage Capital
Inc., as lender
10.78 First Amendment to Mortgage, dated December 30, 1997, among
Magnolia Associates, Ltd., as mortgagor, and Merrill Lynch
Mortgage Capital Inc., as mortgagee
21.1 Subsidiaries of the Company, as amended
27.1 Financial Data Schedule
</TABLE>
- ---------------
+ Incorporated by reference to the Company's Current Report on Form 8-K,
dated December 31, 1997.
* Incorporated by reference to the Company's Registration Statement on Form
S-11, dated August 6, 1997.
** Incorporated by reference to Amendment No. 1 to the Company's Registration
Statement on Form S-11, dated September 23, 1997.
*** Incorporated by reference to Amendment No. 2 to the Company's Registration
Statement on Form S-11, dated October 6, 1997.
**** Incorporated by reference to Amendment No. 4 to the Company's Registration
Statement on Form S-11, dated October 9, 1997.
<PAGE> 1
Exhibit 10.73
================================================================================
REVOLVING CREDIT AGREEMENT
dated as of October 20, 1997
among
Tower Realty Operating Partnership, L.P.
The Banks Listed Herein
and
Fleet National Bank,
as Administrative Agent
and
Merrill Lynch & Co.,
as Syndication Agent and Arranger
and
NationsBank, N.A.,
as Documentation Agent
================================================================================
<PAGE> 2
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS..............................................................2
SECTION 1.1. Definitions..............................................2
SECTION 1.2. Accounting Terms and Determinations.....................26
SECTION 1.3. Types of Borrowings.....................................26
ARTICLE II
THE CREDITS.............................................................26
SECTION 2.1. Commitments to Lend.....................................26
SECTION 2.2. Notice of Borrowing.....................................27
SECTION 2.3. Notice to Banks; Funding of Loans.......................29
SECTION 2.4. Notes...................................................32
SECTION 2.5. Maturity of Loans.......................................33
SECTION 2.6. Interest Rates..........................................33
SECTION 2.7. Fees....................................................35
SECTION 2.8. Mandatory Expiration....................................36
SECTION 2.9. Mandatory Prepayment....................................37
SECTION 2.10. Optional Prepayments....................................37
SECTION 2.11. General Provisions as to Payments.......................39
SECTION 2.12. Funding Losses..........................................40
SECTION 2.13. Computation of Interest and Fees........................40
SECTION 2.14. Use of Proceeds.........................................41
SECTION 2.15. Method of Electing Interest Rates.......................41
SECTION 2.16. Letters of Credit.......................................43
SECTION 2.17. Letter of Credit Usage Absolute.........................46
ARTICLE III
CONDITIONS..............................................................48
SECTION 3.1. Closing.................................................48
SECTION 3.2. Borrowings..............................................51
SECTION 3.3. Unencumbered Assets.....................................53
SECTION 3.4. Conditions Precedent to New Acquisitions and
Additional Real Property Assets.........................54
ARTICLE IV
REPRESENTATIONS AND WARRANTIES..........................................56
SECTION 4.1. Existence and Power.....................................56
SECTION 4.2. Power and Authority.....................................56
SECTION 4.3. No Violation............................................57
SECTION 4.4. Financial Information...................................58
SECTION 4.5. Litigation..............................................58
SECTION 4.6. Compliance with ERISA...................................58
SECTION 4.7. Environmental Matters...................................59
SECTION 4.8. Taxes...................................................60
SECTION 4.9. Full Disclosure.........................................60
SECTION 4.10. Solvency................................................60
SECTION 4.11. Use of Proceeds; Margin Regulations.....................60
SECTION 4.12. Governmental Approvals..................................61
ii
<PAGE> 3
Page
----
SECTION 4.13. Investment Company Act; Public Utility
Holding Company Act.....................................61
SECTION 4.14. Closing Date Transactions...............................61
SECTION 4.15. Representations and Warranties in Loan
Documents...............................................61
SECTION 4.16. Patents, Trademarks, Etc................................62
SECTION 4.17. Ownership of Property...................................62
SECTION 4.18. No Default..............................................62
SECTION 4.19. Licenses, Etc...........................................63
SECTION 4.20. Compliance With Law.....................................63
SECTION 4.21. No Burdensome Restrictions..............................63
SECTION 4.22. Brokers' Fees...........................................63
SECTION 4.23. Labor Matters...........................................63
SECTION 4.24. Insurance...............................................63
SECTION 4.25. Organizational Documents................................63
SECTION 4.26. Principal Offices.......................................64
ARTICLE V
AFFIRMATIVE AND NEGATIVE COVENANTS......................................64
SECTION 5.1. Information.............................................64
SECTION 5.2. Payment of Obligations..................................69
SECTION 5.3. Maintenance of Property; Insurance......................69
SECTION 5.4. Conduct of Business and Good Standing...................70
SECTION 5.5. Compliance with Laws....................................70
SECTION 5.6. Inspection of Property, Books
and Records.............................................70
SECTION 5.7. Existence...............................................71
SECTION 5.8. Maintenance of REIT Status; NYSE Listing................71
SECTION 5.9. Financial Covenants.....................................71
SECTION 5.10. Restriction on Fundamental Changes......................74
SECTION 5.11. Additional Covenants re:
Unencumbered Assets.....................................75
SECTION 5.12. Liens; Release of Liens.................................76
SECTION 5.13. Sale of Unencumbered Assets.............................76
SECTION 5.14. Development Activities..................................77
SECTION 5.15. Permitted Investments...................................77
SECTION 5.16. Changes in Business.....................................77
SECTION 5.17. Fiscal Year; Fiscal Quarter.............................77
SECTION 5.18. Margin Stock............................................77
SECTION 5.19. Covenant Restrictions...................................77
SECTION 5.20. Use of Proceeds.........................................78
SECTION 5.21. Sole General Partner....................................78
ARTICLE VI
DEFAULTS................................................................78
SECTION 6.1. Events of Default.......................................78
SECTION 6.2. Rights and Remedies.....................................82
SECTION 6.3. Notice of Default.......................................83
SECTION 6.4. Actions in Respect of Letters of Credit.................83
ARTICLE VII
THE AGENTS..............................................................86
SECTION 7.1. Appointment and Authorization...........................86
SECTION 7.2. Agents and Affiliates...................................86
iii
<PAGE> 4
Page
----
SECTION 7.3. Actions by Agent........................................86
SECTION 7.4. Consultation with Experts...............................87
SECTION 7.5. Liability of Agents.....................................87
SECTION 7.6. Indemnification.........................................87
SECTION 7.7. Credit Decision.........................................88
SECTION 7.8. Successor Agent.........................................88
ARTICLE VIII
CHANGE IN CIRCUMSTANCES.................................................89
SECTION 8.1. Basis for Determining Interest Rate
Inadequate or Unfair....................................89
SECTION 8.2. Illegality..............................................90
SECTION 8.3. Increased Cost and Reduced Return.......................91
SECTION 8.4. Taxes...................................................93
SECTION 8.5. Base Rate Loans Substituted for Affected
Euro-Dollar Loans.......................................95
ARTICLE IX
MISCELLANEOUS...........................................................96
SECTION 9.1. Notices.................................................96
SECTION 9.2. No Waivers..............................................96
SECTION 9.3. Expenses; Indemnification...............................97
SECTION 9.4. Sharing of Set-Offs.....................................98
SECTION 9.5. Amendments and Waivers.................................100
SECTION 9.6. Successors and Assigns.................................100
SECTION 9.7. Collateral.............................................102
SECTION 9.8. Governing Law; Submission to Jurisdiction..............103
SECTION 9.9. Marshalling; Recapture.................................103
SECTION 9.10. Counterparts; Integration; Effectiveness...............104
SECTION 9.11. WAIVER OF JURY TRIAL...................................104
SECTION 9.12. Survival...............................................104
SECTION 9.13. Domicile of Loans......................................104
SECTION 9.14. Limitation of Liability................................105
SECTION 9.15. Recourse...............................................105
SECTION 9.16. Confidentiality........................................105
EXHIBITS
Exhibit A - Note
Exhibit B - Unencumbered Assets
Exhibit C - Assignment and Assumption Agreement
Exhibit D - Form of Unencumbered Asset Certificate
Exhibit E - Form of Notice of Borrowing
Exhibit F - Form of Letter of Credit Request
Exhibit G - Form of Notice of Interest Rate Election
Exhibit H - Sample Calculations of Financial Covenants
iv
<PAGE> 5
REVOLVING CREDIT AGREEMENT
THIS REVOLVING CREDIT AGREEMENT dated as of October 20, 1997 by and
among TOWER REALTY OPERATING PARTNERSHIP, L.P., a Delaware limited partnership
(the "Borrower"), the BANKS listed on the signature pages hereof FLEET NATIONAL
BANK, as Administrative Agent, MERRILL LYNCH & CO., as Syndication Agent and
Arranger, and NATIONSBANK, N.A., as Documentation Agent.
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions. The following terms, as used herein, have
the following meanings:
"Acquisition Cost" means (i) the purchase price of a New Acquisition
as set forth in the applicable purchase and sale agreement, plus or minus (ii)
increases or reductions to such purchase price as provided in such purchase and
sale agreement or the final closing statement, minus (iii) closing costs and
transaction costs and expenses incurred by Borrower in connection with such
acquisition, including but not limited to, brokerage fees, attorneys fees and
expenses, due diligence expenses, appraisal fees, engineering and environmental
fees, title insurance premiums, survey preparation costs, and recording fees.
"Adjusted London Interbank Offered Rate" has the meaning set forth
in Section 2.6(b).
"Adjusted Unencumbered NOI" shall mean, for any period, the
aggregate sum of the Net Operating Income for each of the Unencumbered Assets,
adjusted to reflect management fees equal to the greater of (a) actual
management fees and (b) 3% of total revenues, less the aggregate sum of the
Capital Expenditure Reserve Amounts.
"Administrative Agent" means Fleet, in its capacity as
administrative agent for the Banks hereunder, and its successors in such
capacity.
<PAGE> 6
"Administrative Questionnaire" means, with respect to each Bank, an
administrative questionnaire in the form prepared by the Administrative Agent
and submitted to the Administrative Agent (with a copy to the Borrower) duly
completed by such Bank.
"Agents" means the Administrative Agent, the Syndication Agent, the
Arranger and the Documentation Agent, and "Agent" means any of them.
"Agreement" means this Revolving Credit Agreement, as the same may
from time to time hereafter be modified, supplemented or amended, as permitted
herein.
"Applicable Lending Office" means, with respect to any Bank, (i) in
the case of its Domestic Loans, its Domestic Lending Office and (ii) in the case
of its Euro-Dollar Loans, its Euro-Dollar Lending Office.
"Applicable Margin" means, with respect to each Euro-Dollar Loan or
Base Rate Loan, the respective percentages per annum determined as of the
Closing Date and thereafter at any time, based on the Leverage Ratio as of the
date of determination, in accordance with the table set forth below. Any change
in the Leverage Ratio shall be effective as of the financial reporting dates set
forth in Section 5.1 hereof or as of the date of any Borrowing on which the
Leverage Ratio changes.
<TABLE>
<CAPTION>
Applicable Margin Applicable
for Base Rate Margin for Euro-
Loans Dollar Loans
Leverage Ratio (% per annum) (% per annum)
- -------------- ------------- -------------
<S> <C> <C>
<30% 0.000 1.250
30% to <45% 0.125 1.375
45% to <55% 0.375 1.625
</TABLE>
"Approved Bank" shall mean a bank, investment bank, insurance
company or other financial institution which has (i)(a) a minimum net worth of
$500,000,000 and/or (b) total assets of $10,000,000,000, and (ii) a minimum long
term debt rating of (a) BBB+ or higher by S&P, and (b) Baa1 or higher by
Moody's.
3
<PAGE> 7
"Approved Uses" has the meaning set forth in Section 2.14.
"Arranger" means Merrill Lynch & Co.
"Assignee" has the meaning set forth in Section 9.6(c).
"Bank" means each bank listed on the signature pages hereof, each
Assignee which becomes a Bank pursuant to Section 9.6(c), and their respective
successors.
"Bankruptcy Code" means Title 11 of the United States Code, entitled
"Bankruptcy", as amended from time to time, and any successor statute or
statutes.
"Base Rate" means, for any day, a rate per annum equal to the higher
of (i) the Prime Rate for such day or (ii) the sum of 1/2 of 1% plus the Federal
Funds Rate for such day.
"Base Rate Loan" means a Loan to be made by a Bank as a Base Rate
Loan in accordance with the applicable Notice of Borrowing or pursuant to
Article VIII.
"Benefit Arrangement" means at any time an employee benefit plan
within the meaning of Section 3(3) of ERISA which is not a Plan or a
Multiemployer Plan and which is maintained or otherwise contributed to by any
member of the ERISA Group.
"Borrower" means Tower Realty Operating Partnership, L.P.
"Borrowing" means a borrowing hereunder consisting of Loans made to
the Borrower at the same time by the Banks pursuant to Article II. A Borrowing
is (i) a "Domestic Borrowing" if such Loans are Domestic Loans or (ii) a
"Euro-Dollar Borrowing" if such Loans are Euro-Dollar Loans.
"Capital Expenditure Reserve Amount" shall mean, with respect to
each Unencumbered Asset, an amount per annum equal to $1.15 multiplied by the
number of rentable square footage of such Unencumbered Asset.
4
<PAGE> 8
"Capital Expenditures" means, for any period, the sum of all
expenditures (whether paid in cash or accrued as a liability) which are
capitalized on the balance sheet of the Borrower in accordance with GAAP.
"Capital Improvements" means improvements to buildings and tenant
improvements, the cost of which is capitalized on the balance sheet of the
Borrower in accordance with GAAP.
"Capitalization Value" shall mean the quotient of Cash Flow divided
by 9.5%; provided, however, that with respect to properties (a) which have been
owned by Borrower, the Company, or any Consolidated Subsidiary for less than
four fiscal quarters, and which have not achieved an occupancy level of 80% or
more for not less than one full fiscal quarter, the Capitalization Value with
respect thereto shall equal, at Borrower's election, either (x) the Acquisition
Cost of such property, plus 100% of "hard" costs incurred and paid to the date
of determination for Capital Improvements at such property, or (y) the product
of four (4) and the Cash Flow with respect to such property for the then most
recently ended fiscal quarter, divided by 9.5%, and (b) which have been owned by
Borrower, the Company, or any Consolidated Subsidiary for less than four fiscal
quarters, but which have achieved an occupancy level of 80% or more for not less
than one full fiscal quarter, the product of four (4) and the Cash Flow with
respect to such property for the then most recently ended fiscal quarter,
divided by 9.5% and, with respect to any such property owned by a Minority
Holding, the pro rata share of such amount properly allocable to the Borrower,
the Company or a Consolidated Subsidiary.
"Cash and Cash Equivalents" means (i) cash, (ii) direct obligations
of the United States Government, including, without limitation, treasury bills,
notes and bonds, (iii) interest bearing or discounted obligations of Federal
agencies and Government sponsored entities or pools of such instruments offered
by Approved Banks and dealers, including, without limitation, Federal Home Loan
Mortgage Corporation participation sale certificates, Government National
Mortgage Association modified pass-through certificates, Federal National
Mortgage Association bonds and notes, Federal Farm Credit System securities,
(iv) time deposits, domestic and Eurodollar
5
<PAGE> 9
certificates of deposit, bankers acceptances, commercial paper rated at least
A-1 by S&P and P-1 by Moody's Investors Service, Inc., and/or guaranteed by an
Aa rating by Moody's Investors Service, Inc., an AA rating by S&P, or better
rated credit, floating rate notes, other money market instruments (including
investments in money market mutual funds offered by Approved Banks) and letters
of credit each issued by Approved Banks, (v) obligations of domestic
corporations, including, without limitation, commercial paper, bonds,
debentures, and loan participations, each of which is rated at least AA by S&P,
and/or Aa2 by Moody's Investors Service, Inc., and/or unconditionally guaranteed
by an AA rating by S&P, an Aa2 rating by Moody's, or better rated credit, (vi)
obligations issued by states and local governments or their agencies, rated at
least MIG-1 by Moody's Investors Service, Inc. and/or SP-1 by S&P and/or
guaranteed by an irrevocable letter of credit of an Approved Bank, (vii)
repurchase agreements with major banks and primary government securities dealers
fully secured by U.S. Government or agency collateral equal to or exceeding the
principal amount on a daily basis and held in safekeeping, and (viii) real
estate loan pool participations, guaranteed by an AA rating given by S&P or an
Aa2 rating given by Moody's Investors Service, Inc., or better rated credit.
"Cash Flow" means, with respect to any Real Property Asset, the sum
of (i) Funds From Operations (adjusted for non-recurring items and non-cash
revenue, including, without limitation, the effect of straight-lining of rents
pursuant to GAAP) and (ii) Interest Expense applicable to such Real Property
Asset.
"Class A Office Building" shall mean an office building which (i) is
an institutional quality office building, built or substantially renovated
within the past 15 years, with high grade interior finishes, upgraded elevator
systems and floor-to-ceiling heights sufficient to accommodate raised floors for
computer cabling and fiber optics and/or (ii) is listed in the database of a
recognized national brokerage company as a "Class A" office building property.
"Class B Office Building" shall mean an office building which is (i)
between 15 and 50 years old, that has not been modernized to current standards,
and com-
6
<PAGE> 10
mands rents not less than the median for similar properties in the market in
which it is located and/or (ii) (ii) is listed in the database of a recognized
national brokerage company as a "Class B" office building property.
"Closing Date" means October 20, 1997.
"Code" means the Internal Revenue Code of 1986, as amended, or any
successor statute.
"Commitment" means, with respect to each Bank, the amount set forth
opposite the name of such Bank on the signature pages hereof (and for each Bank
which is an Assignee, the amount set forth in the Assumption Agreement entered
into pursuant to Section 9.6(c) as the Assignee's Commitment), as such amount
may be reduced from time to time pursuant to Section 2.10(e) or in connection
with an assignment to an Assignee.
"Commitment Fee" has the meaning set forth in Section 2.7(a).
"Company" means Tower Realty Trust, Inc., a Maryland corporation
qualified as a real estate investment trust.
"Consolidated" means "consolidated" in accordance with GAAP.
"Consolidated Subsidiary" means at any date any Subsidiary of the
Borrower or the Company that is Consolidated on the Financial Statements of the
Borrower or the Company in accordance with GAAP.
"Construction Asset Cost" shall mean, with respect to a Real
Property Asset owned by the Borrower, the Company or a Consolidated Subsidiary,
on which construction of Capital Improvements has begun (as evidenced by
obtaining a permit to commence such construction by the applicable governmental
authority) but has not yet been substantially completed (substantial completion
shall be deemed to mean not less than 90% completion, as such completion shall
be evidenced by a certificate of occupancy or its equivalent and the
commencement of the payment of rent by tenants of such Real Property Asset), the
aggregate, good faith estimated
7
<PAGE> 11
cost of construction of such Capital Improvements; and, with respect to a Real
Property Asset owned by a Minority Holding, the pro rata share of such costs
properly allocable to the Borrower, the Company or a Consolidated Subsidiary, as
applicable.
"Contingent Obligation" as to any Person means, without duplication,
(i) any contingent obligation of such Person required to be shown on such
Person's balance sheet in accordance with GAAP, and (ii) any obligation required
to be disclosed in the footnotes to such Person's financial statements in
accordance with GAAP, guaranteeing partially or in whole any non-recourse
Indebtedness, lease, dividend or other obligation, exclusive of contractual
indemnities (including, without limitation, any indemnity or price-adjustment
provision relating to the purchase or sale of securities or other assets) and
guarantees of non-monetary obligations (other than guarantees of completion)
which have not yet been called on or quantified, of such Person or of any other
Person. The amount of any Contingent Obligation described in clause (ii) shall
be deemed to be (a) with respect to a guaranty of interest or interest and
principal, or operating income guaranty, the sum of all payments required to be
made thereunder (which in the case of an operating income guaranty shall be
deemed to be equal to the debt service for the note secured thereby), calculated
at the applicable interest rate, through (i) in the case of an interest or
interest and principal guaranty, the stated date of maturity of the obligation
(and commencing on the date interest could first be payable thereunder), or (ii)
in the case of an operating income guaranty, the date through which such
guaranty will remain in effect, and (b) with respect to all guarantees not
covered by the preceding clause (a), an amount equal to the stated or
determinable amount of the primary obligation in respect of which such guaranty
is made or, if not stated or determinable, the maximum reasonably anticipated
liability in respect thereof (assuming such Person is required to perform
thereunder) as recorded on the balance sheet and on the footnotes to the most
recent Financial Statements of Borrower required to be delivered pursuant to
Section 5.1 hereof. Notwithstanding anything contained herein to the contrary,
guarantees of completion shall not be deemed to be Contingent Obligations unless
and until a claim for payment or performance has been made thereunder by the
8
<PAGE> 12
person entitled to performance or payment thereunder, at which time any such
guaranty of completion shall be deemed to be a Contingent Obligation in an
amount equal to any such claim. Subject to the preceding sentence, (i) in the
case of a joint and several guaranty given by such Person and another Person
(but only to the extent such guaranty is directly or indirectly recourse to such
Person), the amount of the guaranty, to the extent it is directly or indirectly
recourse to such Person, shall be deemed to be 100% thereof unless and only to
the extent that such other Person has delivered Cash or Cash Equivalents to
secure all or any part of such other Person's guaranteed obligations, and (ii)
in the case of a guaranty, (whether or not joint and several) of an obligation
otherwise constituting Indebtedness of another Person, the amount of such
guaranty shall be deemed to be only that amount in excess of the amount of the
obligation constituting Indebtedness of such other Person that is also included
as Indebtedness of the Borrower, the Company or a Consolidated Subsidiary
hereunder.
"Default" means any condition or event which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"Designated Bank" has the meaning set forth in Section 2.3 (d)
hereof.
"Development Projects" means development of improvements at any Real
Property Asset which is in excess of 50% pre-leased.
"Development Project Value" means, with respect to all Development
Projects owned by the Borrower, the Company or a Consolidated Subsidiary, the
Acquisition Cost of each such property, plus 100% of the "hard" costs incurred
and paid to the date of determination for Capital Improvements at each such
property and, with respect to all Development Projects owned by Minority
Holdings, the pro rata share of such costs properly allocable to the Borrower,
the Company, or a Consolidated Subsidiary.
"Documentation Agent" means NationsBank, N.A.
9
<PAGE> 13
"Domestic Business Day" means any day except a Saturday, Sunday or
other day on which commercial banks in Boston, Massachusetts are authorized by
law to close.
"Domestic Lending Office" means, as to each Bank, its office located
at its address set forth on the signature pages hereto or such other office as
such Bank may hereafter designate as its Domestic Lending Office by notice to
the Borrower and the Administrative Agent.
"Domestic Loans" means Base Rate Loans.
"Effective Date" means the date this Agreement becomes effective in
accordance with Section 9.10.
"Environmental Affiliate" means any partner ship, or joint venture,
trust or corporation in which an equity interest is owned by the Borrower or the
Company, either directly or indirectly.
"Environmental Approvals" means any permit, license, approval,
ruling, variance, exemption or other authorization required under applicable
Environmental Laws by a court or governmental agency having jurisdiction.
"Environmental Claim" means, with respect to any Person, any written
notice, claim, demand or similar communication by any other Person having
jurisdiction alleging potential liability for investigatory costs, cleanup
costs, governmental response costs, natural resources damage, property damages,
personal injuries, fines or penalties arising out of, based on or resulting from
(i) the presence, or release into the environment, of any Hazardous Substances
at any location, whether or not owned by such Person or (ii) circumstances
forming the basis of any violation, of any applicable Environmental Law, in each
case as to which there is a reasonable possibility of an adverse determination
with respect thereto and which, if adversely determined, would have a Material
Adverse Effect on the Borrower.
"Environmental Laws" means any and all federal, state, local and
foreign statutes, laws, judicial decisions, regulations, ordinances, rules,
judgments, orders, decrees, plans, injunctions, permits, concessions, grants,
franchises, licenses, agreements and
10
<PAGE> 14
other governmental restrictions relating to the environment, the effect of the
environment on human health or to emissions, discharges or releases of
pollutants, contaminants, Hazardous Substances or wastes into the environment
including, without limitation, ambient air, surface water, ground water, or
land, or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of pollutants, contaminants,
Hazardous Substances or wastes or the clean-up or other remediation thereof.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended, or any successor statute.
"ERISA Group" means the Borrower, the Company, any Subsidiary and
all members of a controlled group of corporations and all trades or businesses
(whether or not incorporated) under common control which, together with the
Borrower, the Company or any Subsidiary, are treated as a single employer under
Section 414 of the Internal Revenue Code.
"Euro-Dollar Business Day" means any Domestic Business Day on which
commercial banks are open for international business (including dealings in
dollar deposits) in London.
"Euro-Dollar Lending Office" means, as to each Bank, its office,
branch or affiliate located at its address set forth on the signature pages
hereto, or such other office, branch or affiliate of such Bank as it may
hereafter designate as its Euro-Dollar Lending Office by notice to the Borrower
and the Administrative Agent.
"Euro-Dollar Loan" means a Loan to be made by a Bank as a
Euro-Dollar Loan in accordance with the applicable Notice of Borrowing or Notice
of Interest Rate Election.
"Event of Default" has the meaning set forth in Section 6.1.
"Federal Funds Rate" means, for any day, the rate per annum (rounded
upward, if necessary, to the nearest 1/100th of 1%) equal to the weighted
average of the rates on overnight Federal funds transactions with
11
<PAGE> 15
members of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Domestic
Business Day next succeeding such day, provided that (i) if such day is not a
Domestic Business Day, the Federal Funds Rate for such day shall be such rate on
such transactions on the next preceding Domestic Business Day as so published on
the next succeeding Domestic Business Day, and (ii) if no such rate is so
published on such next succeeding Domestic Business Day, the Federal Funds Rate
for such day shall be the average rate quoted to Morgan Guaranty Trust Company
of New York on such day on such transactions as determined by the
Administrative Agent.
"Federal Reserve Board" means the Board of Governors of the Federal
Reserve System as constituted from time to time.
"Financial Statements" means the financial statements of the Company
or the Borrower, as applicable, prepared in accordance with GAAP.
"Fixed Charges" means, with respect to any fiscal period, the sum of
(a) Total Interest Expense and (b) the aggregate of all scheduled principal
payments of Total Outstanding Indebtedness made or required to be made during
such fiscal period by the Borrower, the Company, the Consolidated Subsidiaries
and the Minority Holdings which are allocable to the Borrower and/or the Company
(it being agreed that in the case of Indebtedness of Minority Holdings that is
fully recourse to the Borrower or the Company, 100% of Total Interest Expense
and scheduled principal payments shall be included in "Fixed Charges")
(exclusive of optional prepayments and repayments of the outstanding balance of
a loan at maturity other than from loan acceleration), and (c) the aggregate of
all dividends or distributions payable on the Company's or any of its
Consolidated Subsidiaries' preferred stock or the Borrower's preferred
partnership units not owned by the Company or any of its affiliates.
"Fleet" means Fleet National Bank.
"Form S-11 means the Form S-11 filed by the Company with the
Securities and Exchange Commission in connection with the initial public
offering of the common stock of the Company.
12
<PAGE> 16
"Fronting Bank" shall mean Fleet or such other Bank which Borrower
is notified by the Administrative Agent may be a Fronting Bank and which is
designated by Borrower in its Notice of Borrowing as the Bank which shall issue
a Letter of Credit with respect to such Notice of Borrowing.
"Funds From Operations" means, for any period and without
duplication, net income of the Company, the Borrower and the Consolidated
Subsidiaries (computed in accordance with GAAP) before extraordinary items,
excluding gains (or losses) from debt restructuring and sales of property, plus
depreciation and amortization (including amortization of prepaid deferred
financing costs to the extent previously deducted), plus the pro rata share of
such net income so adjusted from the operations of Minority Holdings which is
allocable to the Borrower and/or the Company.
"GAAP" means generally accepted accounting principles recognized as
such in the opinions and pronouncements of the Accounting Principles Board and
the American Institute of Certified Public Accountants and Board or in such
other statements by such other entity as may be approved by a significant
segment of the accounting profession, which are applicable to the circumstances
as of the date of determination.
"Group of Loans" means, at any time, a group of Loans consisting of
(i) all Loans which are Base Rate Loans at such time, or (ii) all Loans which
are Euro-Dollar Loans having the same Interest Period at such time; provided
that, if a Loan of any particular Bank is converted to or made as a Base Rate
Loan pursuant to Section 8.1 or 8.2, such Loan shall be included in the same
Group or Groups of Loans from time to time as it would have been in if it had
not been so converted or made.
"Guarantor" means the Company.
"Guaranty" means that certain Unconditional Guaranty Agreement,
dated as of the date hereof, by the Company, as the same may be amended,
supplemented, modified or restated from time to time.
13
<PAGE> 17
"Hazardous Substances" means any toxic, radioactive, caustic or
otherwise hazardous substance, identified as such as a matter of Environmental
Law, including petroleum, its derivatives, by-products and other hydrocarbons,
or any substance having any constituent elements displaying any of the foregoing
characteristics.
"ICIP Amount" means amounts payable by a Subsidiary of the Company
in respect of the Industrial Commercial Incentive Program relating to the Tower
45 property.
"Indebtedness" of any Person means, without duplication, (A) as
shown on such Person's balance sheet (i) all indebtedness of such Person for
borrowed money or for the deferred purchase price of property and, (ii) all
indebtedness of such Person evidenced by a note, bond, debenture or similar
instrument (whether or not disbursed in full in the case of a construction
loan), (B) the face amount of all letters of credit issued for the account of
such Person and, without duplication, all unreimbursed amounts drawn thereunder,
(C) all Contingent Obligations of such Person, and (D) all payment obligations
of such Person under any interest rate protection agreement (including, without
limitation, any interest rate swaps, caps, floors, collars and similar
agreements) and currency swaps and similar agreements which were not entered
into specifically in connection with Indebtedness set forth in clauses (A), (B)
or (C) hereof. For purposes of this Agreement, Indebtedness (other than
Contingent Obligations) of the Borrower shall be deemed to include only
Indebtedness of the Borrower, the Company, and the Consolidated Subsidiaries
plus, without duplication, the Borrower's pro rata share (such share being based
upon the Borrower's percentage ownership interest as shown on the Borrower's
annual Financial Statements) of the Indebtedness of any Person in which the
Borrower, directly or indirectly, owns an interest, provided that such
Indebtedness is nonrecourse, both directly and indirectly, to the Borrower, the
Company, or any such Consolidated Subsidiary.
"Indemnitee" has the meaning set forth in Section 9.3(b).
14
<PAGE> 18
"Interest Expense" means interest (whether accrued, paid or
capitalized) actually payable by a Person on its Indebtedness for borrowed
money.
"Interest Period" means: (1) with respect to each Euro-Dollar
Borrowing, the period commencing on the date of such Borrowing or the applicable
Notice of Interest Rate Election and ending one, two, three or six months
thereafter, as the Borrower may elect in the applicable Notice of Borrowing or
Notice of Interest Rate Election; provided that:
(a) any Interest Period which would otherwise end on a day which is
not a Euro-Dollar Business Day shall be extended to the next succeeding
Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in
another calendar month, in which case such Interest Period shall end on
the next preceding Euro-Dollar Business Day;
(b) any Interest Period which begins on the last Euro-Dollar
Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such
Interest Period) shall, subject to clause (c) below, end on the last
Euro-Dollar Business Day of a calendar month; and
(c) if any Interest Period includes a date on which a payment of
principal of the Loans is required to be made under Section 2.9 but does
not end on such date, then (i) the principal amount (if any) of each
Euro-Dollar Loan required to be repaid on such date shall have an Interest
Period ending on such date and (ii) the remainder (if any) of each such
Euro-Dollar Loan shall have an Interest Period determined as set forth
above.
(2) with respect to each Base Rate Borrowing, the period commencing on the date
of such Borrowing or Notice of Interest Rate Election and ending 30 days
thereafter; provided that:
(a) any Interest Period (other than an Interest Period determined
pursuant to clause (b) below) which would otherwise end on a day which is
not a
15
<PAGE> 19
Euro-Dollar Business Day shall be extended to the next succeeding
Euro-Dollar Business Day; and
(b) if any Interest Period includes a date on which a payment of
principal of the Loans is required to be made under Section 2.9 but does
not end on such date, then (i) the principal amount (if any) of each Base
Rate Loan required to be repaid on such date shall have an Interest Period
ending on such date and (ii) the remainder (if any) of each such Base Rate
Loan shall have an Interest Period determined as set forth above.
"Land Held for Development" means (i) Real Property Assets upon
which no material construction of material improvements has been commenced; all
such Real Property Assets that constitute Land Held for Development will
continue to be deemed Land Held for Development until such time as the chief
financial officer or chief accounting officer of Borrower and/or the Company
shall certify to the Administrative Agent that material construction of material
improvements has commenced thereon; and (ii) Real Property Assets upon which
development of improvements has commenced but which are 50% or less pre-leased;
all such Real Property Assets that constitute Land Held for Development will
continue to be deemed Land Held for Development until such time as the chief
financial officer or chief accounting officer of Borrower and/or the Company
shall certify to the Administrative Agent that the improvements thereon are
greater than 50% pre-leased.
"Land Held for Development Value" means, with respect to all Land
Held for Development owned by the Borrower, the Company or a Consolidated
Subsidiary, the Acquisition Cost of each such property, plus 100% of "hard"
costs incurred and paid to the date of determination for infrastructure
improvements and/or Capital Improvements (if any) at each such property, and,
with respect to all Land Held for Development owned by a Minority Holding, the
pro rata share of such costs properly allocable to the Borrower, the Company or
a Consolidated Subsidiary.
"Letter(s) of Credit" has the meaning provided in Section 2.2(b).
16
<PAGE> 20
"Letter of Credit Collateral" has the meaning provided in Section
6.4.
"Letter of Credit Collateral Account" has the meaning provided in
Section 6.4.
"Letter of Credit Documents" has the meaning provided in Section
2.17.
"Letter of Credit Usage" means at any time the sum of (i) the
aggregate maximum amount available to be drawn under the Letters of Credit then
outstanding, assuming compliance with all requirements for drawing referred to
therein, and (ii) the aggregate amount of the Borrower's unpaid obligations
under this Agreement in respect of the Letters of Credit.
"Leverage Ratio" means the ratio, expressed as a percentage, of
Total Outstanding Indebtedness to Total Value.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind, or any other type of
preferential arrangement that has the practical effect of creating a security
interest, in respect of such asset. For the purposes of this Agreement, the
Borrower, the Company, or any Subsidiary shall be deemed to own subject to a
Lien any asset which it has acquired or holds subject to the interest of a
vendor or lessor under any conditional sale agreement, capital lease or other
title retention agreement relating to such asset.
"Loan" means a Domestic Loan or a Euro-Dollar Loan and "Loans" means
Domestic Loans or Euro-Dollar Loans or any combination of the foregoing.
"Loan Amount" shall mean the amount of Two Hundred Million Dollars
($200,000,000).
"Loan Documents" means this Agreement, the Notes and the Guaranty.
"London Interbank Offered Rate" has the meaning set forth in
Section 2.6(b).
17
<PAGE> 21
"Mandatory Prepayment Event" has the meaning set forth in Section
2.9.
"Margin Stock" shall have the meaning provided such term in
Regulation U and Regulation G of the Federal Reserve Board.
"Material Adverse Effect" means a material adverse effect upon (i)
the business, operations, properties or assets of the Borrower, the Company,
and the Consolidated Subsidiaries, taken as a whole, or (ii) the ability of the
Borrower to pay debt service on the Loans, as such debt service becomes due from
time to time.
"Material Plan" means at any time a Plan or Plans having aggregate
Unfunded Liabilities in excess of $5,000,000.
"Maturity Date" shall have the meaning set forth in Section 2.8.
"Maximum Loan Amount" means the Loan Amount, as the Loan Amount may
be reduced pursuant to Section 2.10(e).
"Merrill" means Merrill Lynch Capital Corporation.
"Minority Holdings" means partnerships, joint ventures, limited
liability companies, trusts, associations and corporations held or owned by the
Borrower and/or the Company which are not Consolidated with Borrower or the
Company on their respective Financial Statements.
"Multiemployer Plan" means at any time an employee pension benefit
plan within the meaning of Section 4001(a)(3) of ERISA to which any member of
the ERISA Group is then making or accruing an obligation to make contributions
or has within the preceding five plan years made contributions, including for
these purposes any Person which ceased to be a member of the ERISA Group during
such five year period.
"Net Operating Income" means net operating income determined in
accordance with GAAP (adjusted for
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non-recurring items and non-cash revenue, including, without limitation, the
effect of straight-lining of rents pursuant to GAAP).
"Net Offering Proceeds" means all cash or other assets received by
the Company as a result of the sale of common shares, preferred shares,
partnership interests, limited liability company interests, convertible
securities or other ownership or equity interests in the Company, less customary
costs, expenses and discounts of issuance paid by the Company in connection
therewith.
"Net Worth" means Total Value less Total Outstanding Indebtedness.
"New Acquisitions" has the meaning set forth in Section 2.14.
"Non-Recourse Indebtedness" means Indebtedness of a Person for which
the right of recovery of the obligee thereof is limited to recourse against the
Real Property Assets securing such Indebtedness (subject to such limited
exceptions as fraud, misappropriation, misapplication and environmental
indemnities as are usual and customary in similar transactions at the time such
Indebtedness is incurred).
"Notes" means promissory notes of the Borrower, substantially in
the form of Exhibit A hereto, evidencing the obligation of the Borrower to
repay the Loans, as the same may be amended, supplemented, modified or restated
from time to time, and "Note" means any one of such promissory notes issued
hereunder.
"Notice of Borrowing" has the meaning set forth in Section 2.2. A
form of Notice of Borrowing is attached hereto as Exhibit E.
"Notice of Interest Rate Election" has the meaning set forth in
Section 2.15(a). A form of Notice of Interest Rate Election is attached hereto
as Exhibit G.
"Obligations" means all obligations, liabilities and Indebtedness of
every nature of the Borrower
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from time to time owing to any Bank under or in connection with this Agreement
or any other Loan Document.
"Outstanding Balance" means the sum of (i) the aggregate outstanding
and unpaid principal balance of all Loans and (ii) the Letter of Credit Usage.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Parent" means, with respect to any Bank, any Person controlling
such Bank.
"Participant" has the meaning set forth in Section 9.6(b).
"Permitted Liens" means (a) Liens to secure the performance of
statutory obligations, surety or appeal bonds, performance bonds, completion
bonds, government contracts or other obligations of a like nature, including
Liens in connection with workers' compensation, unemployment insurance and other
types of statutory obligations or to secure the performance of tenders, bids,
leases, contracts (other than for the repayment of Indebtedness) and other
similar obligations incurred in the ordinary course of business; (b) Liens for
taxes, assessments or governmental charges or claims that are not yet delinquent
or that are being contested in good faith by appropriate proceedings promptly
instituted and diligently concluded; provided, that any reserve or other
appropriate provision as shall be required in conformity with GAAP shall have
been made therefor; (c) Liens on property of Borrower or any Consolidated
Subsidiary thereof in favor of the Federal or any state government to secure
certain payments pursuant to any contract, statute or regulation; (d) easements
(including, without limitation, reciprocal easement agreements and utility
agreements), rights of way, covenants, consents, reservations, encroachments,
variations and zoning and other restrictions, charges or encumbrances (whether
or not recorded), which do not interfere materially with the ordinary conduct of
the business of the Borrower or any Consolidated Subsidiary thereof and which do
not materially detract from the value of the property to which they attach or
materially impair the use thereof by the Borrower or Consolidated Subsidiary;
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<PAGE> 24
(e) statutory Liens of carriers, warehousemen, mechanics, suppliers,
materialmen, repairmen or other Liens imposed by law and arising in the ordinary
course of business, for sums not then due and payable (or which, if due and
payable are being contested in good faith and with respect to which adequate
reserves are being maintained to the extent required by GAAP); and (f) the
interests of lessees and lessors under leases of real or personal property made
in the ordinary course of business which would not have a Material Adverse
Effect.
"Person" means an individual, a corporation, a partnership, an
association, a trust, limited liability company or any other entity or
organization, including a government or political subdivision or an agency or
instrumentality thereof.
"Plan" means at any time an employee pension benefit plan (other
than a Multiemployer Plan) which is covered by Title IV of ERISA or subject to
the minimum funding standards under Section 412 of the Internal Revenue Code and
either (i) is maintained, or contributed to, by any member of the ERISA Group
for employees of any member of the ERISA Group or (ii) has at any time within
the preceding five years been maintained, or contributed to, by any Person which
was at such time a member of the ERISA Group for employees of any Person which
was at such time a member of the ERISA Group.
"Prime Rate" means the rate of interest publicly announced by Fleet
National Bank in Boston, Massachusetts from time to time as its Prime Rate.
"Qualified Real Property Asset" means a fully operational office
building property (i) that is owned 100% by the Borrower (directly or through a
Wholly-Owned Subsidiary of the Borrower), in fee or pursuant to a ground lease
with an unexpired term of not less than 30 years (inclusive of extension options
exercisable in the Borrower's sole discretion at no more than the then fair
market value), (ii) that is not the subject of any Secured Indebtedness either
with respect to the property itself or with respect to the ownership thereof
(e.g. stock, partnership, or other pledge of equity) or any negative pledge,
(iii) that the Required Banks, in their sole and reasonable discretion, deem to
be a Class A Office Building or a Class B Office Building in gener-
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ally good condition and repair, and (iv) no less than 60% of the rentable square
feet of which are occupied by tenants pursuant to written leases (a) for which
no monetary default has occurred beyond applicable notice and cure periods, and
(b) which have a weighted (by rentable square footage) average remaining term of
not less than five years with respect to Real Property Assets located in New
York, New York and not less than three years and six months with respect to Real
Property Assets located in areas outside of New York, New York.
"Real Property Assets" means the real property assets or interests
therein (including interests in participating mortgages in which the Borrower's
interest therein is characterized as equity according to GAAP) currently owned,
from time to time, directly or indirectly by the Borrower, the Company, or the
Consolidated Subsidiaries (including the interest in which the real property
asset is held, such as a partnership, limited liability company or corporation).
"Recourse Indebtedness" means Indebtedness of a Person that is not
Non-Recourse Indebtedness.
"Regulation U" means Regulation U of the Board of Governors of the
Federal Reserve System, as in effect from time to time.
"Required Banks" means at any time Banks having at least 66-2/3% of
the aggregate amount of the Commitments or, if the Commitments shall have been
terminated, holding Notes evidencing at least 66-2/3% of the aggregate unpaid
principal amount of the Loans.
"Reuters Screen LIBO Page" shall mean the display designated as page
"LIBO" on the Reuters Monitor Money rates Service (or such other page as may
replace the LIBO page on such service) for the purpose of displaying interbank
rates from London in U.S. dollars.
"Secured Indebtedness" means Indebtedness of a Person that is
secured by a Lien.
"Solvent" as to any Person shall mean that such Person is not
"insolvent" within the meaning of Section 101(32) of the Bankruptcy Code or
Section 271 of the Debtor and Creditor Law of the State of New York.
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"Subsidiary" means any corporation, limited partnership, limited
liability company, or other entity of which securities or other ownership
interests having ordinary voting power to elect a majority of the board of
directors or other persons performing similar functions are at the time
directly or indirectly owned by the Borrower.
"Syndication Agent" means Merrill Lynch & Co.
"Telerate Page 3750" means the display designated as "Page 3750" on
the Dow Jones Telerate Service (or such other page as may replace Page 3750 on
that service) or such other service as may be nominated by the British Bankers'
Association as the information vendor for the purpose of displaying British
Bankers' Association Interest Settlement Rates for U.S. dollar deposits.
"Term" has the meaning set forth in Section 2.8.
"Title Company" means, with respect to each Unencumbered Asset, a
title insurance company of recognized national standing.
"Title Commitment" means, for each Unencumbered Asset, an ALTA fee
or leasehold title commitment or title policy issued by the Title Company at the
time of acquisition by the Borrower or its Subsidiary.
"Total Interest Expense" means, for any period, the sum of (i) the
Interest Expense of the Borrower, the Company and the Consolidated Subsidiaries
with respect to the Total Outstanding Indebtedness paid, accrued and/or
capitalized (but exclusive of capitalized construction loan interest funded from
an established interest reserve) for such period, and (ii) the pro rata share of
Interest Expense of the Minority Holdings allocable to the Borrower or the
Company during such period and paid, accrued and/or capitalized during such
period as set forth above.
"Total Outstanding Indebtedness" means, for any period, the sum of
(i) the amount of Indebtedness of the Borrower, the Company and the Consolidated
Subsidiaries set forth on their then most recent quarterly Fi-
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nancial Statements, plus any additional Indebtedness incurred by the Borrower,
the Company and the Consolidated Subsidiaries since the time of such Financial
Statements, including without limitation reimbursement obligations for letters
of credit, and interest rate and currency hedges, and (ii) the pro rata share of
outstanding amount of Indebtedness of Minority Holdings properly allocable to
the Borrower, the Company or the Consolidated Subsidiaries as of the date of
determination, and (iii) Contingent Obligations of the Borrower, the Company
and the Consolidated Subsidiaries and the Borrower's, the Company's or such
Consolidated Subsidiaries' pro rata share of the Contingent Obligations of any
Minority Holdings (other than the ICIP Amount).
"Total Outstanding Secured Indebtedness" shall mean, for any period,
the sum of (i) the amount of Secured Indebtedness of the Borrower, the Company,
and the Consolidated Subsidiaries, set forth on their then most recent quarterly
Financial Statements, plus any additional Secured Indebtedness incurred by the
Borrower, the Company or the consolidated subsidiaries since the date of such
Financial Statements, (ii) the pro rata share of the outstanding amount of
Secured Indebtedness of the Minority Holdings allocable in accordance with GAAP
to the Borrower, the Company or the Consolidated Subsidiaries as of the date of
determination, plus any additional Secured Indebtedness allocable thereto since
the date of determination, and (iii) all Unsecured Indebtedness of any
Consolidated Subsidiary or Minority Holding that is non-recourse to the Borrower
and the Company, other than the ICIP Amount.
"Total Outstanding Unsecured Indebtedness" shall mean that portion
of Total Outstanding Indebtedness which is recourse to the Borrower, the
Company, and/or its Consolidated Subsidiaries, plus the pro rata share of such
recourse Indebtedness of Minority Holdings that is allocable to the Borrower,
the Company or the Consolidated Subsidiaries as of the date of determination.
"Total Unencumbered Asset Value" means the sum of (i) the aggregate
Unencumbered Asset Value of the Unencumbered Assets, and (ii) unrestricted Cash
and Cash Equivalents, exclusive of tenant security deposits.
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"Total Value" means the sum of (i) Capitalization Value, (ii)
Construction Asset Costs (provided that Construction Asset Costs do not account
for more than 10% of Total Value), and (iii) unrestricted Cash and Cash
Equivalents, exclusive of tenant security deposits.
"UCC Searches" has the meaning set forth in Section 3.1(m).
"Unencumbered Assets" has the meaning set forth in Section 3.3.
"Unencumbered Asset Value" means, with respect to any Unencumbered
Asset, an amount equal to the product of (x) four (4), and (y) the Adjusted
Unencumbered NOI with respect to any such Unencumbered Asset for the immediately
preceding quarter, with pro forma adjustments in the case of any Unencumbered
Asset that has been owned for less than one full fiscal quarter, divided by
9.5%.
"United States" means the United States of America, including the
states and the District of Columbia, but excluding its territories and
possessions.
"Unsecured Interest Expense" for any period, shall be the greater of
(a) actual Interest Expense incurred on Total Outstanding Unsecured
Indebtedness, and (b) the product of (i) the average amount of Total Outstanding
Unsecured Indebtedness outstanding for such period, and (ii) a percentage equal
to an interest rate constant equal to the product of (x) the sum of the then
current rate of the seven-year U.S. Treasury Note and one and one half percent
(1.50%), and (y) a thirty year mortgage-style amortization schedule.
"Wholly-Owned Subsidiary" means any Subsidiary of the Borrower that
is wholly owned, directly or indirectly, by the Borrower; provided that a
Subsidiary shall also be deemed to be a "Wholly-Owned" Subsidiary hereunder if
the Company wholly owns, directly or indirectly, a minority position in such
Subsidiary (in addition to the indirect interest of the Company in such
Subsidiary as a result of the Company's ownership interest in the Borrower).
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SECTION 1.2. Accounting Terms and Determinations. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
accounting determinations hereunder shall be made, and all Financial Statements
required to be delivered hereunder shall be prepared in accordance with GAAP as
in effect from time to time, applied on a basis consistent (except for changes
concurred in by the Borrower's independent public accountants) with the most
recent audited Consolidated Financial Statements of the Borrower and its
Consolidated Subsidiaries delivered to the Banks; provided that, if the
Borrower notifies the Administrative Agent that the Borrower wishes to amend any
covenant in Article V to eliminate the effect of any change in GAAP on the
operation of such covenant (or if the Administrative Agent notifies the
Borrower that the Required Banks wish to amend Article V for such purpose), then
the Borrower's compliance with such covenant shall be determined on the basis
of GAAP in effect immediately before the relevant change in GAAP became
effective, until either such notice is withdrawn or such covenant is amended in
a manner satisfactory to the Borrower and the Required Banks.
SECTION 1.3. Types of Borrowings. The term "Borrowing" denotes the
aggregation of Loans of one or more Banks to be made to the Borrower pursuant to
Article II on a single date and for a single Interest Period. Borrowings are
classified for purposes of this Agreement by reference to the pricing of Loans
comprising such Borrowing (e.g., a "Euro-Dollar Borrowing" is a Borrowing
comprised of Euro-Dollar Loans).
ARTICLE II
THE CREDITS
SECTION 2.1. Commitments to Lend. During the Term, each Bank
severally agrees, on the terms and conditions set forth in this Agreement, to
make the Loans to the Borrower and participate in Letters of Credit issued by
the Fronting Bank on behalf of the Borrower pursuant to this Section from time
to time in amounts such that the aggregate principal amount of Loans by such
Bank together with such Bank's pro rata share of the Letter of Credit Usage at
any one time
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outstanding shall not exceed the amount of its Commitment. The aggregate amount
of Loans to be made hereunder together with the Letter of Credit Usage shall not
exceed the Maximum Loan Amount. At no time shall there be more than six (6)
Euro-Dollar Loans outstanding and at no time shall there be more than twelve
(12) Loans outstanding. Each Borrowing under this subsection (a) shall be in an
aggregate principal amount of not less than $2,000,000, or an integral multiple
of $1,000,000 in excess thereof (except that any such Borrowing may be in the
aggregate amount available in accordance with Section 3.2(c)) and shall be made
from the several Banks ratably in proportion to their respective Commitments.
Upon the expiration of the Term, the Banks shall have no further obligation to
make Loans or issue or participate in Letters of Credit to Borrower. Within the
foregoing limits, the Borrower may borrow under this Section, repay, or to the
extent required by Section 2.9 or permitted by Section 2.10, prepay Loans and
reborrow at any time during the Term.
SECTION 2.2. Notice of Borrowing.
(a) The Borrower shall give the Administrative Agent notice (a
"Notice of Borrowing") not later than 10:00 a.m. (New York City time) (y) one
(1) Domestic Business Day before each Base Rate Borrowing, or (z) three (3)
Euro-Dollar Business Days before each Euro-Dollar Borrowing, as applicable,
specifying:
(i) the date of such Borrowing, which shall be a Domestic
Business Day in the case of a Domestic Borrowing or a Euro-Dollar Business Day
in the case of a Euro-Dollar Borrowing,
(ii) the aggregate amount of such Borrowing,
(iii) whether the Loans comprising such Borrowing are to be
Base Rate Loans or Euro-Dollar Loans,
(iv) in the case of a Euro-Dollar Borrowing, the duration of
the Interest Period applicable thereto, subject to the provisions of the
definition of Interest Period, except that no Interest Period shall
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extend beyond the Maturity Date, as such may be extended pursuant to Section 2.8
hereof, and
(v) the Approved Use (in reasonable detail) for which such
Borrowing shall be used.
(b) Borrower shall give the Administrative Agent, and the designated
Fronting Bank, written notice in the form of Exhibit F attached hereto in the
event that it desires to have Letters of Credit (each, a "Letter of Credit")
issued hereunder no later than 10:00 a.m., New York City time, at least four (4)
Domestic Business Days prior to the date of such issuance. Each such notice
shall specify (i) the designated Fronting Bank, (ii) the aggregate amount of the
requested Letters of Credit, (iii) the individual amount of each requested
Letter of Credit and the number of Letters of Credit to be issued, (iv) the date
of such issuance (which shall be a Domestic Business Day), (v) the name and
address of the beneficiary, (vi) the expiration date of the Letter of Credit
(which in no event shall be later than twelve (12) months after the issuance of
such Letter of Credit or the Maturity Date, whichever is earlier), (vii) the
purpose and circumstances for which such Letter of Credit is being issued and
(viii) the terms upon which each such Letter of Credit may be drawn down (which
terms shall not leave any discretion to Fronting Bank). Each such notice may be
revoked telephonically by the Borrower to the applicable Fronting Bank and the
Administrative Agent any time prior to the date of issuance of the Letter of
Credit by the applicable Fronting Bank, provided such revocation is confirmed in
writing by the Borrower to the Fronting Bank and the Administrative Agent within
one (1) Domestic Business Day by facsimile. No later than 10:00 a.m., New York
City time, on the date that is four (4) Domestic Business Days prior to the date
of issuance, the Borrower shall specify a precise description of the documents
and the verbatim text of any certificate to be presented by the beneficiary of
such Letter of Credit, which if presented by such beneficiary prior to the
expiration date of the Letter of Credit would require the Fronting Bank to make
a payment under the Letter of Credit; provided, that Fronting Bank may, in its
reasonable judgment, require changes in any such documents and certificates
only in conformity with changes in customary and commercially reasonable
practice or law and, provided further, that no Letter of
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Credit shall require payment against a conforming draft to be made thereunder on
the following Domestic Business Day that such draft is presented if such
presentation is made later than 10:00 A.M. New York City time (except that if
the beneficiary of any Letter of Credit requests at the time of the issuance of
its Letter of Credit that payment be made on the same Domes tic Business Day
against a conforming draft, such beneficiary shall be entitled to such a same
day draw, provided such draft is presented to the applicable Fronting Bank no
later than 10:00 A.M. New York City time and provided further the Borrower shall
have requested to the Fronting Bank and the Administrative Agent that such
beneficiary shall be entitled to a same day draw). In determining whether to pay
on such Letter of Credit, the Fronting Bank shall be responsible only to
determine that the documents and certificates required to be delivered under the
Letter of Credit have been delivered and that they comply on their face with the
requirements of that Letter of Credit.
SECTION 2.3. Notice to Banks; Funding of Loans.
(a) Upon receipt of a Notice of Borrowing, the Administrative Agent
shall promptly notify each Bank of the contents thereof and of such Bank's share
(if any) of such Borrowing and such Notice of Borrowing shall thereafter only be
revocable by the Borrower no later than (y) with respect to a Base Rate
Borrowing, 5:00 p.m. (New York City time) one Domestic Business Day before each
Base Rate Borrowing or (z) with respect to a Euro-Dollar Borrowing, 3:00 p.m.
(New York City time) three (3) Euro-Dollar Business Days before each Euro-Dollar
Borrowing. Upon the expiration of such applicable time periods, the Notice of
Borrowing shall not thereafter be revocable by Borrower.
(b) Not later than 1:00 p.m. (New York City time) on the date of
each Borrowing as indicated in the Notice of Borrowing, each Bank participating
therein shall (except as provided in subsection (c) of this Section) make
available its share of such Borrowing, in Federal or other funds immediately
available to the Administrative Agent at its address referred to in Section 9.1.
Unless the Administrative Agent determines that any applicable condition
specified in Article III
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has not been satisfied, the Administrative Agent will make the funds so received
from the Banks available to the Borrower at the Borrower's address. If the
Borrower has requested the issuance of a Letter of Credit, no later than 12:00
Noon (New York City time) on the date of such issuance as indicated in the
notice delivered pursuant to Section 2.2(b), the Fronting Bank shall issue such
Letter of Credit in the amount so requested and deliver the same to the Borrower
(or as the Borrower shall direct) with a copy thereof to the Administrative
Agent. Immediately upon the issuance of each Letter of Credit by the Fronting
Bank, such Fronting Bank shall be deemed to have sold and transferred to each
other Bank, and each such other Bank shall be deemed, and hereby agrees, to have
irrevocably and unconditionally purchased and received from the Fronting Bank,
without recourse or warranty, an undivided interest and a participation in such
Letter of Credit, any drawing thereunder, and the obligations of the Borrower
hereunder with respect thereto, and any security therefor or guaranty pertaining
thereto, in an amount equal to such Bank's rat able share thereof (based upon
the ratio its Commitment bears the aggregate of all Commitments). Upon any
change in any of the Commitments in accordance herewith, there shall be an
automatic adjustment to such participations to reflect such changed shares. The
Fronting Bank shall have the primary obligation to fund any and all draws made
with respect to such Letter of Credit notwithstanding any failure of a
participating Bank to fund its ratable share of any such draw. The
Administrative Agent will instruct the Fronting Bank to make such Letter of
Credit available to the Borrower and the Fronting Bank shall make such Letter of
Credit available to the Borrower at the Borrower's aforesaid address on the date
of the Borrowing.
(c) Unless the Administrative Agent shall have received notice from
a Bank prior to the date of any Borrowing that such Bank will not make available
to the Administrative Agent such Bank's share of such Borrowing, the
Administrative Agent may assume that such Bank has made such share available to
the Administrative Agent on the date of such Borrowing in accordance with
subsection (b) of this Section 2.3 and the Administrative Agent may (but shall
have no obligation to), in reliance upon such assumption, make available to the
Borrower on such date a corresponding amount. If and to
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the extent that such Bank shall not have so made such share available to the
Administrative Agent, such Bank and the Borrower severally agree to repay to the
Administrative Agent forthwith within ten (10) days after demand therefore such
corresponding amount together with interest thereon, for each day from the date
such amount is made available to the Borrower until the date such amount is
repaid to the Administrative Agent, at (i) in the case of the Borrower, a rate
per annum equal to the higher of the Federal Funds Rate and the interest rate
applicable thereto pursuant to Section 2.6 and (ii) in the case of such Bank,
the Federal Funds Rate. If such Bank shall repay to the Administrative Agent
such corresponding amount, such amount so repaid shall constitute such Bank's
Loan included in such Borrowing for purposes of this Agreement. The failure of
any Bank to make any Loan on a date of Borrowing hereunder shall not relieve any
other Bank of any obligation hereunder to make a Loan on such date.
Notwithstanding the foregoing and any other provision to the contrary contained
herein, if any Bank shall have failed to fund its share of a previously
requested Loan on the applicable date of Borrowing and Borrower provides a new
Notice of Borrowing as a result of such failure to fund, then, if necessary to
make such Borrowing, Borrower shall be permitted a single additional Loan
(beyond that permitted by Section 2.1, if a Euro-Dollar Loan) and the $2,000,000
minimum Borrowing limit elsewhere referred to in the Credit Agreement shall not
apply to such new Borrowing.
(d) In the event a Bank (a "Designated Bank") shall have failed to
make a Loan within the ten (10) day period specified in clause (c) above, the
Borrower may, at its sole election, (i) make written demand on such Designated
Bank (with a copy to the Administrative Agent) for the Designated Bank to
assign, and such Designated Bank shall assign pursuant to one or more duly
executed Assignment and Acceptances to one or more banks or other institutions
which the Borrower or the Administrative Agent shall have identified for such
purpose (provided that neither the Administrative Agent nor any Bank shall have
any obligation to identify a bank or other institution for such purpose), all of
such Designated Bank's right and obligations under this Agreement and the Notes
(including, without limitation, its Commitment, all Loans owing to it, and all
of its participation interests in Letters of Credit) in accor-
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dance with Section 9.6 or (ii) repay all Loans owing to the Designated Bank
together with interest accrued with respect thereto to the date of such
repayment and all fees and other charges accrued or payable under the terms of
this Agreement for the benefit of the Designated Bank to the date of such
repayment and remit to the Administrative Agent to be held as cash collateral an
amount equal to the participation interest of the Designated Bank in Letters of
Credit. Any such repayment and remittance shall be for the sole credit of the
Designated Bank and not for any other Bank. Upon delivery of such repayment and
remittance in immediately available funds as aforesaid, the Designated Bank
shall cease to be a Bank under this Agreement and its Commitment shall
terminate. All expenses incurred by the Administrative Agent in connection with
the foregoing shall be for the sole account of the Borrower and shall constitute
Obligations hereunder.
SECTION 2.4. Notes.
(a) The Loans of each Bank shall be evidenced by a single Note
payable to the order of such Bank for the account of its Applicable Lending
Office in an amount equal to the aggregate unpaid principal amount of such
Bank's Loans.
(b) Each Bank may, by notice to the Borrower and the Administrative
Agent, request that its Loans of a particular type be evidenced by a separate
Note in an amount equal to the aggregate unpaid principal amount of such Bank's
Loans. Each such Note shall be in substantially the form of Exhibit A hereto
with appropriate modifications to reflect the fact that it evidences solely
Loans of the relevant type for such Bank. Each reference in this Agreement to
the "Note" of such Bank shall be deemed to refer to and include any or all of
such Notes, as the context may require.
(c) Upon receipt of each Bank's Note pursuant to Section 3.1(a), the
Administrative Agent shall forward such Note to such Bank. Each Bank shall
record the date, amount, type and maturity of each Loan made by it and the date
and amount of each payment of principal made by the Borrower with respect
thereto, and may, if such Bank so elects in connection with any transfer or
enforcement of its Note, endorse on the schedule forming
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a part thereof appropriate notations to evidence the foregoing information with
respect to each such Loan then outstanding; provided that the failure of any
Bank to make any such recordation or endorsement shall not affect the
obligations of the Borrower hereunder or under the Notes. Each Bank is hereby
irrevocably authorized by the Borrower so to endorse its Note and to attach to
and make a part of its Note a continuation of any such schedule as and when
required which continuation shall be deemed correct absent manifest error.
SECTION 2.5. Maturity of Loans. Each Loan included in any Borrowing
shall mature, and the principal amount thereof shall be due and payable, on the
Maturity Date.
SECTION 2.6. Interest Rates.
(a) Each Base Rate Loan shall bear interest on the outstanding
principal amount thereof for each day from the date such Loan is made until the
date it is repaid at a rate per annum equal to the Base Rate plus the Applicable
Margin for Base Rate Loans for such day. Such interest shall be payable for each
Interest Period on the last day thereof.
(b) Each Euro-Dollar Loan shall bear interest on the outstanding
principal amount thereof, for each day during the Interest Period applicable
thereto, at a rate per annum equal to the sum of the Applicable Margin for
Euro-Dollar Loans for such day plus the Adjusted London Interbank Offered Rate
applicable to such Interest Period. Such interest shall be payable for each
Interest Period on the last day thereof and, if such Interest Period is longer
than one month, at intervals of thirty days after the first day thereof.
The "Adjusted London Interbank Offered Rate" applicable to any
Interest Period means a rate per annum equal to the quotient obtained (rounded
upward, if necessary, to the next higher 1/100 of 1%) by dividing (i) the
applicable London Interbank Offered Rate by (ii) 1.00 minus the Euro-Dollar
Reserve Percentage.
The "London Interbank Offered Rate" applicable to any Interest
Period means the rate (expressed as a percentage per annum rounded upwards, if
necessary, to
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the nearest one sixteenth (1/16) of one percent (1%)) for deposits in U.S.
Dollars for a period of time comparable to such Interest Period that appears on
Telerate Page 3750 as of 11:00 a.m., London time, two Euro-Dollar Business Days
before the first day of such Interest Period. If such rate does not appear on
Telerate Page 3750 as of 11:00 a.m., London time, two Euro-Dollar Business Days
before the first day of such Interest Period, the London Interbank Offered Rate
will be the arithmetic mean of the offered rates (expressed as a percentage per
annum rounded upwards, if necessary, to the nearest one sixteenth (1/16) of one
percent (1%)) for deposits in U.S. dollars for a one (1) month period that
appear on the Reuters Screen LIBO Page as of 11:00 a.m., London time, two
Euro-Dollar Business Days before the first day of such Interest Period, if at
least two such offered rates so appear. If fewer than two such offered rates
appear on the Reuters Screen LIBO Page as of 11:00 a.m., London time, on any
such date, the Administrative Agent will request the principal London office of
any four (4) major reference banks in the London interbank market selected by
the Administrative Agent to provide such bank's offered quotation (expressed as
a percentage per annum rounded upwards, if necessary, to the nearest one
sixteenth (1/16) of one percent (1%)) to prime banks in the London interbank
market for deposits in U.S. dollars for a period comparable to such Interest
Period as of 11:00 a.m., London time, on such date for amounts comparable to the
then outstanding principal amount of the applicable Loan (if available). If at
least two such offered quotations are so provided, LIBOR will be the arithmetic
mean of such quotations. If fewer than two such quotations are so provided, the
Administrative Agent will request any three (3) major banks in New York City
selected by the Administrative Agent to provide such bank's rate (expressed as a
percentage per annum rounded upwards, if necessary, to the nearest one sixteenth
(1/16) of one percent (1%)) for loans in U.S. dollars to leading European banks
for a period comparable to such Interest Period as of approximately 11:00 a.m.,
New York City time, on the date which is two Euro-Dollar Business Days before
the first day of such Interest Period for amounts comparable to the then
outstanding principal amount (if available) of such Loan. If at least two such
rates are so provided, the London Interbank Offered Rate will be the arithmetic
mean of such rates. If fewer than two rates are so
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provided, then the London Interbank Offered Rate will be the rate provided.
"Euro-Dollar Reserve Percentage" means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement for a member bank of the Federal
Reserve System in New York City with deposits exceeding five billion dollars in
respect of "Eurocurrency liabilities" (or in respect of any other category of
liabilities which includes deposits by reference to which the interest rate on
Euro-Dollar Loans is determined or any category of extensions of credit or other
assets which includes loans by a nonUnited States office of any Bank to United
States residents). The Adjusted London Interbank Offered Rate shall be adjusted
automatically on and as of the effective date of any change in the Euro-Dollar
Reserve Percentage.
(c) In the event that, and for so long as, any Event of Default
shall have occurred and be continuing, the outstanding principal amount of the
Loans, and, to the extent permitted by applicable law, overdue interest in
respect of all Loans, shall bear interest at the annual rate of the sum of the
Prime Rate and four percent (4%).
(d) The Administrative Agent shall determine each interest rate
applicable to the Loans hereunder. The Administrative Agent shall give prompt
notice to the Borrower and the participating Banks of each rate of interest so
determined, and its determination thereof shall be conclusive in the absence of
manifest error.
(e) The Administrative Agent agrees to use its best efforts to
obtain quotations of the London Interbank Offered Rate as contemplated by this
Section. If the Administrative Agent does not obtain a timely quotation, the
provisions of Section 8.1 shall apply.
SECTION 2.7. Fees.
(a) Commitment Fee. During the Term, the Borrower shall pay the
Administrative Agent for the account of the Banks ratably in proportion to their
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respective Commitments a commitment fee (the "Commitment Fee") accruing at a per
annum rate equal to 0.25% on the daily average undrawn Commitments. The
Commitment Fee shall be payable monthly in arrears during the Term.
(b) Letter of Credit Fee Charges. In connection with each Letter of
Credit, Borrower hereby covenants to pay to the Administrative Agent the
following fees each payable monthly in arrears: (1) a fee for the account of the
Banks, computed daily on the amount of the Letter of Credit issued and
outstanding at a rate per annum equal to the "Banks' L/C Fee Rate" (as
hereinafter defined) and (2) a fee, for the Fronting Bank's own account,
computed daily on the amount of the Letter of Credit issued and outstanding at a
rate per annum equal to 0.125%. For purposes of this Agreement, the "Banks' L/C
Fee Rate" shall mean, at any time, a rate per annum equal to the Applicable
Margin for Eurodollar Rate Loans less 0.125% per annum. It is understood and
agreed that the last installment of the fees provided for in this paragraph (b)
with respect to any particular Letter of Credit shall be due and payable on the
first day of the calendar month following the return, undrawn, or cancellation
of such Letter of Credit. In addition, the Borrower shall pay to the Fronting
Bank, solely for its own account, the standard charges assessed by the Fronting
Bank in connection with the issuance, administration, amendment and payment or
cancellation of Letters of Credit and such compensation in respect of such
Letters of Credit for the Borrower's account as may be agreed upon by the
Borrower and the Fronting Bank from time to time.
(c) Fees Non-Refundable. All fees set forth in this Section 2.7
shall be deemed to have been earned on the date payment is due in accordance
with the provisions of this Agreement and shall be non-refundable. The
obligation of the Borrower to pay such fees in accordance with the provisions
of this Agreement shall be binding upon the Borrower and shall inure to the
benefit of the Administrative Agent and the Banks regardless of whether any
Loans are actually made.
SECTION 2.8. Mandatory Expiration. The term (the "Term") of the
Commitments shall terminate and expire, and the Borrower shall return or cause
to be returned all Letters of Credit to the Fronting Bank, on
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the date which is the third anniversary of the Closing Date (or, if such date is
not a Domestic Business Day, then the next succeeding Domestic Business Day)
(the "Maturity Date").
SECTION 2.9. Mandatory Prepayment.
(a) Each of the Loans shall immediately mature and the Commitments
shall terminate upon the occurrence of any of the following events (each, a
"Mandatory Prepayment Event"): (i) the Company or the Borrower merges or
consolidates with another person and the Company or Borrower, as the case may
be, is not the surviving entity; (ii) the Borrower or the Company shall sell
any asset or assets which in the aggregate constitute in excess of 25% of the
Capitalization Value; or (iii) the Company, the Borrower or any of their
affiliates cease to provide property management or leasing services to at least
75% of the total number of Real Property Assets in which the Borrower or the
Company has an ownership interest.
(b) Prepayments of the Loans pursuant to this Section 2.9 shall be
applied to prepay ratably the Loans of the Banks. In connection with the
prepayment of a Euro-Dollar Loan prior to the maturity thereof, the Borrower
shall also pay any applicable expenses pursuant to Section 2.12.
SECTION 2.10. Optional Prepayments.
(a) The Borrower may, upon at least two (2) Domestic Business Days'
notice to the Administrative Agent, prepay any Base Rate Borrowing in whole at
any time, or from time to time in part, by paying the principal amount to be
prepaid together with accrued interest thereon to the date of prepayment. Each
such optional prepayment shall be applied to prepay ratably the Loans of the
several Banks included in such Borrowing.
(b) Except as provided in Section 8.2, the Borrower may not prepay
all or any portion of the principal amount of any Euro-Dollar Loan prior to the
maturity thereof unless the Borrower shall also pay any applicable expenses
pursuant to Section 2.12. Notice of such prepayment shall be delivered to the
Administrative
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Agent by Borrower, upon at least three (3) Domestic Business Days notice. Each
such optional prepayment shall be applied to prepay ratably the Loans of the
Banks included.
(c) The Borrower may, upon at least one (1) Domestic Business Day's
notice to the Administrative Agent (by 11:00 a.m New York time on such Domestic
Business Day), reimburse the Administrative Agent for the benefit of the
Fronting Bank for the amount of any drawing under a Letter of Credit in whole or
in part in any amount.
(d) The Borrower may at any time return any undrawn Letter of Credit
to the Fronting Bank in whole, but not in part, and the Fronting Bank shall give
the Administrative Agent and each of the Banks notice of such return.
(e) The Borrower may cancel all or any portion of the Commitments
by the delivery to the Administrative Agent of a notice of cancellation within
the applicable time periods set forth in Sections 2.10(a) and (b) above if there
are Loans then outstanding or, if there are no Loans outstanding at such time,
upon at least five (5) Domestic Business Days notice to the Administrative
Agent, whereupon, in either event, such Commitments so designated by Borrower
shall terminate on the date set forth in such notice of cancellation, and, if
there are any Loans then outstanding in excess of the Commitments after giving
effect to such termination, Borrower shall prepay such Loans outstanding on such
date in accordance with the requirements of Section 2.10(a) and (b). In no event
shall the Borrower be permitted to cancel Commitments for which a Letter of
Credit has been issued and is outstanding unless the Borrower returns (or causes
to be returned) such Letter of Credit to the Fronting Bank.
(f) Upon receipt of a notice of prepayment or cancellation or a
return of a Letter of Credit pursuant to this Section, the Administrative Agent
shall promptly notify each Bank of the contents thereof and of such Bank's
ratable share (if any) of such prepayment or cancellation and such notice shall
thereafter be revocable by the Borrower no later than 10:00 a.m. (New York City
time) three (3) Domestic Business Days before the
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date originally set forth by Borrower in the applicable notice of prepayment or
cancellation as the prepayment or cancellation date. Upon the expiration of such
time period, the notice of prepayment or cancellation shall be irrevocable.
(g) Any amounts prepaid pursuant to Sections 2.10(a) or (b) may be
reborrowed. Any amounts cancelled pursuant to Section 2.10(e) may not be
reborrowed.
SECTION 2.11. General Provisions as to Payments.
(a) The Borrower shall make each payment of principal of, and
interest on, the Loans and of fees required hereunder, not later than 11:00
a.m. (New York City time) on the date when due, in Federal or other funds
immediately available to the Administrative Agent at its address referred to in
Section 9.1. The Administrative Agent will promptly distribute to each Bank its
ratable share of each such payment received by the Administrative Agent for the
account of the Banks and, if such payment is not made by the Administrative
Agent to any such Bank within two (2) Domestic Business Days after the
Administrative Agent's actual receipt of funds from the Borrower, the
Administrative Agent shall in addition pay to such Bank(s) interest on the
amount of such late repayment at the Federal Funds Rate. Whenever any payment of
principal of, or interest on, the Base Rate Loans or of fees required hereunder
shall be due on a day which is not a Domestic Business Day, the date for payment
thereof shall be extended to the next succeeding Domestic Business Day. Whenever
any payment of principal of, or interest on, the Euro-Dollar Loans shall be due
on a day which is not a Euro-Dollar Business Day, the date for payment thereof
shall be extended to the next succeeding Euro-Dollar Business Day unless such
Euro-Dollar Business Day falls in another calendar month, in which case the date
for payment thereof shall be the next preceding Euro-Dollar Business Day. If the
date for any payment of principal is extended by operation of law or otherwise,
interest thereon shall be payable for such extended time.
(b) Unless the Administrative Agent shall have received notice from
the Borrower prior to the date on which any payment is due to the Banks
hereunder that
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the Borrower will not make such payment in full, the Administrative Agent may
assume that the Borrower has made such payment in full to the Administrative
Agent on such date and the Administrative Agent may (but shall have no
obligation to), in reliance upon such assumption, cause to be distributed to
each Bank on such due date an amount equal to the amount then due such Bank. If
and to the extent that the Borrower shall not have so made such payment, each
Bank shall repay to the Administrative Agent forthwith on demand such amount
distributed to such Bank together with interest thereon, for each day from the
date such amount is distributed to such Bank until the date such Bank repays
such amount to the Administrative Agent, at the Federal Funds Rate.
SECTION 2.12. Funding Losses. If the Borrower makes any payment of
principal with respect to any Euro-Dollar Loan (pursuant to Article II, VI or
VIII or otherwise) on any day other than the last day of the Interest Period
applicable thereto (other than the last day of a Euro-Dollar Period as
established in clause (1)(c) of the definition of Interest Period), or the last
day of an applicable period fixed pursuant to Section 2.6(b), or if the Borrower
fails to borrow any Euro-Dollar Loans, after notice has been given to any Bank
in accordance with Section 2.3(a) and not revoked as permitted in this
Agreement, or in the event of any mandatory prepayment under Section 2.9 hereof,
then and only then shall Borrower reimburse each Bank within 15 days after
demand therefor for any resulting loss or expense reasonably incurred by it (or
by a Participant in the related Loan), including (without limitation) any loss
incurred in obtaining, liquidating or employing deposits from third parties, but
excluding loss of margin for the period after any such payment or failure to
borrow, provided that such Bank shall have delivered to the Borrower a
certificate signed by an authorized officer of such Bank as to the amount of
such loss or expense reasonably incurred, which certificate shall be conclusive
in the absence of manifest error.
SECTION 2.13. Computation of Interest and Fees. Interest and fees
shall be computed on the basis of a year of 360 days and paid for the actual
number of days elapsed (including the first day but excluding the last day).
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SECTION 2.14. Use of Proceeds. The Borrower shall use the proceeds
of the Loans solely for (i) the acquisition by the Borrower (either directly or
indirectly through Wholly-Owned Subsidiaries) of real estate properties (or
interests therein) which are office buildings located in the continental United
States, with land adjacent or incidental thereto (the "New Acquisitions"), (ii)
such other costs and expenses attendant with such acquisitions and improvements,
including, without limitation, closing costs, attorneys' fees and expenses and
other professional fees, architectural fees, due diligence expenses, title
insurance premiums, survey preparation costs, recording fees, appraisal fees,
engineering and environmental fees, licensing and regulatory filing fees,
brokerage commissions, leasing commissions, reasonable tenant improvement costs,
(iii) construction, renovation, rehabilitation and alteration of Real Property
Assets or other Capital Improvements, (iv) the refinancing of existing
Indebtedness of the Borrower and its Consolidated Subsidiaries, and (v) general
working capital needs of the Borrower not to exceed a maximum amount, with
respect to such working capital needs, of ten percent (10%) of the Commitments
then available to be drawn pursuant to the terms hereof (collectively, "Approved
Uses").
SECTION 2.15. Method of Electing Interest Rates.
(a) The Loans included in each Borrowing shall bear interest
initially at the type of rate specified by the Borrower in the applicable Notice
of Borrowing. Thereafter, the Borrower may from time to time elect to change or
continue the type of interest rate borne by each Group of Loans (subject in each
case to the provisions of Article VIII), as follows:
(i) if such Loans are Base Rate Loans, the Borrower may elect to
convert such Loans to Euro-Dollar Loans as of any Euro-Dollar Business Day;
(ii) if such Loans are Euro-Dollar Loans, the Borrower may elect to
convert such Loans to Base Rate Loans or elect to continue such Loans as
Euro-Dollar Loans for an additional Interest Period, in each case effective on
the last day of the then current Interest Period applicable to such Loans.
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Each such election shall be made by delivering a notice (a "Notice of Interest
Rate Election") to the Administrative Agent at least three (3) Euro-Dollar
Business Days before the conversion or continuation selected in such notice is
to be effective (unless the relevant Loans are to be continued as Base Rate
Loans, in which case such notice shall be delivered to the Administrative Agent
no later than 12:00 Noon (New York City time) at least one (1) Domestic Business
Day before such continuation is to be effective). A Notice of Interest Rate
Election may, if it so specifies, apply to only a portion of the aggregate
principal amount of the relevant Group of Loans; provided that (i) such portion
is allocated ratably among the Loans comprising such Group, (ii) the portion to
which such notice applies, and the remaining portion to which it does not apply,
are each $1,000,000 or any larger multiple of $1,000,000, (iii) there shall be
no more than six (6) Borrowings comprised of Euro-Dollar Loans and no more than
twelve (12) Loans in total outstanding at any time under this Agreement, (iv) no
Loan may be continued as, or converted into, a Euro-Dollar Loan when any Event
of Default has occurred and is continuing, and (v) no Interest Period shall
extend beyond the Maturity Date.
(b) Each Notice of Interest Rate Election shall specify:
(i) the Group of Loans (or portion thereof) to which such notice
applies;
(ii) the date on which the conversion or continuation selected in
such notice is to be effective, which shall comply with the applicable clause of
subsection (a) above;
(iii) if the Loans comprising such Group are to be converted, the
new type of Loans and, if such new Loans are Euro-Dollar Loans, the duration of
the initial Interest Period applicable thereto; and
(iv) if such Loans are to be continued as Euro-Dollar Loans for an
additional Interest Period, the duration of such additional Interest Period.
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Each Interest Period specified in a Notice of Interest Rate Election shall
comply with the provisions of the definition of Interest Period.
(c) Upon receipt of a Notice of Interest Rate Election from the
Borrower pursuant to subsection (a) above, the Administrative Agent shall notify
each Bank on the same day as it receives such Notice of Interest Rate Election
of the contents thereof and such notice shall not thereafter be revocable by the
Borrower. If the Borrower fails to deliver a timely Notice of Interest Rate
Election to the Administrative Agent for any Group of Euro-Dollar Loans, such
Loans shall be converted into Base Rate Loans on the last day of the then
current Interest Period applicable thereto.
SECTION 2.16. Letters of Credit.
(a) Subject to the terms contained in this Agreement and the other
Loan Documents, upon the receipt of a notice in accordance with Section 2.2(b)
requesting the issuance of a Letter of Credit, the Fronting Bank shall issue a
Letter of Credit or Letters of Credit in such form as is reasonably acceptable
to the Borrower in an amount or amounts equal to the amount or amounts requested
by the Borrower.
(b) Each Letter of Credit shall be issued in the minimum amount of
One Hundred Thousand Dollars ($100,000).
(c) The Letter of Credit Usage shall be no more than Fifty Million
Dollars ($50,000,000) at any one time.
(d) There shall be no more than ten (10) Letters of Credit
outstanding at any one time.
(e) In the event of any request for a drawing under any Letter of
Credit by the beneficiary thereunder, the Fronting Bank shall notify the
Borrower and the Administrative Agent (and the Administrative Agent shall notify
each Bank thereof) on or before the date on which the Fronting Bank intends to
honor such drawing, and, except as provided in this subsection (e), the Borrower
shall reimburse the Fronting Bank, in immediately available funds, on the same
day on which such drawing is
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honored in an amount equal to the amount of such drawing. Notwithstanding
anything contained herein to the contrary, however, unless the Borrower shall
have notified the Administrative Agent, and the Fronting Bank prior to 11:00
a.m. (New York time) on the Domestic Business Day immediately prior to the date
of such drawing that the Borrower intends to reimburse the Fronting Bank for
the amount of such drawing with funds other than the proceeds of the Loans, the
Borrower shall be deemed to have timely given a Notice of Borrowing pursuant to
Section 2.2 to the Administrative Agent, requesting a Borrowing of Base Rate
Loans on the date on which such drawing is honored and in an amount equal to the
amount of such drawing. Each Bank (other than the Fronting Bank) shall, in
accordance with Section 2.3(b), make available its share of such Borrowing to
the Administrative Agent, the proceeds of which shall be applied directly by
the Administrative Agent to reimburse the Fronting Bank for the amount of such
draw. In the event that any such Bank fails to make available to the Fronting
Bank the amount of such Bank's participation on the date of a drawing, the
Fronting Bank shall be entitled to recover such amount on demand from such Bank
together with interest at the Federal Funds Rate commencing on the date such
drawing is honored.
(f) If, after the date hereof, any change in any law or regulation
or in the interpretation thereof by any court or administrative or governmental
authority charged with the administration thereof shall either (i) impose,
modify or deem applicable any reserve, special deposit or similar requirement
against letters of credit issued by, or assets held by, or deposits in or for
the account of, or participations in any letter of credit, upon any Bank
(including the Fronting Bank) or (ii) impose on any Bank any other condition
regarding this Agreement or such Bank (including the Fronting Bank) as it
pertains to the Letters of Credit or any participation therein and the result
of any event referred to in the preceding clause (i) or (ii) shall be to
increase the cost to the Fronting Bank or any Bank of issuing or maintaining any
Letter of Credit or participating therein then the Borrower shall pay to the
Fronting Bank or such Bank, within 15 days after written demand by such Bank
(with a copy to the Administrative Agent), which demand shall be accompanied by
a certificate showing, in reasonable detail, the calculation of such
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<PAGE> 48
amount or amounts, such additional amounts as shall be required to compensate
the Fronting Bank or such Bank for such increased costs or reduction in amounts
received or receivable hereunder together with interest thereon at the Base
Rate. The amount specified in the written demand shall, absent manifest error,
be final and conclusive and binding upon the Borrower.
(g) The Borrower hereby agrees to protect, indemnify, pay and save
the Fronting Bank harmless from and against any and all claims, demands,
liabilities, damages, losses, costs, charges and expenses (including reasonable
attorneys' fees and disbursements) which the Fronting Bank may incur or be
subject to as a result of (i) the issuance of the Letters of Credit, other than
as a result of the gross negligence or wilful misconduct of the Fronting Bank or
(ii) the failure of the Fronting Bank to honor a drawing under any Letter of
Credit as a result of any act or omission, whether rightful or wrongful, of any
present or future de jure or de facto government or Governmental Authority
(collectively, "Governmental Acts"), other than as a result of the gross
negligence or wilful misconduct of the Fronting Bank. As between the Borrower
and the Fronting Bank, the Borrower assumes all risks of the acts and omissions
of, or misuses of, the Letters of Credit issued by the Fronting Bank, by the
beneficiaries of such Letters of Credit. In furtherance and not in limitation of
the foregoing, the Fronting Bank shall not be responsible (i) for the form,
validity, sufficiency, accuracy, genuineness or legal effect of any document
submitted by any party in connection with the application for and issuance of
such Letters of Credit, even if it should in fact prove to be in any or all
respects invalid, insufficient, inaccurate, fraudulent or forged; (ii) for the
validity or insufficiency of any instrument transferring or assigning or
purporting to transfer or assign any such Letter of Credit or the rights or
benefits thereunder or proceeds thereof, in whole or in part, which may prove to
be invalid or ineffective for any reason; (iii) for failure of the beneficiary
of any such Letter of Credit to comply fully with conditions required in order
to draw upon such Letter of Credit; (iv) for errors, omissions, interruptions or
delays in transmission or delivery of any message, by mail, cable, telegraph,
telex, facsimile transmission, or otherwise; (v) for errors in interpretation of
any technical terms; (vi)
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for any loss or delay in the transmission or otherwise of any documents required
in order to make a drawing under any such Letter of Credit or of the proceeds
thereof; (vii) for the misapplication by the beneficiary of any such Letter of
Credit of the proceeds of such Letter of Credit; and (viii) for any consequence
arising from causes beyond the control of the Fronting Bank, including any
Government Acts, in each case other than as a result of the gross negligence or
willful misconduct of the Fronting Bank. None of the above shall affect, impair
or prevent the vesting of the Fronting Bank's rights and powers hereunder. In
furtherance and extension and not in limitation of the specific provisions
hereinabove set forth, any action taken or omitted by the Fronting Bank under or
in connection with the Letters of Credit issued by it or the related
certificates, if taken or omitted in good faith, shall not put the Fronting Bank
under any resulting liability to the Borrower.
(h) If the Fronting Bank or the Administrative Agent is required at
any time, pursuant to any bankruptcy, insolvency, liquidation or reorganization
law or otherwise, to return to the Borrower any reimbursement by the Borrower
of any drawing under any Letter of Credit, each Bank shall pay to the Fronting
Bank or the Administrative Agent, as the case may be, its share of such payment,
but without interest thereon unless the Fronting Bank or the Administrative
Agent is required to pay interest on such amounts to the person recovering such
payment, in which case with interest thereon, computed at the same rate, and on
the same basis, as the interest that the Fronting Bank or the Administrative
Agent is required to pay.
SECTION 2.17. Letter of Credit Usage Absolute. The obligations of
the Borrower under this Agreement in respect of any Letter of Credit shall be
unconditional and irrevocable, and shall be paid strictly in accordance with the
terms of this Agreement (as the same may be amended from time to time) and any
Letter of Credit Documents (as hereinafter defined) under all circumstances,
including, without limitation, to the extent permitted by law, the following
circumstances:
(a) any lack of validity or enforceability of any Letter of Credit or any
other agreement or instrument
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relating thereto (collectively, the "Letter of Credit Documents") or any Loan
Document;
(b) any change in the time, manner or place of payment of, or in any other
term of, all or any of the obligations of the Borrower in respect of the Letters
of Credit or any other amendment or waiver of or any consent by the Borrower to
departure from all or any of the Letter of Credit Documents or any Loan
Document; provided, that the Fronting Bank shall not consent to any such change
or amendment unless previously consented to in writing by the Borrower;
(c) any exchange, release or non-perfection of any collateral, or any
release or amendment or waiver of or consent to departure from any guaranty, for
all or any of the obligations of the Borrower in respect of the Letters of
Credit;
(d) the existence of any claim, set-off, defense or other right that the
Borrower may have at any time against any beneficiary or any transferee of a
Letter of Credit (or any Persons for whom any such beneficiary or any such
transferee may be acting), the Administrative Agent, the Fronting Bank or any
Bank (other than a defense based on the gross negligence or wilful misconduct
of the Administrative Agent, the Fronting Bank or such Bank) or any other
Person, whether in connection with the Loan Documents, the transactions
contemplated hereby or by the Letters of Credit Documents or any unrelated
transaction;
(e) any draft or any other document presented under or in connection with
any Letter of Credit or other Loan Document proving to be forged, fraudulent,
invalid or insufficient in any respect or any statement therein being untrue or
inaccurate in any respect; provided, that payment by the Fronting Bank under
such Letter of Credit against presentation of such draft or document shall not
have constituted gross negligence or wilful misconduct of the Fronting Bank;
(f) payment by the Fronting Bank against presentation of a draft or
certificate that does not comply with the terms of the Letter of Credit;
provided, that such payment shall not have constituted gross negligence or
wilful misconduct of the Fronting Bank; and
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(g) any other circumstance or happening whatsoever other than the payment
in full of all obligations hereunder in respect of any Letter of Credit or any
agreement or instrument relating to any Letter of Credit, whether or not similar
to any of the foregoing, that might otherwise constitute a defense available to,
or a discharge of, the Borrower; provided, that such other circumstance or
happening shall not have been the result of gross negligence or wilful
misconduct of the Fronting Bank.
ARTICLE III
CONDITIONS
SECTION 3.1. Closing. The closing hereunder shall occur on the date
(the "Closing Date") when each of the following conditions is satisfied (or
waived by the Administrative Agent), each document to be dated the Closing Date
unless otherwise indicated:
(a) the Borrower shall have executed and delivered to the Administrative
Agent a Note for the account of each Bank dated on or before the Closing Date
complying with the provisions of Section 2.4;
(b) the Borrower and the Administrative Agent shall have executed and
delivered to the Administrative Agent a duly executed original of this
Agreement;
(c) The Company shall have executed and delivered to the Administrative
Agent the Guaranty;
(d) the Administrative Agent shall have received an enforceability opinion
of Battle Fowler, New York counsel for the Borrower and the Company, reasonably
acceptable to the Administrative Agent, the Banks and their counsel;
(e) The Administrative Agent shall have received all documents the
Administrative Agent may reasonably request relating to the existence of the
Borrower and the Company, the authority for and the validity of this Agreement
and the other Loan Documents, and any other matters relevant hereto, all in form
and substance reasonably satisfactory to the Administrative Agent. Such
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documentation shall include, without limitation, the partnership agreement of
the Borrower, and the articles of incorporation of the Company, each as amended,
modified or supplemented to the Closing Date, certified to be true, correct and
complete by a senior officer of the Company as of a date not more than twenty
(20) days prior to the Closing Date, together with a good standing certificate
from the Secretary of State (or the equivalent thereof) of the State or States
in which Borrower and the Company are organized or incorporated (as applicable)
and from the Secretary of State (or the equivalent thereof) of each other State
in which a Unencumbered Asset is located and in which any of the Borrower or
the Company is required to be qualified to transact business, each to be dated
not more than twenty (20) days prior to the Closing Date;
(f) The Administrative Agent shall have received all certificates,
agreements and other documents referred to in this Section 3.1 and Section 3.2,
unless otherwise specified, in sufficient counterparts, satisfactory in form
and substance to the Administrative Agent in its sole discretion;
(g) The Borrower and the Company shall each have taken all actions
required to authorize the execution and delivery of this Agreement and the other
Loan Documents to which it is a party and the performance thereof by the
Borrower and the Company, as applicable;
(h) The Administrative Agent shall be satisfied that the Borrower is not
subject to any present or contingent Environmental Claim which could have a
Material Adverse Effect;
(i) The Administrative Agent shall have received a pro forma Consolidated
balance sheet of the Borrower, the Company and the Consolidated Subsidiaries for
the period ended June 30, 1997;
(j) The Administrative Agent shall have received wire transfer
instructions in connection with any Loans to be made on the Closing Date;
(k) The Agents shall have received, for its and any other Bank's account,
(i) all fees due and payable to any Agent or Bank on or before the Closing Date,
and
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(ii) the reasonable fees and expenses accrued through the Closing Date of
Skadden, Arps, Slate, Meagher & Flom LLP;
(l) The Administrative Agent shall have received copies of all consents,
licenses and approvals, if any, required in connection with the execution,
delivery and performance by the Borrower and/or the Company, and the validity
and enforceability, of the Loan Documents, or in connection with any of the
transactions contemplated thereby, and such consents, licenses and approvals
shall be in full force and effect in all material respects;
(m) The Administrative Agent shall have received satisfactory reports of
UCC (collectively, the "UCC Searches"), tax lien, and judgment searches
conducted by a search firm reasonably acceptable to the Administrative Agent
with respect to the Unencumbered Assets, the Borrower, the Company and any
affiliate thereof that owned such Unencumbered Asset during the one (1) year
period prior to the Closing Date, such searches to be conducted by Borrower's
counsel in each of the locations where the Borrower, the Company or such
affiliate has its principal place of business and where each Unencumbered Asset
is located;
(n) the Administrative Agent shall have received, with respect to each
Unencumbered Asset: (i) a description of the Real Property Asset or New
Acquisition, and the address of the property, (ii) two years of historical cash
flow operating statements, if available, (iii) five years of cash flow
projections (including Capital Expenditures), (iv) a map and site plan, (v) a
current photograph of the property, (vi) if available, a financial statement of
each existing tenant of such Unencumbered Asset which occupies 15% or more of
such Unencumbered Asset or accounts for 15% or more of the base rentals of such
Unencumbered Asset or other information reasonably acceptable to the
Administrative Agent with respect to such tenants, (vii) a lease agreement for
any lease at the property with a tenant which occupies 15% or more of the
property, and, if available, an abstract thereof, (viii) a title report or title
commitment with respect to the property, including legible copies of the
documents and instruments referenced as exceptions therein, (ix) a certified
rent roll for the property, (x) in the case of a New Acquisition, a certified
copy
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of the purchase and sale agreement for the property together with a summary
description of the material terms of the acquisition, (xi) an engineer's report
with respect to the property, (xii) a Phase I environmental report for the
property, (xiii) evidence of zoning compliance (which evidence can include a
"lawyer's letter" from a local counsel engaged by Borrower at the time of
acquisition), (xiv) if applicable, the ground lease for the property, and (xv)
such additional information with respect to each New Acquisition or Real
Property Asset, the Subsidiary that owns or leases such New Acquisition or Real
Property Asset, and the tenants of such New Acquisition or Real Property Asset
as the Administrative Agent or any Bank shall reasonably request (provided that
such additional information is reasonably available, at no additional expense,
to the Borrower);
(o) the Administrative Agent shall have received certificates of insurance
with respect to each Unencumbered Asset demonstrating the coverage required
under this Agreement;
(p) the Administrative Agent shall have received a compliance certificate
from Borrower's chief financial officer or chief accounting officer certifying
compliance with Section 5.9 and Section 5.11 hereof containing such information
as is required by Section 5.1(c)(i) and (ii); and
(q) the Syndication Agent shall have received satisfactory evidence that
(i) the initial public offering of the common stock of the Company has been
consummated, with Merrill Lynch & Co. acting as lead underwriter and (ii) such
initial public offering (together with concurrent private placements of the
stock of the Company) shall have resulted in Net Offering Proceeds to the
Company of no less than $250,000,000, and (iii) all "Formation Transactions" (as
defined in the Form S-11) have been consummated.
The Administrative Agent shall promptly notify Borrower and the Banks of the
Closing Date.
SECTION 3.2. Borrowings. The obligation of any Bank to make a Loan
on the occasion of any Borrowing or to participate in any Letter of Credit
issued by the Fronting Bank and the obligation of the Fronting Bank to
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issue a Letter of Credit on the occasion of any Borrowing are each subject to
the satisfaction of the following conditions:
(a) the Closing Date shall have occurred on or prior to October 20, 1997;
(b) receipt by the Administrative Agent of a Notice of Borrowing as
required by Section 2.2;
(c) immediately after such Borrowing, the Outstanding Balance will not
exceed the Maximum Loan Amount;
(d) immediately after such Borrowing, the Outstanding Balance will not
exceed the aggregate amount of the Commitments (as reduced pursuant to Section
2.10(e)) and with respect to each Bank, such Bank's pro rata portion of the
Loans and Letter of Credit Usage will not exceed such Bank's Commitment (as
reduced pursuant to Section 2.10(e)).
(e) immediately before and after such Borrowing, no Default or Event of
Default shall have occurred and be continuing both before and after giving
effect to the making of such Loans;
(f) the representations and warranties of the Borrower contained in this
Agreement shall be true and correct in all material respects on and as of the
date of such Borrowing both before and after giving effect to the making of such
Loans;
(g) no law or regulation shall have been adopted, no order, judgment or
decree of any governmental authority shall have been issued, and no litigation
shall be pending or threatened, which does or, with respect to any threatened
litigation, seeks to enjoin, prohibit or restrain, the making or repayment of
the Loans, the issuance of any Letter of Credit, or the consummation of the
transactions contemplated by this Agreement;
(h) no event, act or condition shall have occurred after the Closing Date
which, in the reasonable judgment of the Administrative Agent or the Banks, as
the case may be, has had or is likely to have a Material Adverse Effect;
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(i) with respect to any portion of the ten percent (10%) of the proceeds
of the Loans available for the payment of working capital needs of the Borrower
in accordance with Section 2.14, receipt by the Administrative Agent of a
certificate of the chief financial officer or the chief accounting officer of
the Borrower certifying that the Borrower will use the proceeds of such Loan for
working capital needs of the Borrower and briefly describing such needs;
(j) receipt by the Administrative Agent of a certificate of the chief
financial officer or the chief accounting officer of the Borrower certifying
that as of the date of such Borrowing, the Borrower is in compliance Section
5.9 and Section 5.11 and containing such information as is required by Section
5.1(c) (i) and (ii); and
(k) receipt by the Administrative Agent of a certificate of the chief
financial officer or the chief accounting officer of the Borrower certifying
that the Borrower will use the proceeds of such Loan for Approved Uses and
briefly describing such Approved Uses.
Each Borrowing hereunder shall be deemed to be a representation and warranty by
the Borrower on the date of such Borrowing as to the facts specified in clauses
(c), (d), (e), (f), and (g) of this Section.
SECTION 3.3. Unencumbered Assets.
(a) For purposes of this Agreement, the term "Unencumbered Assets"
shall mean (i) the Real Property Assets listed in Exhibit B attached hereto and
made a part hereof, each of which shall be 100% owned in fee (or leasehold in
the case of assets listed as such on Exhibit B) by the Borrower (either directly
or indirectly through Wholly-Owned Subsidiaries of the Borrower) and each of
which is not subject to any Lien (other than Permitted Liens), subject to
adjustment as set forth herein, together with (ii) all New Acquisitions or Real
Property Assets each of which is 100% owned in fee or leasehold by the Borrower
(either directly or indirectly through Wholly-Owned Subsidiaries of the
Borrower), each of which is not subject to a Lien (other than Permitted Liens),
none of which is an interest in a participating
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mortgage, all as certified by Borrower pursuant to a certificate in
substantially the form of Exhibit D attached hereto delivered to the
Administrative Agent at the time that Borrower submits such New Acquisition or
Real Property Asset for inclusion as a Unencumbered Asset, and each of which
have become part of the Unencumbered Assets as of such date in accordance with
Section 3.4 hereof.
(b) Real Property Assets (i) which have been released from this
Agreement and the other Loan Documents as of such date in accordance with
Sections 5.12 or Section 5.13 or any other provision of this Agreement, or (ii)
which, for any reason, become subject to a Lien (other than a Permitted Lien)
shall be immediately excluded as "Unencumbered Assets" for purposes of this
Agreement. In addition, any Unencumbered Asset that becomes the subject of any
matter that materially adversely affects the value thereof or that becomes
subject to any environmental event that could reasonably be expected to have a
material adverse effect on the Unencumbered Asset Value of any Unencumbered
Asset (provided, however, that the presence of asbestos containing materials
which are properly contained or encapsulated or which are in the process of
being removed shall not be deemed to give rise to a materially adverse affect)
shall be immediately excluded as "Unencumbered Assets" for purposes of this
Agreement.
SECTION 3.4. Conditions Precedent to New Acquisitions and Additional
Real Property Assets.
(a) All New Acquisitions or Real Property Assets to be added to the
Unencumbered Assets of Borrower shall be approved by the Required Banks, which
approval shall not be unreasonably withheld provided that the applicable
property under consideration is a Qualified Real Property Asset. The approval
of each Bank may be granted or withheld in the sole and absolute discretion of
such Bank with respect to any New Acquisition or Real Property Asset that is not
a Qualified Real Property Asset.
(b) The Borrower shall submit to the Administrative Agent for
distribution to the Banks the materials set forth below (the "Due Diligence
Package") relating to each potential New Acquisition or Real Property
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Assets that the Borrower desires to be added to the Unencumbered Assets. The Due
Diligence Package shall include (i) a description of the Real Property Asset or
New Acquisition, and the address of the property, (ii) two years of historical
cash flow operating statements, if available, (iii) five years of cash flow
projections (including Capital Expenditures), (iv) a map and site plan, (v) a
current photograph of the property, (vi) if available, a financial statement of
each existing tenant of such Unencumbered Asset which occupies 15% or more of
such Unencumbered Asset or accounts for 15% or more of the base rentals of such
Unencumbered Asset or other information reasonably acceptable to the
Administrative Agent with respect to such tenants, (vii) a lease agreement for
each lease at the property with a tenant which occupies 15% or more of the
property, and, if available, an abstract thereof, (viii) a title report or title
commitment with respect to the property, including legible copies of the
documents and instruments referenced as exceptions therein, (ix) a certified
rent roll for the property, (x) in the case of a New Acquisition, a certified
copy of the purchase and sale agreement for the property together with a summary
description of the material terms of the acquisition, (xi) an engineer's report
with respect to the property, (xii) a Phase I environmental report for the
property, (xiii) evidence of zoning compliance (which evidence can include a
"lawyer's letter" from a local counsel engaged by Borrower at the time of
acquisition), (xiv) if applicable, the ground lease for the property, and (xv)
such additional information with respect to each New Acquisition or Real
Property Asset, the Subsidiary that owns or leases such New Acquisition or Real
Property Asset, and the tenants of such New Acquisition or Real Property Asset
as the Administrative Agent or any Bank shall reasonably request (provided that
such additional information is reasonably available, at no additional expense,
to the Borrower and should not require any extension of the time periods for
Bank review and approval of the Due Diligence Package set forth in clause (c)
below). The Borrower shall permit the Administrative Agent at all reasonable
times and upon reasonable prior notice to make an inspection of such New
Acquisition or Real Property Asset.
(c) The Borrower shall distribute a copy of each item constituting
the Due Diligence Package by
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overnight mail to the Administrative Agent for distribution to each of the Banks
for their review and approval no less than ten (10) Domestic Business Days prior
to the date that the Borrower desires to include such asset as an Unencumbered
Asset hereunder. Failure to respond to the Administrative Agent in writing by
any Bank within seven (7) Domestic Business Days after receipt of the Due
Diligence Package, shall be deemed to be an approval by such Bank of such
potential New Acquisition or Real Property Asset.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
In order to induce the Administrative Agent and each of the other Banks
which may become a party to this Agreement to make the Loans, the Borrower makes
the following representations and warranties as of the Closing Date. Such
representations and warranties, shall survive the effectiveness of this
Agreement, the execution and delivery of the other Loan Documents and the
making of the Loans.
SECTION 4.1. Existence and Power. The Company is a real estate
investment trust, duly formed, validly existing and in good standing as a
corporation under the laws of Maryland. The Company is the sole general partner
of the Borrower. The Borrower is a limited partnership duly formed, validly
existing and in good standing under the laws of Delaware. Each of the Borrower,
the Company and the Consolidated Subsidiaries has all powers and all material
governmental licenses, authorizations, consents and approvals required to own
its property and assets and carry on its business as now conducted or as it
presently proposes to conduct and has been duly qualified and is in good
standing in every jurisdiction in which the failure to be so qualified and/or in
good standing is likely to have a Material Adverse Effect.
SECTION 4.2. Power and Authority. Each of the Borrower and the
Company has the partnership or corporate (as applicable) power and authority to
execute, deliver and carry out the terms and provisions of each of the Loan
Documents to which it is a party and
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has taken all necessary partnership or corporate (as applicable) action to
authorize the execution and delivery on behalf of, as applicable, the Borrower
and the Company and the performance by the Borrower and the Company of such Loan
Documents to which it is a party. Each of the Borrower and the Company has duly
executed and delivered each Loan Document to which it is a party, and each such
Loan Document constitutes the legal, valid and binding obligation of such party,
enforceable in accordance with its terms, except as enforceability may be
limited by applicable insolvency, bankruptcy or other laws affecting creditors
rights generally, or general principles of equity, whether such enforceability
is considered in a proceeding in equity or at law.
SECTION 4.3. No Violation. Neither the execution, delivery or
performance by or on behalf of the Borrower or the Company of the Loan Documents
to which it is a party, nor compliance by the Borrower or the Company with the
terms and provisions thereof nor the consummation of the transactions
contemplated by the Loan Documents, (i) will contravene any applicable provision
of any material law, statute, rule, regulation, order, writ, injunction or
decree of any court or governmental instrumentality or (ii) will conflict, in
any material respect, with or result in any breach of, any of the material
terms, covenants, conditions or provisions of, or constitute a material default
under, or result in the creation or imposition of (or the obligation to create
or impose) any Lien upon any of the property or assets of the Borrower, the
Company or any of the Consolidated Subsidiaries pursuant to the terms of any
indenture, mortgage, deed of trust, subscription agreement or other agreement or
other instrument to which the Borrower, the Company (or of any partnership of
which the Borrower or the Company is a partner) or any of their Consolidated
Subsidiaries is a party or by which it or any of its property or assets is bound
or to which it is subject, or (iii) will cause a default by the Borrower, or the
Company under any subscription agreement or any other organizational document of
any Person in which the Borrower, the Company or any Consolidated Subsidiary has
an interest, or cause a default under the partnership agreement or the articles
of incorporation or by laws (as applicable) of the Borrower or the Company.
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SECTION 4.4. Financial Information.
(a) The pro forma Consolidated balance sheet of the Borrower, the Company
and its Consolidated Subsidiaries dated June 30, 1997 and the related
Consolidated statements of the Borrower's and the Company's pro forma financial
position, prepared by Coopers & Lybrand LLP, a copy of which has been delivered
to the Administrative Agent fairly presents, in conformity with GAAP, the
Consolidated pro forma financial position of the Borrower, the Company and its
Consolidated Subsidiaries of such date and their pro forma results of operations
and cash flows as set forth therein.
(b) Since June 30, 1997, (i) there has been no material adverse change in
the business, pro forma financial position or pro forma results of operations of
the Borrower, the Company or the Consolidated Subsidiaries and (ii) except as
previously disclosed to the Administrative Agent, none of the Borrower, the
Company nor any of the Consolidated Subsidiaries has incurred any material
Indebtedness or Contingent Obligation.
SECTION 4.5. Litigation. There is no material action, suit or
proceeding pending against, or to the actual knowledge of the Borrower, after
due inquiry, threatened against or adversely affecting, (i) the Borrower, the
Company or any of their Consolidated Subsidiaries, (ii) the Loan Documents or
any of the transactions contemplated by the Loan Documents or (iii) any of its
assets, before any court or arbitrator or any governmental body, agency or
official in which there is a reasonable possibility of an adverse decision which
could, individually, or in the aggregate have a Material Adverse Effect or which
in any manner draws into question the validity of this Agreement or the other
Loan Documents.
SECTION 4.6. Compliance with ERISA.
(a) Each member of the ERISA Group has fulfilled its obligations under the
minimum funding standards of ERISA and the Internal Revenue Code with respect to
each Plan and is in compliance in all material respects with the presently
applicable provisions of ERISA and the Internal Revenue Code with respect to
each Plan. No member of the ERISA Group has (i) sought a waiver of the
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minimum funding standard under Section 412 of the Internal Revenue Code in
respect of any Plan, (ii) failed to make any contribution or payment to any Plan
or Multiemployer Plan or in respect of any Benefit Arrangement, or made any
amendment to any Plan or Benefit Arrangement, which has resulted or could
result in the imposition of a Lien or the posting of a bond or other security
under ERISA or the Internal Revenue Code or (iii) incurred any liability under
Title IV of ERISA other than a liability which remains unpaid to the PBGC for
premiums under Section 4007 of ERISA.
(b) Except for each "employee benefit plan" (as such term is defined in
Section 3(3) of ERISA) that is maintained, or contributed to, by one or more
members of the ERISA Group, no member of the ERISA Group is a "party in
interest" (as such term is defined in Section 3(14) of ERISA) or a "disqualified
person" (as such term is defined in Section 4975(e)(2) of the Code with respect
to any funded employee benefit plan and none of the assets of any such plans
have been invested in a manner that would cause the transactions contemplated by
the Loan Documents to constitute a nonexempt prohibited transaction (as such
term is defined in Section 4975 of the Code or Section 406 of ERISA) that could
subject the Administrative Agent or the Banks to any tax or penalty on
prohibited transactions imposed under Section 4975 of the Code or Section 502(i)
of ERISA.
SECTION 4.7. Environmental Matters. The Borrower has conducted a
review of the effect of Environmental Laws on the business, operations and
properties of the Borrower and its Subsidiaries, including, without limitation,
the Real Property Assets, in the course of which it sought to identify and
evaluate applicable liabilities and costs (including, without limitation, any
capital or operating expenditures required as a matter of Environmental Law for
clean-up or closure of properties presently or previously owned, any capital or
operating expenditures required as a matter of Environmental Law to achieve or
maintain compliance with Environmental Law or as a condition of any license,
permit or contract to which Borrower is a party or a beneficiary, any related
constraints on operating activities, including any periodic or permanent
shutdown of any facility or reduction in the level of or change in the nature of
operations conducted thereat, any costs or
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liabilities in connection with off-site disposal of wastes or Hazardous
Substances, and any actual or potential liabilities to third parties, including
employees, and any related costs and expenses). On the basis of this review, the
Borrower has reasonably concluded that such associated potential liabilities and
costs, including the costs of compliance with Environmental Laws, are unlikely
to have a Material Adverse Effect.
SECTION 4.8. Taxes. The Company, the Borrower and its Subsidiaries
have filed all United States Federal income tax returns and all other material
tax returns which are required to be filed by them and have paid all taxes due
and payable pursuant to such returns or pursuant to any assessment received by
the Borrower or any Subsidiary. The charges, accruals and reserves on the books
of the Company, the Borrower and its Subsidiaries in respect of taxes or other
governmental charges are, in the reasonable judgment of the Borrower, adequate.
SECTION 4.9. Full Disclosure. All written information heretofore
furnished by or on behalf of the Company, the Borrower and their Subsidiaries to
the Administrative Agent or any Bank for purposes of or in connection with this
Agreement or any transaction contemplated hereby is, and all such written
information hereafter furnished by the Borrower to the Administrative Agent or
any Bank will be, true and accurate in all material respects on the date as of
which such information is stated. The Borrower has disclosed to the Banks in
writing any and all facts which, in Borrower's reasonable judgment, have or are
likely to have a Material Adverse Effect (to the extent the Borrower can now
reasonably foresee).
SECTION 4.10. Solvency. On the Closing Date and after and giving
effect to the transactions contemplated by the Loan Documents occurring on the
Closing Date, each of Borrower and the Company will be Solvent.
SECTION 4.11. Use of Proceeds; Margin Regulations. All proceeds of
the Loans will be used by the Borrower only in accordance with the provisions of
this Agreement. No part of the proceeds of any Loan will be used by the Borrower
to purchase or carry any Margin Stock or to extend credit to others for the
expressed
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purpose of purchasing or carrying any Margin Stock. Neither the making of any
Loan nor the use of the proceeds thereof will violate or be inconsistent with
the provisions of Regulations G, T, U or X of the Federal Reserve Board.
SECTION 4.12. Governmental Approvals. No order, consent, approval,
license, authorization, or validation of, or filing, recording or registration
with, or exemption by, any governmental or public body or authority, or any
subdivision thereof, is required to authorize, or is required in connection with
the execution, delivery and performance of any Loan Document or the
consummation of any of the transactions contemplated thereby other than those
that have already been duly made or obtained and remain in full force and
effect.
SECTION 4.13. Investment Company Act; Public Utility Holding Company
Act. The Borrower is not (x) an "investment company" or a company "controlled"
by an "investment company", within the meaning of the Investment Company Act of
1940, as amended, (y) a "holding company" or a "subsidiary company" of a
"holding company" or an "affiliate" of either a "holding company" or a
"subsidiary company" within the meaning of the Public Utility Holding Company
Act of 1935, as amended, or (z) subject to any other federal or state law or
regulation which purports to restrict or regulate its ability to borrow money.
SECTION 4.14. Closing Date Transactions. On the Closing Date and
immediately prior to the making of the Loans, the transactions (other than the
making of the Loans) intended to be consummated on the Closing Date will have
been consummated in material compliance with all applicable laws. All material
consents and approvals of, and all material filings and registrations with, and
all other material actions by, any Person required in order to make or
consummate such transactions have been obtained, given, filed or taken and are
in full force and effect.
SECTION 4.15. Representations and Warranties in Loan Documents. All
representations and warranties made by the Borrower in the Loan Documents are
true and correct in all material respects as of the date of this
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Agreement and as of any date that Borrower is expressly obligated to confirm the
same under this Agreement.
SECTION 4.16. Patents, Trademarks, Etc. The Borrower, the Company
and the Consolidated Subsidiaries have obtained and hold in full force and
effect all patents, trademarks, service marks, trade names, copyrights and other
such rights, free from burdensome restrictions, which are necessary for the
operation of their business as presently conducted, the impairment of which is
likely to have a Material Adverse Effect. To the Borrower's knowledge, no
material product, process, method, substance, part or other material presently
sold by or employed by the Borrower or its Consolidated Subsidiaries in
connection with such business infringes any patent, trademark, service mark,
trade name, copyright, license or other such right owned by any other Person.
There is not pending or, to the Borrower's knowledge, threatened any claim or
litigation against or affecting Borrower or its Consolidated Subsidiaries
contesting its right to sell or use any such product, process, method,
substance, part or other material.
SECTION 4.17. Ownership of Property. As of the Closing Date, the
Borrower, the Company and the Consolidated Subsidiaries have good and insurable
fee simple title (or leasehold title, as applicable) to all Real Property Assets
described in the Form S-11, subject to customary encumbrances and liens as of
the date of this Agreement. As of the date of this Agreement, there are no
mortgages, deeds of trust, indentures, debt instruments or other agreements
creating a Lien against any of the Real Property Assets except as disclosed in
the Form S-11.
SECTION 4.18. No Default. No Default or Event of Default exists
under or with respect to any Loan Document. None of the Borrower, the Company,
or any Consolidated Subsidiary, is in default in any material respect beyond any
applicable grace period under or with respect to any other material agreement,
instrument or undertaking to which it is a party or by which it or any of its
property is bound in any respect, the existence of which default is likely to
result in a Material Adverse Effect.
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SECTION 4.19. Licenses, Etc. The Borrower, the Company and each of
the Consolidated Subsidiaries has obtained and holds in full force and effect,
all material franchises, licenses, permits, certificates, authorizations,
qualifications, accreditations, easements, rights of way and other consents and
approvals which are necessary for the operation of its business as presently
conducted, the absence of which is likely to have a Material Adverse Effect.
SECTION 4.20. Compliance With Law. The Borrower, the Company, each
of the Consolidated Subsidiaries, and each of the Real Property Assets is in
compliance with all material laws, rules, regulations, orders, judgments, writs
and decrees, including, without limitation, all building and zoning ordinances
and codes, the failure to comply with which is likely to have a Material Adverse
Effect.
SECTION 4.21. No Burdensome Restrictions. None of the Borrower, the
Company, or any Consolidated Subsidiary is a party to any agreement or
instrument or subject to any other obligation or any charter or corporate or
partnership restriction, as the case may be, which, individually or in the
aggregate, is likely to have a Material Adverse Effect except in the event of a
default thereunder.
SECTION 4.22. Brokers' Fees. The Borrower has not dealt with any
broker or finder with respect to the transactions contemplated by the Loan
Documents or otherwise in connection with this Agreement.
SECTION 4.23. Labor Matters. There are no collective bargaining
agreements or Multiemployer Plans covering any employees of the Borrower, the
Company, or any of the Consolidated Subsidiaries.
SECTION 4.24. Insurance. The Borrower, the Company and each of the
Consolidated Subsidiaries currently maintains all insurance which is required to
be maintained by Section 5.3 hereof.
SECTION 4.25. Organizational Documents. The documents delivered
pursuant to Section 3.1(e) constitute, as of the Closing Date, all of the
organizational documents (together with all amendments and modifica-
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tions thereof) of the Borrower and the Company. The Borrower represents that it
has delivered to the Administrative Agent true, correct and complete copies of
each of the documents set forth in Section 3.1(e).
SECTION 4.26. Principal Offices. The principal office, chief
executive office and principal place of business of each of the Borrower and the
Company is 120 West 45th Street, 24th floor, New York, New
York 10036.
ARTICLE V
AFFIRMATIVE AND NEGATIVE COVENANTS
The Borrower covenants and agrees that, so long as any Bank has any
Commitment hereunder or any Obligations remain unpaid:
SECTION 5.1. Information. The Borrower will deliver to the
Administrative Agent on behalf of the Banks:
(a) as soon as reasonably available and in any event within 90 days
after the end of each fiscal year of the Borrower, an audited Consolidated
balance sheet of the Borrower, the Company and the Consolidated Subsidiaries as
of the end of such fiscal year and the related Consolidated statements of
operations for such fiscal year prepared and reported on by Coopers & Lybrand
LLP or other independent public accountants of nationally recognized standing,
all reported on in a manner acceptable to the Securities and Exchange
Commission;
(b) as soon as available and in any event within 45 days after the
end of each of the first three quarters of each fiscal year of the Borrower, (i)
a Consolidated balance sheet of the Borrower, the Company and the Consolidated
Subsidiaries as of the end of such quarter and the related Consolidated
statements of operations for such quarter and for the portion of the Borrower's
fiscal year ended at the end of such quarter, all certified (subject to normal
year-end adjustments) as to fairness of presentation, GAAP and consistency by
the chief financial officer or the chief accounting
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officer of the Borrower; (ii) an acquisition status report, with respect to
each Real Property Asset acquired during such quarter, in form reasonably
satisfactory to the Administrative Agent, setting forth all acquisition activity
during such quarterly period, including a description of such Real Property
Asset and the acquisition price thereof and (iii) such other information
reasonably requested by the Administrative Agent or any Bank;
(c) simultaneously with the delivery of each set of Financial
Statements referred to in clauses (a) and (b) above, a certificate of the chief
financial officer or the chief accounting officer of the Borrower (i) setting
forth in reasonable detail the calculations required to establish whether the
Borrower was in compliance with the requirements of Section 5.9 and Section
5.11 on the date of such Financial Statements (an example of such calculations
is set forth on Exhibit H attached hereto); (ii) stating whether any Default or
Event of Default exists on the date of such certificate and, if any Default or
Event of Default then exists, setting forth the details thereof and the action
which the Borrower is taking or proposes to take with respect thereto; and (iii)
certifying (x) that such Financial Statements fairly present the financial
condition and the results of operations of the Borrower and the Company on the
dates and for the periods indicated, on the basis of GAAP, subject, in the case
of interim Financial Statements, to normally recurring year-end adjustments, and
(y) that such officer has reviewed the terms of the Loan Documents and has made,
or caused to be made under his or her supervision, a review in reasonable detail
of the business and condition of the Borrower during the period beginning on the
date through which the last such review was made pursuant to this Section 5.1(c)
(or, in the case of the first certification pursuant to this Section 5.1(c),
the Closing Date) and ending on a date not more than ten (10) Domestic Business
Days prior to the date of such delivery and that (1) on the basis of such
Financial Statements and such review of the Loan Documents, no Event of Default
existed under Section 6.1(b) with respect to Section 5.9 or Section 5.11 at or
as of the date of said Financial Statements, and (2) on the basis of such review
of the Loan Documents and the business and condition of the Borrower, to the
actual knowledge of such officer, no Default or Event of De-
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fault under any other provision of Section 6.1 occurred or, if any such Default
or Event of Default has occurred and is then continuing, specifying the nature
and extent thereof and, if continuing, the action the Borrower proposes to take
in respect thereof and (3) on the basis of such review of the Loan Documents and
the business and condition of the Borrower, no Mandatory Prepayment Event then
exists or has existed during the period since the last review pursuant to this
Section 5.1(c). Such certificate shall set forth the calculations required to
establish the matters described in clause (i) above;
(d) (i) within seven (7) days after the chief financial officer or
chief accounting officer of Borrower, the Company or any Consolidated Subsidiary
of any of the foregoing obtains knowledge of any Default or Event of Default or
Mandatory Prepayment Event, if such Default, Event of Default or Mandatory
Prepayment Event is then continuing, a certificate of such officer setting forth
the details thereof and the action which the Borrower is taking or proposes to
take with respect thereto; (ii) promptly and in any event within ten (10) days
after the chief financial officer or chief accounting officer of Borrower, the
Company or any Consolidated Subsidiary of any of the foregoing obtains knowledge
thereof, notice of (x) any litigation or governmental proceeding pending or
actions threatened against the Borrower, the Company or the Real Property Assets
as to which there is a reasonable possibility of an adverse determination and
which, if adversely determined, is likely to individually or in the aggregate,
result in a Material Adverse Effect, and (y) any other event, act or condition
which is likely to result in a Material Adverse Effect;
(e) promptly upon the mailing thereof to the shareholders of the
Company generally, copies of all Financial Statements, reports and proxy
statements so mailed;
(f) promptly upon the filing thereof, copies of all registration
statements (other than the exhibits thereto and any registration statements on
Form S-8 or its equivalent) and reports on Forms 10-K, 10-Q and 8-K (or their
equivalents) which the Company shall have filed with the Securities and Exchange
Commission (and, if available at no additional cost to the Borrower,
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multiple originals of such filings for distribution to each Bank);
(g) promptly and in any event within ten (10) Domestic Business Days
after the Borrower obtains actual knowledge of any of the following events, a
certificate of the Borrower, executed by an officer of the Borrower, specifying
the nature of such condition and the Borrower's or, if the Borrower has actual
knowledge thereof, the Environmental Affiliate's proposed initial response
thereto: (i) the receipt by the Borrower, or, if the Borrower has actual
knowledge thereof, any of the Environmental Affiliates of any written
communication, whether from a governmental authority, citizens group, employee
or otherwise, that alleges that the Borrower, or, if the Borrower has actual
knowledge thereof, any of the Environmental Affiliates, is not in compliance
with applicable Environmental Laws, and such noncompliance is likely to have a
Material Adverse Effect, (ii) the Borrower shall obtain actual knowledge that
there exists any Environmental Claim pending or threatened against the Borrower
or any Environmental Affiliate or (iii) the Borrower obtains actual knowledge of
any release, emission, discharge or disposal of any Hazardous Substances that
is likely to form the basis of any Environmental Claim against the Borrower or
any Environmental Affiliate;
(h) within ten (10) Domestic Business Days after receipt of any
material notices or correspondence from any company or Administrative Agent for
any company providing insurance coverage to the Borrower relating to any
material loss of the Borrower, copies of such notices and correspondence;
(i) no less than ten (10) Domestic Business Days prior to a sale,
transfer or conveyance of any Real Property Asset and immediately upon knowledge
of any Lien (other than a Permitted Lien) on any Unencumbered Asset, Borrower
shall deliver a certificate of the chief financial officer or the chief
accounting officer of the Borrower certifying that such officer has reviewed the
terms of the Loan Documents and has made, or caused to be made under his or her
supervision, a review in reasonable detail of the business and condition of the
Borrower during the period beginning on the date through which the last such
review was made pursuant to Section
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5.1(c) hereof and ending on a date not more than twenty (20) Domestic Business
Days prior to the date of such delivery and that (1) on the basis of such review
of the Loan Documents and assuming such sale, transfer or conveyance is
actually consummated or such Lien is actually placed on such Unencumbered Asset,
no Event of Default exists under Section 6.1(b) with respect to Section 5.9 or
Section 5.11 at or as of the date of said sale, transfer or conveyance or Lien
and (2) on the basis of such review of the Loan Documents and the business and
condition of the Borrower and assuming the transaction is actually consummated,
to the actual knowledge of such officer, no Default or Event of Default under
any other provision of Section 6.1 occurred or, if any such Default or Event of
Default has occurred and is then continuing, specifying the nature and extent
thereof and, if continuing, the action the Borrower proposes to take in respect
thereof;
(j) within 45 days after the end of each fiscal quarter, a statement
containing (i) a listing of all Development Projects and other development
activities permitted pursuant to Section 5.14 hereof, (ii) a list of overall
cash payments and disbursements for each such Development Project or development
activity, and (iii) a reasonable good faith estimate of the cost to complete
each such Development Project or development activity, such that such
Development Project or applicable Real Property Asset is open to the public and
available for rental, together with a certification of the chief financial
officer or chief accounting officer of the Borrower certifying that, as of the
date of such certification, such statement is true and correct and fairly
represents the scope, expenses, costs of completion of such Development Projects
and development activities;
(k) within 30 days after filing of the annual income tax return with
the Internal Revenue Service, a certificate of the chief financial officer or
chief accounting officer of the Borrower certifying that the Company is properly
classified and continues to qualify as a real estate investment trust under the
Internal Revenue Code and has taken all actions consistent with maintaining such
status;
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(l) simultaneously with delivery of the information required by
Sections 5.1(a) and (b), a statement of Adjusted Unencumbered NOI with respect
to each Unencumbered Asset and a list of all Unencumbered Assets;
(m) promptly upon receipt thereof, any correspondence or written
notice from the ground lessor with respect to any Unencumbered Asset that is
owned by the Borrower or a Wholly-Owned Subsidiary of the Borrower pursuant to a
ground lease and promptly and in any event within ten (10) days after the chief
financial officer or chief accounting officer of Borrower, the Company or any
Consolidated Subsidiary of any of the foregoing obtains knowledge thereof,
notice of any default or potential default with respect to any such ground
lease; and
(n) from time to time such additional information regarding the
financial position or business of the Borrower and its Subsidiaries as the
Administrative Agent, at the request of any Bank, may reasonably request in
writing.
SECTION 5.2. Payment of Obligations. The Borrower, the Company and
each of the Consolidated Subsidiaries will pay and discharge, at or before
maturity, all its respective material obligations and liabilities, including,
without limitation, any obligation pursuant to any agreement by which it or any
of its properties is bound and any tax liabilities, except where such tax
liabilities may be contested in good faith by appropriate proceedings, and will
maintain in accordance with GAAP, appropriate reserves for the accrual of any of
the same.
SECTION 5.3. Maintenance of Property; Insurance.
(a) The Borrower and the Company will keep (or cause to be kept through
its leases at the respective Real Property Assets), and will cause each
Consolidated Subsidiary to keep, all property useful and necessary in its
business, including without limitation the Real Property Assets, in good repair,
working order and condition, ordinary wear and tear excepted.
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(b) The Borrower currently maintains, or causes its tenants to maintain,
insurance at 100% replacement cost insurance coverage (subject to customary
deductibles) in respect of each of the Real Property Assets, as well as
commercial general liability insurance (including "builders' risk") against
claims for personal, and bodily injury and/or death, to one or more persons, or
property damage, as well as workers' compensation insurance, in each case with
respect to the Real Property Assets with insurers having an A.M. Best
policyholders' rating of not less than A-IX in amounts that prudent owner of
assets such as the Real Property Assets would maintain.
SECTION 5.4. Conduct of Business and Good Standing. The Borrower and
the Company will continue to engage in business of the same general type as now
conducted by the Borrower and the Company, as applicable, and will remain
qualified to do business and in good standing in every jurisdiction in which the
nature of their businesses so requires.
SECTION 5.5. Compliance with Laws. The Borrower, the Company and
each Consolidated Subsidiary will comply in all material respects with all
material applicable laws, ordinances, rules, regulations, and requirements of
governmental authorities (including, without limitation, Environmental Laws, and
all zoning and building codes with respect to the Real Property Assets, all
laws, rules and regulations with respect to the Company's status as a real
estate investment trust under the Code, and ERISA and the rules and regulations
thereunder) except where the necessity of compliance therewith is contested in
good faith by appropriate proceedings or is not likely to have a Material
Adverse Effect.
SECTION 5.6. Inspection of Property, Books and Records. The Borrower
and the Company will keep (and will cause each of its Subsidiaries to keep)
proper books of record and account in which full, true and correct entries shall
be made of all material financial matters and transactions in relation to its
business and activities; and will permit representatives of any Bank at such
Bank's expense to visit and inspect any of its properties (subject to the terms
of the applicable leases), including without limitation the Real Property As-
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sets, to examine and make abstracts from any of its books and records and to
discuss its affairs, finances and accounts with its officers, employees and
independent public accountants, all at such reasonable times and as often as
may reasonably be desired.
SECTION 5.7. Existence. The Borrower and the Company shall each do
or cause to be done, all things reasonably necessary to preserve and keep in
full force and effect its existence and its trade names, licenses, permits,
certificates, authorizations, qualifications, accreditations, easements, rights
of way and other rights, consents and approvals the nonexistence of which is
likely to have a Material Adverse Effect.
SECTION 5.8. Maintenance of REIT Status; NYSE Listing. The Company
shall take all actions necessary to continue to qualify as a self-managed and
self-administered real estate investment trust under the Code and shall comply
with all applicable governmental regulations and securities laws and take all
actions necessary to remain a publicly traded company and to continue to be
listed on the New York Stock Exchange.
SECTION 5.9. Financial Covenants.
(a) Total Outstanding Indebtedness.
(i) As of the first day of each fiscal quarter, for the
immediately preceding fiscal quarter, and as of the date of each Borrowing (with
pro forma adjustments made in accordance with GAAP for additional acquisitions
and Indebtedness incurred during the immediately preceding calendar quarter),
during the period commencing on the Closing Date and ending 364 days thereafter:
Total Outstanding Indebtedness will not exceed fifty-five percent (55%) of Total
Value.
(ii) As of the first day of each fiscal quarter, for the
immediately preceding fiscal quarter, and as of the date of each Borrowing (with
pro forma adjustments made in accordance with GAAP for additional acquisitions
and Indebtedness incurred during the immediately preceding fiscal quarter),
during the period commencing on the first anniversary of the Closing Date and
ending on the Maturity Date: Total Outstanding
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Indebtedness will not exceed fifty percent (50%) of Total Value.
(b) Total Outstanding Unsecured Indebtedness.
(i) As of the first day of each fiscal quarter, for the
immediately preceding fiscal quarter, and as of the date of each Borrowing (with
pro forma adjustments made in accordance with GAAP for additional acquisitions
and Indebtedness incurred during the immediately preceding fiscal quarter),
during the period commencing on the Closing Date and ending 364 days
thereafter: Total Outstanding Unsecured Indebtedness will not exceed sixty
percent (60%) of Total Unencumbered Asset Value.
(ii) As of the first day of each fiscal quarter, for the
immediately preceding fiscal quarter, and as of the date of each Borrowing (with
pro forma adjustments made in accordance with GAAP for additional acquisitions
and Indebtedness incurred during the immediately preceding fiscal quarter),
during the period commencing on the first anniversary of the Closing Date and
ending on the Maturity Date: Total Outstanding Unsecured Indebtedness will not
exceed fifty-five per cent (55%) of Total Unencumbered Asset Value.
(c) Total Outstanding Secured Indebtedness.
(i) As of the first day of each fiscal quarter, for the
immediately preceding fiscal quarter, and as of the date of each Borrowing (with
pro forma adjustments made in accordance with GAAP for additional acquisitions
and Indebtedness incurred during the immediately preceding fiscal quarter),
during the period commencing on the Closing Date and ending 364 days thereafter:
Total Outstanding Secured Indebtedness will not exceed forty percent (40%) of
Total Value.
(ii) As of the first day of each fiscal quarter, for the
immediately preceding fiscal quarter, and as of the date of each Borrowing (with
pro forma adjustments made in accordance with GAAP for additional acquisitions
and Indebtedness incurred during the immediately preceding fiscal quarter),
during the period commencing on the first anniversary of the Closing Date and
ending on the Maturity Date: Total Outstanding Se-
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cured Indebtedness will not exceed thirty-five percent (35%) of Total Value.
(d) Net Worth. The Net Worth shall at no time be less than the sum
of (i) 85% of the Net Worth as of the Closing Date and (ii) an amount equal to
50% of all Net Offering Proceeds received by the Company subsequent to the
Closing Date.
(e) Minimum Consolidated Interest Coverage Ratio. As of the first
day of each fiscal quarter, for the immediately preceding fiscal quarter, and as
of the date of each Borrowing (with pro forma adjustments made in accordance
with GAAP for additional acquisitions and Indebtedness incurred during the
immediately preceding fiscal quarter), the ratio of (i) Cash Flow to (ii) Total
Interest Expense shall not be less than 2.0 to 1.0.
(f) Minimum Fixed Charge Coverage Ratio. As of the first day of each
fiscal quarter, for the immediately preceding fiscal quarter, and as of the date
of each Borrowing (with pro forma adjustments made in accordance with GAAP for
additional acquisitions and Indebtedness incurred during the immediately
preceding fiscal quarter), the ratio of (i) Cash Flow to (ii) Fixed Charges
shall not be less than 1.80 to 1.00.
(g) Minimum Unsecured Interest Coverage Ratio. As of the first day
of each fiscal quarter, for the immediately preceding fiscal quarter, and as of
the date of each Borrowing (with pro forma adjustments made in accordance with
GAAP for additional acquisitions and Indebtedness incurred during the
immediately preceding fiscal quarter), the ratio of (i) Adjusted Unencumbered
NOI to (ii) Unsecured Interest Expense shall not be less than 1.75 to 1.00.
(h) Dividends. The Company shall not declare or make any dividends
in any fiscal quarter in excess of 95% of its "Funds From Operations" (as
defined, from time to time, by NAREIT), provided, however that the Company may
declare dividends in excess thereof to maintain its status as a real estate
investment trust under the Code.
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(i) Limitation on Recourse Indebtedness. None of the Borrower, the
Company or any Consolidated Subsidiary shall create, incur or guaranty any
Recourse Indebtedness (exclusive of such limited exceptions to otherwise
non-recourse debt, such as fraud, misappropriation, misapplication and
environmental indemnities as are usual and customary in similar transactions at
the time such Indebtedness is incurred) that is, in the aggregate, in excess of
five percent (5%) of Total Value. Notwithstanding the foregoing, the existing
guarantee of $35,000,000 of mortgage Indebtedness relating to the "Tower 45"
project shall be permitted for a period not to exceed fifty days from the
Closing Date.
(j) Limitation on Development Projects and Land Held for
Development. The Land Held for Development Value shall not exceed 5% of
Capitalization Value. The sum of (i) the Development Project Value and (ii) the
Land Held for Development Value shall not exceed 10% of Total Value.
(k) Limits on Negative Pledge. None of the Borrower, the Company nor
any Subsidiary will agree to limits on Liens on Unencumbered Assets of Borrower,
except as may otherwise be required pursuant to the terms of this Agreement.
SECTION 5.10. Restriction on Fundamental Changes. (a) Neither the
Borrower nor the Company shall enter into any merger or consolidation or
reorganization, unless (i) the Borrower or the Company, as applicable, is the
surviving entity and (ii) no Default or Event of Default has occurred and is
continuing and the Borrower and the Company are each in compliance with the
covenants contained in the Loan Documents prior to and, on a pro forma basis,
subsequent to such merger, consolidation or reorganization. Neither the Borrower
nor the Company shall liquidate, wind-up or dissolve (or suffer any liquidation
or dissolution), discontinue its business or convey, lease, sell, transfer or
otherwise dispose of, in one transaction or series of transactions, all or any
substantial part of its business or property, whether now or hereafter
acquired. Subject to other provisions of this Agreement, nothing in this Section
5.10 shall be deemed to prohibit (i) the leasing of portions of the Real
Property Assets or an entire Real Property Asset in the ordinary course of
business for
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occupancy by the tenants thereunder or (ii) the sale of such Real Property
Assets in the ordinary course of Borrower's business or (iii) the sale of
additional equity interests in the Company pursuant to a public or privately
placed equity offering of common or preferred stock.
(b) The Borrower shall not amend its partnership Agreement and the
Company shall not amend its articles of incorporation, by-laws, or other
organizational documents, other than in connection with (i) the sale of
additional equity interests in the Company pursuant to a public or privately
placed equity offering of common or preferred stock, or (ii) the issuance or
transfer of partnership units in the Borrower, without the Administrative
Agent's consent, which shall not be unreasonably withheld or delayed.
SECTION 5.11. Additional Covenants re: Unencumbered Assets.
(a) Class A Office Buildings and Class B Office Buildings shall, in
the aggregate comprise not less than 80% of total "Unencumbered Assets", as
determined by Unencumbered Asset Value.
(b) From and after the date that is sixty (60) days following the
Closing Date: (i) The Unencumbered Asset Value of any individual Unencumbered
Asset shall not exceed 33.3% of the Unencumbered Asset Value of all Unencumbered
Assets, and (ii) Unencumbered Assets that are not owned in fee by the Borrower
or a Wholly-Owned Subsidiary of the Borrower shall not constitute more than 20%
of the aggregate Unencumbered Value of all Unencumbered Assets; provided that
noncompliance with the requirements set forth in clauses (i) and (ii) shall not
result in a Default hereunder, but the portion of any Unencumbered Asset giving
rise to such non-compliance shall be excluded from the calculation of the
aggregate Unencumbered Asset Value of all Unencumbered Assets.
(c) No less than 60% of the rentable square feet of any Unencumbered
Asset shall be occupied by tenants pursuant to written leases for which no
monetary default has occurred beyond applicable notice and cure periods.
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(d) No less than 80% of the rentable square feet of all Unencumbered
Assets, in the aggregate, shall be occupied by tenants pursuant to written
leases for which no monetary default has occurred beyond applicable notice and
cure periods.
(e) Notwithstanding the foregoing, noncompliance with the
requirements set forth in clauses (a), (c) and (d) above shall not result in a
default hereunder, but instead any Unencumbered Asset(s) giving rise to such
noncompliance shall be excluded from the calculation of the Total Unencumbered
Asset Value of all Unencumbered Assets.
SECTION 5.12. Liens; Release of Liens. Neither Borrower nor any of
its Subsidiaries shall at any time during the Term directly or indirectly
create, incur, assume or permit to exist any Lien for borrowed monies or any
other Lien (except for Permitted Liens) unless the same is being contested in
good faith or the same is discharged, bonded off or paid within thirty (30) days
of filing of such Lien, on or with respect to any Unencumbered Asset.
Notwithstanding the foregoing, the Borrower may obtain a release from the terms
of this Agreement of any Unencumbered Asset provided that prior to or
simultaneously with such release Borrower delivers to the Administrative Agent a
certificate from its chief financial officer or chief accounting officer
certifying that at the time of the release Borrower, the Company and the
Consolidated Subsidiaries (as applicable) are in compliance with all of the
covenants contained in Article V, and, after giving effect to the transaction,
shall continue to be in compliance therewith.
SECTION 5.13. Sale of Unencumbered Assets. Prior to the sale or
transfer of any Unencumbered Asset, the Borrower shall (i) deliver prior written
notice to the Administrative Agent, (ii) deliver to the Administrative Agent a
certificate from its chief financial officer or chief accounting officer
certifying that at the time of such sale or other disposal (based on pro-forma
calculations for the previous fiscal quarter assuming that such Unencumbered
Asset was not a Unencumbered Asset for the relevant fiscal quarter) Borrower,
the Company and the Consolidated Subsidiaries (as applicable) are in compliance
with all of the covenants con-
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tained in Article V, and, after giving effect to the transaction, shall continue
to be in compliance therewith
SECTION 5.14. Development Activities. The Borrower shall not engage
in any development activities other than (i) Development Projects, (ii)
development of pre-leased "build-to-suit" improvements, (iii) development in
connection with the repositioning, or restoration following a casualty or
condemnation of existing improvements on Real Property Assets or (iv)
development of Land Held for Development to the extent permitted under Section
5.9(j) hereof.
SECTION 5.15. Permitted Investments. The Borrower shall not make any
investments other than in Cash and Cash Equivalents, as permitted under this
Agreement and, subject to the limitations set forth herein: (a) investments in
office management companies or office management contracts, (b) investments in
notes secured by office building properties, (c) investments in companies whose
primary purpose is the ownership of notes secured by office building properties,
and (d) investments in real property located in the continental United States.
SECTION 5.16. Changes in Business. The Borrower shall not enter into
any business which is substantially different from that conducted by the
Borrower on the Closing Date after giving effect to the transactions
contemplated by the Loan Documents.
SECTION 5.17. Fiscal Year; Fiscal Quarter. The Borrower shall not
change its fiscal year or any of its fiscal quarters, without Administrative
Agent's prior written consent, which consent shall not be unreasonably withheld
or delayed.
SECTION 5.18. Margin Stock. None of the proceeds of the Loan will be
used by Borrower, directly or indirectly, for the purpose, whether immediate,
incidental or ultimate, of buying or carrying any Margin Stock.
SECTION 5.19. Covenant Restrictions. No Indebtedness of the Company,
the Borrower or any Consolidated Subsidiary incurred after the date hereof shall
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contain any covenant or restriction which is more restrictive in any material
respect than any covenant or restriction contained in this Agreement or any
other Loan Documents.
SECTION 5.20. Use of Proceeds. The Borrower shall use the proceeds
of the Loans solely for the Approved Uses.
SECTION 5.21. Sole General Partner. The Company shall at all times
remain the sole general partner of the Borrower.
ARTICLE VI
DEFAULTS
SECTION 6.1. Events of Default. The occurrence and continuation of
one or more of the following events (each, an "Event of Default") shall
constitute an event of default hereunder:
(a) the Borrower shall fail to (i) pay when due any principal or
interest on any Loan, or (ii) pay when due any fees or any other amount payable
hereunder and such failure to pay fees or other amounts shall continue for three
(3) Domestic Business Days;
(b) the Borrower shall fail to observe or perform any covenant
contained in Section 5.8 - 5.15 (inclusive), or Section 5.21 and such failure
continues for five (5) Domestic Business Days;
(c) the Borrower shall fail to observe or perform any covenant or
agreement contained in this Agreement (other than those covered by clause (a) or
(b) above) for 30 days after written notice thereof has been given to the
Borrower by the Administrative Agent at the request of any Bank;
(d) any representation, warranty, certification or statement made by
the Borrower in this Agreement or in any certificate, Financial Statement or
other document delivered pursuant to this Agreement shall prove to have been
incorrect in any material respect when made (or deemed made);
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(e) The Borrower, the Company or any Consolidated Subsidiary shall
default in the payment when due (whether by scheduled maturity, required
prepayment, acceleration, demand or otherwise) of any amount owing in respect of
any Indebtedness (other than the Obligations) having a principal amount, in the
aggregate, of $10,000,000 or more and such default shall continue beyond the
giving of any required notice and the expiration of any applicable grace period;
or the Borrower, the Company or any Consolidated Subsidiary shall default in the
performance or observance of any material obligation or material conditions with
respect to any such Indebtedness or any other event shall occur or condition
exist beyond the giving of any required notice and the expiration of any
applicable grace period, if the effect of such default, event or condition is
to accelerate the maturity of any such Indebtedness or to permit (without any
further requirement of notice or lapse of time) the holder or holders thereof,
or any trustee or agent for such holders, to accelerate the maturity of any such
Indebtedness, or any such Indebtedness shall become or be declared to be due and
payable prior to its stated maturity other than as a result of a regularly
scheduled payment.
(f) the Borrower or the Company or any Wholly-Owned Subsidiary that
owns an Unencumbered Asset shall commence a voluntary case or other proceeding
seeking liquidation, reorganization or other relief with respect to itself or
its debts under any bankruptcy, insolvency or other similar law now or hereafter
in effect or seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any substantial part of its
property, or shall consent to any such relief or to the appointment of or taking
possession by any such official in an involuntary case or other proceeding
commenced against it, or shall make a general assignment for the benefit of
creditors, or shall fail generally to pay its debts as they become due;
(g) an involuntary case or other proceeding shall be commenced
against the Borrower or the Company or any Wholly-Owned Subsidiary that owns an
Unencumbered Asset, seeking liquidation, reorganization or other relief with
respect to it or its debts under any bankruptcy, insolvency or other similar law
now or hereafter
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in effect or seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any substantial part of its
property, and such involuntary case or other proceeding shall remain undismissed
and unstayed for a period of 60 days; or an order for relief shall be entered
against the Borrower or the Company or such Wholly-Owned Subsidiary under the
federal bankruptcy laws as now or hereafter in effect;
(h) one or more judgments or decrees in an aggregate amount of Ten
Million Dollars ($10,000,000) or more shall be entered by a court or courts of
competent jurisdiction against the Borrower, the Company or any Consolidated
Subsidiary (other than any judgment as to which, and only to the extent, a
reputable insurance company has acknowledged coverage of such claim in writing
or has acknowledged in writing its willingness to defend any such claim under a
reservation of rights) and (i) any such judgments or decrees shall not be
stayed, discharged, paid, bonded or vacated within twenty (20) days or (ii)
enforcement proceedings shall be commenced by any creditor on any such judgments
or decrees;
(i) any member of the ERISA Group shall fail to pay when due an
amount or amounts aggregating in excess of $1,000,000 which it shall have become
liable to pay under Title IV of ERISA, or notice of intent to terminate a
Material Plan shall be filed under Title IV of ERISA by any member of the ERISA
Group, any plan administrator or any combination of the foregoing, or the PBGC
shall institute proceedings under Title IV of ERISA to terminate, to impose
liability (other than for premiums under Section 4007 of ERISA) in respect of,
or to cause a trustee to be appointed to administer any Material Plan, or a
condition shall exist by reason of which the PBGC would be entitled to obtain a
decree adjudicating that any Material Plan must be terminated, or there shall
occur a complete or partial withdrawal from, or a default, within the meaning of
Section 4219(c)(5) of ERISA, with respect to, one or more Multiemployer Plans
which could cause one or more members of the ERISA Group to incur a current
payment obligation in excess of $1,000,000;
(j) (i) a judgment or decree with respect to any Environmental Claim
shall have been entered against the Borrower or any Environmental Affiliate or
any Real
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Property Asset by a court of competent jurisdiction, (ii) any release, emission,
discharge or disposal of any Hazardous Substances shall have occurred, and such
event is reasonably likely to form the basis of an Environmental Claim by a
government agency with jurisdiction against the Borrower or any Environmental
Affiliate or any Real Property Asset thereof, or (iii) the Borrower or the
Environmental Affiliates shall have failed to obtain any Environmental Approval
necessary for the ownership, or operation of its business, property or assets or
any such Environmental Approval shall be revoked, terminated, or otherwise
cease to be in full force and effect, in each case, if the existence of such
condition has had or is reasonably likely to have a Material Adverse Effect;
(k) the Company shall cease to qualify as a real estate investment
trust under the Code or shall cease to be a publically traded company listed on
the New York Stock Exchange;
(l) the Company shall cease to be the sole general partner of the
Borrower;
(m) the Borrower or the Company shall default in its obligations
under any Loan Document other than this Agreement (including, without
limitation, the Guaranty) beyond the applicable grace periods (if any) or the
Borrower or the Company shall seek at any time to repudiate its respective
obligations under any Loan Document (including this Agreement);
(n) intentionally omitted;
(o) if any member of the ERISA Group shall commit a failure
described in Section 302(f)(1) of ERISA or Section 412(n)(1) of the Code and the
amount of the lien determined under Section 302(f)(3) of ERISA or Section
412(n)(3) of the Code that could reasonably be expected to be imposed on any
member of the ERISA Group or their assets in respect of such failure shall be
equal to or greater than $1,000,000; or
(p) during any consecutive two year period commencing on or after
the date hereof, individuals who at the beginning of such period constituted the
Board of Directors of the Company (together with any new direc-
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tors whose election by the Board of Directors or whose nomination for election
by the Company's stockholders was approved by a vote of at least a majority of
the members of the Board of Directors then in the office who either were members
of the Board of Directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the members of the Board of Directors then in office.
SECTION 6.2. Rights and Remedies. (a) Upon the occurrence of any
Event of Default described in Sections 6.1(f) or (g), the Commitments shall
immediately terminate and the unpaid principal amount of, and any and all
accrued interest on, the Loans and any and all accrued fees and other
Obligations hereunder shall automatically become immediately due and payable,
with all additional interest from time to time accrued thereon and without
presentation, demand, or protest or other requirements of any kind (including,
without limitation, valuation and appraisement, diligence, presentment, notice
of intent to demand or accelerate and notice of acceleration), all of which are
hereby expressly waived by the Borrower; and upon the occurrence and during the
continuance of any other Event of Default, the Administrative Agent may and at
the direction of the Required Banks shall (until the Administrative Agent
receives such written direction, it may, but shall not be obligated to, take
such action, or refrain from taking such action with respect to such Event of
Default as it shall deem advisable in its sole discretion), by written notice to
the Borrower, terminate the Commitments, and may, and at the direction of the
Required Banks shall (until the Administrative Agent receives such written
direction, it may, but shall not be obligated to, take such action, or refrain
from taking such action with respect to such Event of Default as it shall deem
advisable in its sole discretion), in addition to the exercise of all rights and
remedies permitted Administrative Agent and the Banks at law or equity, declare
the unpaid principal amount of and any and all accrued and unpaid interest on
the Loans and any and all accrued fees and other Obligations hereunder to be,
and the same shall thereupon be, immediately due and payable with all additional
interest from time to time accrued thereon and without presentation, demand, or
protest or other requirements of any kind other than as provided in the
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Loan Documents (including, without limitation, valuation and appraisement,
diligence, presentment, notice of intent to demand or accelerate and notice of
acceleration), all of which are hereby expressly waived by the Borrower to the
extent permitted by law.
(b) Notwithstanding anything to the contrary contained in this
Agreement or in any other Loan Document, the Administrative Agent and the Banks
each agree that any exercise or enforcement of the rights and remedies granted
the Administrative Agent or the Banks under this Agreement or at law or in
equity with respect to this Agreement or any other Loan Documents shall be
commenced and maintained by the Administrative Agent on behalf of the Banks.
SECTION 6.3. Notice of Default. The Administrative Agent shall give
notice to the Borrower under Section 6.1 promptly upon being requested to do so
by any Bank and shall thereupon notify all the Banks thereof.
SECTION 6.4. Actions in Respect of Letters of Credit. (a) If, at any
time and from time to time, any Letter of Credit shall have been issued
hereunder and an Event of Default shall have occurred and be continuing, then,
upon the occurrence and during the continuation thereof, the Administrative
Agent may, whether in addition to the taking by the Administrative Agent of any
of the actions described in this Article or otherwise, make a demand upon the
Borrower to, and forthwith upon such demand (but in any event within ten (10)
days after such demand) the Borrower shall, pay to the Administrative Agent, on
behalf of the Banks, in same day funds at the Administrative Agent's office
designated in such demand, for deposit in a special cash collateral account (the
"Letter of Credit Collateral Account") to be maintained in the name of the
Administrative Agent (on behalf of the Banks) and under its sole dominion and
control at such place as shall be designated by the Administrative Agent, an
amount equal to the amount of the Letter of Credit Usage under the Letters of
Credit. Interest shall accrue on the Letter of Credit Collateral Account at a
rate equal to the rate on overnight funds.
(b) The Borrower hereby pledges, assigns and grants to the
Administrative Agent, as administrative
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agent for its benefit and the ratable benefit of the Banks a lien on and a
security interest in, the following collateral (the "Letter of Credit
Collateral"):
(i) the Letter of Credit Collateral Account, all cash
deposited therein and all certificates and instruments, if any, from time to
time representing or evidencing the Letter of Credit Collateral Account;
(ii) all notes, certificates of deposit and other instruments
from time to time hereafter delivered to or otherwise possessed by the
Administrative Agent for or on behalf of the Borrower in substitution for or in
respect of any or all of the then existing Letter of Credit Collateral;
(iii) all interest, dividends, cash, instruments and other
property from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of the then existing Letter of Credit
Collateral; and
(iv) to the extent not covered by the above clauses, all
proceeds of any or all of the forego ing Letter of Credit Collateral.
The lien and security interest granted hereby secures the payment of all
obligations of the Borrower now or hereafter existing hereunder and under any
other Loan Document.
(c) The Borrower hereby authorizes the Administrative Agent for the
ratable benefit of the Banks to apply, from time to time after funds are
deposited in the Letter of Credit Collateral Account, funds then held in the
Letter of Credit Collateral Account to the payment of any amounts, in such order
as the Administrative Agent may elect, as shall have become due and payable by
the Borrower to the Banks in respect of the Letters of Credit.
(d) Neither the Borrower nor any Person claiming or acting on behalf
of or through the Borrower shall have any right to withdraw any of the funds
held in the Letter of Credit Collateral Account, except as provided in Section
6.4(h) hereof.
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(e) The Borrower agrees that it will not (i) sell or otherwise
dispose of any interest in the Letter of Credit Collateral or (ii) create or
permit to exist any lien, security interest or other charge or encumbrance upon
or with respect to any of the Letter of Credit Collateral, except for the
security interest created by this Section 6.4.
(f) If any Event of Default shall have occurred and be continuing:
(i) The Administrative Agent may, in its sole discretion,
without notice to the Borrower except as required by law and at any time from
time to time, charge, set off or otherwise apply all or any part of first, (x)
amounts previously drawn on any Letter of Credit that have not been reimbursed
by the Borrower and (y) any Letter of Credit Usage described in clause (ii) of
the definition thereof that are then due and payable and second, any other
unpaid Obligations then due and payable against the Letter of Credit Collateral
Account or any part thereof, in such order as the Administrative Agent shall
elect. The rights of the Administrative Agent under this Section 6.4 are in
addition to any rights and remedies which any Bank may have.
(ii) The Administrative Agent may also exercise, in its sole
discretion, in respect of the Letter of Credit Collateral Account, in addition
to the other rights and remedies provided herein or otherwise available to it,
all the rights and remedies of a secured party upon default under the Uniform
Commercial Code in effect in the State of New York at that time.
(g) The Administrative Agent shall be deemed to have exercised
reasonable care in the custody and preservation of the Letter of Credit
Collateral if the Letter of Credit Collateral is accorded treatment
substantially equal to that which the Administrative Agent accords its own
property, it being understood that, assuming such treatment, the Administrative
Agent shall not have any responsibility or liability with respect thereto.
(h) At such time as all Events of Default have been cured or waived
in writing, all amounts remaining in the Letter of Credit Collateral Account
shall be
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promptly returned to the Borrower. Absent such cure or written waiver, any
surplus of the funds held in the Letter of Credit Collateral Account and
remaining after payment in full of all of the Obligations of the Borrower
hereunder and under any other Loan Document after the Maturity Date shall be
paid to the Borrower or to whomsoever may be lawfully entitled to receive such
surplus.
ARTICLE VII
THE AGENTS
SECTION 7.1. Appointment and Authorization. Each Bank irrevocably
appoints and authorizes the Agents to take such action as agent on its behalf
and to exercise such powers under this Agreement and the other Loan Documents as
are delegated to such Agent by the terms hereof or thereof, together with all
such powers as are reasonably incidental thereto. Only the Agents (and not one
or more of the Banks) shall have the authority to deal directly with the
Borrower under this Agreement and each Bank acknowledges that all notices,
demands or requests from such Bank to Borrower must be forwarded to the
applicable Agent for delivery to the Borrower. Each Bank acknowledges that
Borrower has no obligation to act or refrain from acting on instructions or
demands of one or more Banks absent written instructions from an Agent in
accordance with its rights and authority hereunder.
SECTION 7.2. Agents and Affiliates. Merrill and Fleet and
NationsBank, N.A. shall each have the same rights and powers under this
Agreement as any other Bank and may each exercise or refrain from exercising the
same as though it were not an Agent, and such Agents and their respective
affiliates may accept deposits from, lend money to, and generally engage in any
kind of business with the Borrower or any Subsidiary or affiliate of the
Borrower as if it were not an Agent hereunder, and the term "Bank" and "Banks"
shall include Merrill and Fleet and NationsBank, N.A. each in its individual
capacity.
SECTION 7.3. Actions by Agent. The obligations of the Agents
hereunder are only those expressly set forth herein. Without limiting the
generality of
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the foregoing, no Agent shall be required to take any action with respect to any
Default, except as expressly provided in Article VI.
SECTION 7.4. Consultation with Experts. Each Agent may consult with
legal counsel (who may be counsel for the Borrower), independent public
accountants and other experts selected by it and shall not be liable for any
action taken or omitted to be taken by it in good faith in accordance with the
advice of such counsel, accountants or experts.
SECTION 7.5. Liability of Agents. No Agent or any of their
respective affiliates nor any of their respective directors, officers, agents or
employees shall be liable for any action taken or not taken by it in connection
herewith (i) with the consent or at the request of the Required Banks (unless
the consent of all of the Banks is required, in which case such Agent shall be
protected from liability for such action taken or not taken if it has obtained
the consent or behaved at the request of all of the Banks) or (ii) in the
absence of its own gross negligence or willful misconduct. No Agent or any of
their respective affiliates or directors, officers, agents or employees shall
be responsible for or have any duty to ascertain, inquire into or verify (i)
any statement, warranty or representation made in connection with this Agreement
or any borrowing hereunder; (ii) the performance or observance of any of the
covenants or agreements of the Borrower; (iii) the satisfaction of any
condition specified in Article III, except receipt of items required to be
delivered to such Agent; or (iv) the validity, effectiveness or genuineness of
this Agreement, the other Loan Documents or any other instrument or writing
furnished in connection herewith. No Agent shall incur any liability by acting
in reliance upon any notice, consent, certificate, statement, or other writing
(which may be a bank wire, telex or similar writing) believed by it to be
genuine or to be signed by the proper party or parties.
SECTION 7.6. Indemnification. Each Bank shall, ratably in accordance
with its Commitment, indemnify the Agents, their respective affiliates and their
respective directors, officers, agents and employees (to the extent not
reimbursed by the Borrower as may be required under this Agreement) against any
cost, expense
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(including counsel fees and disbursements), claim, demand, action, loss or
liability (except such as result from such indemnitees' gross negligence or
willful misconduct) that such indemnitees may suffer or incur in connection with
this Agreement, the other Loan Documents or any action taken or omitted by such
indemnitees hereunder.
SECTION 7.7. Credit Decision. Each Bank acknowledges that it has,
independently and without reliance upon any Agent or any other Bank or any of
their respective affiliates, and based on such documents and information as it
has deemed appropriate, made its own credit analysis and decision to enter into
this Agreement. Each Bank also acknowledges that it will, independently and
without reliance upon any Agent or any other Bank or their respective
affiliates, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking any action under this Agreement.
SECTION 7.8. Successor Agent. An Agent may resign at any time by
giving notice thereof to the Banks and the Borrower. Upon any such resignation,
the Required Banks shall have the right to appoint a successor Agent with the
consent of Borrower which shall not be unreasonably withheld or delayed provided
that any such successor agent is then a Bank hereunder. Furthermore, in the
event that at any time Fleet is the Administrative Agent and assigns its entire
interest as a Bank hereunder to an Assignee as permitted by Section 9.6(c)
hereof, which Assignee is not an affiliate of Fleet, then Fleet shall offer to
resign as Administrative Agent, which resignation shall only become effective if
the Required Banks accept such resignation in writing within twenty (20)
Domestic Business Days after it has been tendered by Fleet. If the Required
Banks do not timely accept such resignation, then the resignation shall be
deemed to be withdrawn and Fleet shall continue as Administrative Agent pursuant
to the terms hereof. In addition, upon the affirmative vote of the Required
Banks that the Administrative Agent has acted (or failed to act) with gross
negligence or committed an act of willful misconduct in its capacity as agent
for the Banks hereunder, the Administrative Agent shall immediately tender its
resignation. If no successor Adminis-
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trative Agent shall have been so appointed by the Required Banks, and shall have
accepted such appointment, within 30 days after the retiring Administrative
Agent gives notice of resignation, then the retiring Administrative Agent may,
on behalf of the Banks, appoint a successor Administrative Agent, which shall be
a commercial bank organized or licensed under the laws of the United States of
America or of any State thereof and having a combined capital and surplus of at
least $50,000,000. Provided that no Event of Default has occurred and is
continuing, the Borrower shall have the right to consent to a successor
Administrative Agent (other than an affiliate of Fleet), which consent shall not
be unreasonably withheld or delayed. Upon the acceptance of its appointment as
the Administrative Agent hereunder by a successor Administrative Agent, such
successor Administrative Agent shall thereupon succeed to and become vested with
all the rights and duties of the retiring Administrative Agent, and the retiring
Administrative Agent shall be discharged from its duties and obligations
hereunder. After any retiring Administrative Agent's resignation hereunder as
Administrative Agent, the provisions of this Article shall inure to its benefit
as to any actions taken or omitted to be taken by it while it was the
Administrative Agent.
ARTICLE VIII
CHANGE IN CIRCUMSTANCES
SECTION 8.1. Basis for Determining Interest Rate Inadequate or
Unfair. If on or prior to the first day of any Interest Period for any
Euro-Dollar Borrowing:
(a) the Administrative Agent is unable to obtain a quotation for the
London Interbank Offered Rate as contemplated by Section 2.6, or
(b) Banks having 50% or more of the aggregate amount of the Commitments
advise the Administrative Agent that the Adjusted London Interbank Offered Rate
as determined by the Administrative Agent will not adequately and fairly
reflect the cost to such Banks of funding their Euro-Dollar Loans for such
Interest Peri-
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od, the Administrative Agent shall forthwith give notice thereof to the Borrower
and the Banks, whereupon until the Administrative Agent notifies the Borrower
that the circumstances giving rise to such suspension no longer exist, the
obligations of the Banks to make Euro-Dollar Loans shall be suspended (provided
that nothing contained in this Section 8.1 shall be deemed to relieve the Banks
of their obligation to fund Base Rate Loans hereunder). Unless the Borrower
notifies the Administrative Agent at least two Domestic Business Days before the
date of any Euro-Dollar Borrowing for which a Notice of Borrowing has previously
been given that it elects not to borrow on such date, such Borrowing shall
instead be made as a Base Rate Borrowing.
SECTION 8.2. Illegality. If, on or after the date of this Agreement,
the adoption of any applicable law, rule or regulation, or any change in any
applicable law, rule or regulation, or any change in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by any Bank (or its Euro-Dollar Lending Office) with any request or directive
(whether or not having the force of law) of any such authority, central bank or
comparable agency shall make it unlawful or impossible for any Bank (or its
Euro-Dollar Lending Office) to make, maintain or fund its Euro-Dollar Loans or
to participate in any Letter of Credit issued by the Fronting Bank, or, with
respect to the Fronting Bank, to issue any Letter of Credit, and such Bank shall
so notify the Administrative Agent, the Administrative Agent shall forthwith
give written notice thereof to the other Banks and the Borrower, whereupon until
such Bank notifies the Borrower and the Administrative Agent that the
circumstances giving rise to such suspension no longer exist, the obligation of
such Bank to make Euro-Dollar Loans, or to participate in any Letter of Credit
issued by the Fronting Bank or, with respect to the Fronting Bank, to issue any
Letter of Credit, shall be suspended. Before giving any notice to the Adminis
trative Agent pursuant to this Section, such Bank shall designate a different
Euro-Dollar Lending Office if such designation will avoid the need for giving
such notice and will not, in the judgment of such Bank, be otherwise
disadvantageous to such Bank. If such Bank shall determine that it may not
lawfully continue to maintain and fund any of
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its outstanding Euro-Dollar Loans to maturity and shall so specify in such
notice, the Borrower shall immediately prepay in full the then outstanding
principal amount of each such Euro-Dollar Loan, together with accrued interest
thereon. Concurrently with prepaying each such Euro-Dollar Loan, the Borrower
shall borrow a Base Rate Loan in an equal principal amount from such Bank (on
which interest and principal shall be payable contemporaneously with the related
Euro-Dollar Loans of the other Banks), and such Bank shall make such a Base Rate
Loan.
SECTION 8.3. Increased Cost and Reduced Return.
(a) If, on or after the date hereof, the adoption of any applicable
law, rule or regulation, or any change in any applicable law, rule or
regulation, or any change in the interpretation or administration thereof by any
governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by any Bank (or its
Applicable Lending Office) with any request or directive (whether or not having
the force of law) of any such authority, central bank or comparable agency shall
impose, modify or deem applicable any reserve (including, without limitation,
any such requirement imposed by the Board of Governors of the Federal Reserve
System (but excluding with respect to any Euro-Dollar Loan any such requirement
reflected in an applicable Euro-Dollar Reserve Percentage)), special deposit,
insurance assessment or similar requirement against assets of, deposits with or
for the account of, or credit extended by, any Bank (or its Applicable Lending
Office) or shall impose on any Bank (or its Applicable Lending Office) or on the
London interbank market any other condition affecting its Euro-Dollar Loans, its
Note, or its obligation to make Euro-Dollar Loans, and the result of any of the
foregoing is to increase the cost to such Bank (or its Applicable Lending
Office) of making or maintaining any Euro-Dollar Loan, or to reduce the amount
of any sum received or receivable by such Bank (or its Applicable Lending
Office) under this Agreement or under its Note with respect thereto, by an
amount deemed by such Bank to be material, then, within 15 days after demand by
such Bank (with a copy to the Administrative Agent), the Borrower shall pay to
such Bank such additional amount
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or amounts as will compensate such Bank for such increased cost or reduction;
provided, however, that such amounts shall be no greater than that which such
Bank is generally charging other borrowers similarly situated to Borrower.
(b) If any Bank shall have determined that, after the date hereof,
the adoption of any applicable law, rule or regulation regarding capital
adequacy, or any change in any such law, rule or regulation, or any change in
the interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or any request or directive regarding capital adequacy
(whether or not having the force of law) of any such authority, central bank or
comparable agency, has or would have the effect of reducing the rate of return
on capital of such Bank (or its Parent) as a consequence of such Bank's
obligations hereunder to a level below that which such Bank (or its Parent)
could have achieved but for such adoption, change, request or directive (taking
into consideration its policies with respect to capital adequacy) by an amount
deemed by such Bank to be material, then from time to time, within 15 days after
demand by such Bank (with a copy to the Administrative Agent), the Borrower
shall pay to such Bank such additional amount or amounts as will compensate such
Bank (or its Parent) for such reduction; provided, however, that such amount
shall be no greater than that which such Bank is generally charging other
borrowers similarly situated to Borrower.
(c) Each Bank will promptly notify the Borrower and the
Administrative Agent of any event of which it has knowledge, occurring after the
date hereof, which will entitle such Bank to compensation pursuant to this
Section and will designate a different Applicable Lending Office if such
designation will avoid the need for, or reduce the amount of, such compensation
and will not, in the judgment of such Bank, be otherwise disadvantageous to such
Bank. A certificate of any Bank delivered to the Borrower claiming compensation
under this Section and setting forth the calculation of the additional amount or
amounts to be paid to it hereunder shall be conclusive in the absence of
manifest error. In determining such amount, such Bank may use any reasonable
averaging and attribution methods.
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(d) Notwithstanding anything to the contrary contained herein, no
Bank shall demand compensation for any increased cost, reduction or capital
referred to above in Section 8.3(a) or (b) if it shall not at the time be the
general policy and practice of such Bank to demand such compensation in similar
circumstances from similarly situated borrowers.
SECTION 8.4. Taxes.
(a) Any and all payments by the Borrower to or for the account of
any Bank or the Administrative Agent hereunder or under any other Loan Document
shall be made free and clear of and without deduction for any and all present or
future taxes, duties, levies, imposts, deductions, charges or withholdings, and
all liabilities with respect thereto, excluding, in the case of each Bank and
the Administrative Agent, taxes imposed on its income, and franchise taxes
imposed on it, by the jurisdiction under the laws of which such Bank or the
Administrative Agent (as the case may be) is organized or any political
subdivision thereof and, in the case of each Bank, taxes imposed on its income,
and franchise or similar taxes imposed on it, by the jurisdiction of such Bank's
Applicable Lending Office or any political subdivision thereof (all such
non-excluded taxes, duties, levies, imposts, deductions, charges, withholdings
and liabilities being hereinafter referred to as "Taxes"). If the Borrower shall
be required by law to deduct any Taxes from or in respect of any sum payable
hereunder or under any Note or Letter of Credit or participation therein to any
Bank or the Administrative Agent, (i) the sum payable shall be increased as
necessary so that after making all required deductions (including deductions
applicable to additional sums payable under this Section 8.4) such Bank, the
Fronting Bank, or the Administrative Agent (as the case may be) receives an
amount equal to the sum it would have received had no such deductions been made,
(ii) the Borrower shall make such deductions, (iii) the Borrower shall pay the
full amount deducted to the relevant taxation authority or other authority in
accordance with applicable law and (iv) the Borrower shall furnish to the
Administrative Agent, at its address referred to in Section 9.1, the original or
a certified copy of a receipt evidencing payment thereof.
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(b) In addition, the Borrower agrees to pay any present or future
stamp or documentary taxes and any other excise or property taxes, or charges or
similar levies which arise from any payment made hereunder or under any Note,
Letter of Credit, or participation therein, or from the execution or delivery
of, or otherwise with respect to, this Agreement or any Note or Letter of Credit
or participation therein (hereinafter referred to as "Other Taxes").
(c) The Borrower agrees to indemnify each Bank, the Fronting Bank,
and the Administrative Agent for the full amount of Taxes or Other Taxes
(including, without limitation, any Taxes or Other Taxes imposed or asserted by
any jurisdiction on amounts payable under this Section 8.4) paid by such Bank,
the Fronting Bank, or the Administrative Agent (as the case may be) and any
liability (including penalties, interest and expenses) arising therefrom or with
respect thereto. This indemnification shall be made within thirty (30) days from
the date such Bank, the Fronting Bank or the Administrative Agent (as the case
may be) makes written demand therefor.
(d) Each Bank organized under the laws of a jurisdiction outside the
United States, on or prior to the date of its execution and delivery of this
Agreement in the case of each Bank listed on the signature pages hereof and on
or prior to the date on which it becomes a Bank in the case of each other Bank,
and from time to time thereafter if requested in writing by the Borrower (but
only so long as such Bank remains lawfully able to do so), shall provide the
Borrower with Internal Revenue Service form 1001 or 4224, as appropriate, or any
successor form prescribed by the Internal Revenue Service, certifying that such
Bank is entitled to benefits under an income tax treaty to which the United
States is a party which reduces the rate of withholding tax on payments of
interest or certifying that the income receivable pursuant to this Agreement is
effectively connected with the conduct of a trade or business in the United
States. If the form provided by a Bank at the time such Bank first becomes a
party to this Agreement indicates a United States interest withholding tax rate
in excess of zero, withholding tax at such rate shall be considered excluded
from "Taxes" as defined in Section 8.4(a).
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(e) For any period with respect to which a Bank has failed to
provide the Borrower with the appropriate form pursuant to Section 8.4(d)
(unless such failure is due to a change in treaty, law or regulation occurring
subsequent to the date on which a form originally was required to be provided),
such Bank shall not be entitled to indemnification under Section 8.4(a) with
respect to Taxes imposed by the United States; provided, however, that should a
Bank, which is otherwise exempt from or subject to a reduced rate of withholding
tax, become subject to Taxes because of its failure to deliver a form required
hereunder, the Borrower shall take such steps as such Bank shall reasonably
request to assist such Bank to recover such Taxes.
(f) If the Borrower is required to pay additional amounts to or for
the account of any Bank pursuant to this Section 8.4, then such Bank will change
the jurisdiction of its Applicable Lending Office so as to eliminate or reduce
any such additional payment which may thereafter accrue if such change, in the
judgment of such Bank, is not otherwise disadvantageous to such Bank.
(g) If circumstances subsequently change so that it is no longer
unlawful for an affected Bank to make or maintain Euro-Dollar Loans as
contemplated hereunder, such Bank will, as soon as reasonably practicable after
such Bank becomes aware of such change in circumstances, notify the Borrower and
the Administrative Agent and upon receipt of such notice, the obligations of
such Bank to make or continue Euro-Dollar Loans or to convert Base Rate Loans
into Euro-Dollar Loans shall be reinstated.
SECTION 8.5. Base Rate Loans Substituted for Affected Euro-Dollar
Loans. If (i) the obligation of any Bank to make Euro-Dollar Loans has been
suspended pursuant to Section 8.2 or (ii) any Bank has demanded compensation
under Section 8.3 or 8.4 with respect to its Euro-Dollar Loans and the Borrower
shall, by at least five Euro-Dollar Business Days' prior notice to such Bank
through the Administrative Agent, have elected that the provisions of this
Section shall apply to such Bank, then, unless and until such Bank notifies the
Borrower that the circumstances giving rise to such suspension or demand for
compensation no longer exist:
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(a) all Loans which would otherwise be made by such Bank as
Euro-Dollar Loans shall be made instead as Base Rate Loans (on which interest
and principal shall be payable contemporaneously with the related Euro-Dollar
Loans of the other Banks), and
(b) after each of its Euro-Dollar Loans has been repaid, all
payments of principal which would otherwise be applied to repay such Euro-Dollar
Loans shall be applied to repay its Base Rate Loans instead.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1. Notices. All notices, requests and other communications
to any party hereunder shall be in writing (including bank wire, facsimile,
facsimile transmission or similar writing) and shall be given to such party: (x)
in the case of the Borrower or the Administrative Agent, at its address or
facsimile number set forth on the signature pages hereof, (y) in the case of any
Bank, at its address or facsimile number set forth in its Administrative
Questionnaire or (z) in the case of any party, such other address or facsimile
number as such party may hereafter specify for the purpose by notice to the
Administrative Agent and the Borrower. Each such notice, request or other
communication shall be effective (i) if given by facsimile, when such facsimile
is transmitted to the facsimile number specified in this Section and the
appropriate answerback is received, (ii) if given by mail, 72 hours after such
communication is deposited in the mails with first class postage prepaid,
addressed as aforesaid or (iii) if given by any other means, when delivered at
the address specified in this Section; provided that notices to the
Administrative Agent under Article II or Article VIII shall not be effective
until received.
SECTION 9.2. No Waivers. No failure or delay by the Administrative
Agent or any Bank or Borrower in exercising any right, power or privilege
hereunder or under any Note shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The
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rights and remedies herein provided shall be cumulative and not exclusive of any
rights or remedies provided by law.
SECTION 9.3. Expenses; Indemnification.
(a) The Borrower shall pay (i) all reasonable out-of-pocket expenses of
the Administrative Agent and the Syndication Agent and Arranger, including,
without limitation, environmental assessment fees, engineering fees, and fees
and disbursements of Skadden, Arps, Slate, Meagher & Flom LLP, counsel for the
Syndication Agent and Arranger, as well as fees and disbursements of internal
counsel, in connection with the preparation, syndications and administration of
this Agreement, the Loan Documents and the documents and instruments referred to
therein, and further modifications or syndications of the Facility in connection
therewith, the administration of the Loans, any waiver or consent hereunder or
any amendment or modification hereof or any Default or Event of Default
hereunder, and (ii) if an Event of Default occurs, all reasonable out-of-pocket
expenses incurred by the Administrative Agent and each Bank, including fees and
disbursements of counsel for the Administrative Agent and each of the Banks, in
connection with the enforcement of the Loan Documents and the instruments
referred to therein and such Event of Default and collection, bankruptcy,
insolvency and other enforcement proceedings resulting therefrom.
(b) The Borrower agrees to indemnify the Administrative Agent and
each Bank, their respective affiliates and the respective directors, officers,
agents and employees of the foregoing (each an "Indemnitee") and hold each
Indemnitee harmless from and against any and all liabilities, losses, damages,
costs and expenses of any kind, including, without limitation, the reasonable
fees and disbursements of counsel, which may be incurred by such Indemnitee in
connection with any investigative, administrative or judicial proceeding
(whether or not such Indemnitee shall be designated a party thereto) that may at
any time (including, without limitation, at any time following the payment of
the Obligations) be imposed on, asserted against or incurred by any Indemnitee
as a result of, or arising out of, or in any way related to or by reason of, (i)
any of the transactions contemplated by the Loan Documents or the
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execution, delivery or performance of any Loan Document, (ii) any violation by
the Borrower or the Environmental Affiliates of any applicable Environmental
Law, (iii) any Environmental Claim arising out of the management, use, control,
ownership or operation of property or assets by the Borrower or any of the
Environmental Affiliates, including, without limitation, all on-site and
off-site activities involving Hazardous Substances, (iv) the breach of any
environmental representation or warranty set forth herein, (v) the grant to the
Administrative Agent and the Banks of any Lien in any property or assets of the
Borrower or any stock or other equity interest in the Borrower, and (vi) the
exercise by the Administrative Agent and the Banks of their rights and remedies
(including, without limitation, foreclosure) under any agreements creating any
such Lien (but excluding, as to any Indemnitee, any such losses, liabilities,
claims, damages, expenses, obligations, penalties, actions, judgments, suits,
costs or disbursements incurred by reason of (i) the gross negligence or
willful misconduct of such Indemnitee as finally determined by a court of
competent jurisdiction, (ii) the breach of this Agreement by such Indemnitee, as
finally determined by a court of competent jurisdiction and (iii) any
investigative, administrative or judicial proceeding imposed or asserted against
any Indemnitee by any bank regulatory agency or by any equity holder of such
Indemnitee). The Borrower's obligations under this Section shall survive the
termination of this Agreement and the payment of the Obligations.
(c) The Borrower shall pay, and hold the Administrative Agent and
each of the Banks harmless from and against, any and all present and future U.S.
stamp, recording, transfer and other similar foreclosure related taxes with
respect to the foregoing matters and hold the Administrative Agent and each Bank
harmless from and against any and all liabilities with respect to or resulting
from any delay or omission (other than to the extent attributable to such Bank)
to pay such taxes.
SECTION 9.4. Sharing of Set-Offs. In addition to any rights now or
hereafter granted under applicable law or otherwise, and not by way of
limitation of any such rights, upon the occurrence and during the continuance of
any Event of Default, each Bank is hereby authorized at any time or from time to
time, without
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presentment, demand, protest or other notice of any kind to the Borrower or to
any other Person, any such notice being hereby expressly waived, to set off and
to appropriate and apply any and all deposits (general or special, time or
demand, provisional or final), other than deposits held for the benefit of third
parties, and any other indebtedness at any time held or owing by such Bank
(including, without limitation, by branches and agencies of such Bank wherever
located) to or for the credit or the account of the Borrower against and on
account of the Obligations of the Borrower then due and payable to such Bank
under this Agreement or under any of the other Loan Documents, including,
without limitation, all interests in Obligations purchased by such Bank. Each
Bank agrees that if it shall, by exercising any right of set-off or counterclaim
or otherwise, receive payment of a proportion of the aggregate amount of
principal and interest due with respect to any Note held by it or Letter of
Credit participated in by it, or, in the case of the Fronting Bank, Letter of
Credit issued by it, which is greater than the proportion received by any other
Bank or Letter of Credit issued or participated in by such other Bank, in
respect of the aggregate amount of principal and interest due with respect to
any Note held by such other Bank, the Bank receiving such proportionately
greater payment shall purchase such participations in the Notes held by the
other Banks or Letter of Credit issued or participated in by such other Bank,
and such other adjustments shall be made, as may be required so that all such
payments of principal and interest with respect to the Notes held by the Banks
or Letter of Credit issued or participate din by such other Banks shall be
shared by the Banks pro rata; provided that nothing in this Section shall impair
the right of any Bank to exercise any right of set-off or counterclaim it may
have and to apply the amount subject to such exercise to the payment of
indebtedness of the Borrower other than its indebtedness under the Notes or the
Letters of Credit. The Borrower agrees, to the fullest extent that it may
effectively do so under applicable law, that any holder of a participation in a
Note, whether or not acquired pursuant to the foregoing arrangements, may
exercise rights of set-off or counterclaim and other rights with respect to such
participation as fully as if such holder of a participation were a direct
creditor of the Borrower in the amount of such participation.
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SECTION 9.5. Amendments and Waivers. Any provision of this
Agreement, the Notes, the Letters of Credit, or other Loan Documents may be
amended or waived if, but only if, such amendment or waiver is in writing and is
signed by the Borrower and the Required Banks (and, if the rights or duties of
the Administrative Agent are affected thereby, by the Administrative Agent);
provided that no such amendment or waiver shall, unless signed by all the Banks,
(i) increase or decrease the Commitment of any Bank (except for a ratable
decrease in the Commitments of all Banks) or subject any Bank to any additional
obligation, (ii) reduce the principal of or rate of interest on any Loan or any
fees hereunder, except as provided below, (iii) postpone the date fixed for any
payment of principal of or interest on any Loan or any fees hereunder or for any
reduction or termination of any Commitment, (iv) change the percentage of the
Commitments or of the aggregate unpaid principal amount of the Notes, or the
number of Banks, which shall be required for the Banks or any of them to take
any action under this Section or any other provision of this Agreement, (v)
release any Guarantor or the Guaranty, or (vi) modify the Guaranty.
SECTION 9.6. Successors and Assigns.
(a) The provisions of this Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
assigns, except that the Borrower may not assign or otherwise transfer any of
its rights under this Agreement or the other Loan Documents without the prior
written consent of all Banks except as permitted by Section 5.10 hereof.
(b) Any Bank may at any time grant to one or more banks or other
institutions (each a "Participant") participating interests in its Commitment or
any or all of its Loans. In the event of any such grant by a Bank of a
participating interest to a Participant, whether or not upon notice to the
Borrower and the Administrative Agent, such Bank shall remain responsible for
the performance of its obligations hereunder, and the Borrower and the
Administrative Agent shall continue to deal solely and directly with such Bank
in connection with such Bank's rights and obligations under this Agreement. Any
agreement pursuant to which any Bank may grant such a participating interest
shall provide that such Bank
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shall retain the sole right and responsibility to enforce the obligations of the
Borrower hereunder including, without limitation, the right to approve any
amendment, modification or waiver of any provision of this Agreement; provided
that such participation agreement may provide that such Bank will not agree to
any modification, amendment or waiver of this Agreement described in clause
(i), (ii), (iii) or (iv) of Section 9.5 without the consent of the Participant.
The Borrower agrees that each Participant shall, to the extent provided in its
participation agreement, be entitled to the benefits of Article VIII with
respect to its participating interest. An assignment or other transfer which is
not permitted by subsection (c) or (d) below shall be given effect for purposes
of this Agreement only to the extent of a participating interest granted in
accordance with this subsection (b).
(c) Any Bank may at any time assign to one or more banks or other
institutions (each an "Assignee") all, or a proportionate part of all, of its
rights and obligations under this Agreement, the Notes and the other Loan
Documents, provided that any such assignment shall be in the minimum amount of
$5,000,000, and such Assignee shall assume such rights and obligations, pursuant
to an Assignment and Assumption Agreement in substantially the form of Exhibit C
hereto executed by such Assignee and such transferor Bank, with (and subject to)
the subscribed consent of the Borrower and the Administrative Agent which
consent shall not be unreasonably withheld; provided that if an Assignee is an
affiliate of such transferor Bank, no such consent shall be required provided
that the rating of such affiliate's senior unsecured Indebtedness shall be at
least investment grade at such time (although nothing contained herein shall
limit the right of any Bank to assign its interest herein as aforesaid to any
successor by merger or consolidation); and provided further that, upon the
occurrence and during the continuation of an Event of Default, a Bank may assign
all or any portion of its interest herein to any entity, regardless of rating
and without restriction on the amount of the assignment and furthermore that
Borrower shall have no right to consent to any Assignee. Upon execution and
delivery of such instrument and payment by such Assignee to such transferor Bank
of an amount equal to the purchase price agreed between such transferor Bank
and such Assignee,
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such Assignee shall be a Bank party to this Agreement and shall have all the
rights and obligations of a Bank with a Commitment as set forth in such
instrument of assumption, and the transferor Bank shall be released from its
obligations hereunder to a correspond ing extent, and no further consent or
action by any party shall be required. Upon the consummation of any assignment
pursuant to this subsection (c), the transferor Bank, the Administrative Agent
and the Borrower shall make appropriate arrangements so that, if required, a new
Note is issued to the Assignee. In connection with any such assignment, the
transferor Bank shall pay to the Administrative Agent an administrative fee for
processing such assignment in the amount of $2,500. If the Assignee is not
incorporated under the laws of the United States of America or a state thereof,
it shall deliver to the Borrower and the Administrative Agent certification as
to exemption from deduction or withholding of any United States federal income
taxes in accordance with Section 8.4.
(d) Any Bank may at any time assign all or any portion of its rights
under this Agreement and its Note and the Letter(s) of Credit participated in by
such bank, or, in the case of the Fronting Bank, issued by it, to a Federal
Reserve Bank. No such assignment shall release the transferor Bank from its
obligations hereunder. Promptly upon being notified in writing of such
transfer, Administrative Agent shall notify Borrower thereof.
(e) No Assignee, Participant or other transferee of any Bank's
rights shall be entitled to receive any greater payment under Section 8.3 or 8.4
than such Bank would have been entitled to receive with respect to the rights
transferred, unless such transfer is made with the Borrower's prior written
consent or by reason of the provisions of Section 8.2, 8.3 or 8.4 requiring such
Bank to designate a different Applicable Lending Office under certain
circumstances or at a time when the circumstances giving rise to such greater
payment did not exist.
SECTION 9.7. Collateral. Each of the Banks represents to the
Administrative Agent and each of the other Banks that it in good faith is not
relying upon any "margin stock" (as defined in Regulation U) as
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collateral in the extension or maintenance of the credit provided for in this
Agreement.
SECTION 9.8. Governing Law; Submission to Jurisdiction. (a) THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER AND THEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
(b) Any legal action or proceeding with respect to this Agreement
or any other Loan Document and any action for enforcement of any judgment in
respect thereof may be brought in the courts of the State of New York or of the
United States of America for the Southern District of New York, and, by
execution and delivery of this Agreement, the Borrower hereby accepts for itself
and in respect of its property, generally and unconditionally, the
non-exclusive jurisdiction of the aforesaid courts and appellate courts from any
thereof. The Borrower irrevocably consents to the service of process out of any
of the aforementioned courts in any such action or proceeding by the hand
delivery, or mailing of copies thereof by registered or certified mail, postage
prepaid, to the Borrower at its address set forth below. The Borrower hereby
irrevocably waives, to the extent permitted by applicable law, any objection
which it may now or hereafter have to the laying of venue of any of the
aforesaid actions or proceedings arising out of or in connection with this
Agreement or any other Loan Document brought in the courts referred to above and
hereby further irrevocably waives, to the extent permitted by applicable law,
and agrees not to plead or claim in any such court that any such action or
proceeding brought in any such court has been brought in an inconvenient forum.
Nothing herein shall affect the right of the Administrative Agent, any Bank or
any holder of a Note to serve process in any other manner permitted by law or to
commence legal proceedings or otherwise proceed against the Borrower in any
other jurisdiction.
SECTION 9.9. Marshalling; Recapture. Neither the Administrative
Agent nor any Bank shall be under any obligation to marshall any assets in favor
of the Borrower or any other party or against or in payment of any or all of the
Obligations. To the extent any Bank receives any payment by or on behalf of the
Bor-
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rower, which payment or any part thereof is subsequently invalidated, declared
to be fraudulent or preferential, set aside or required to be repaid to the
Borrower or its estate, trustee, receiver, custodian or any other party under
any bankruptcy law, state or federal law, common law or equitable cause, then to
the extent of such payment or repayment, the Obligation or part thereof which
has been paid, reduced or satisfied by the amount so repaid shall be reinstated
by the amount so repaid and shall be included within the liabilities of the
Borrower to such Bank as of the date such initial payment, reduction or
satisfaction occurred.
SECTION 9.10. Counterparts; Integration; Effectiveness. This
Agreement may be signed in any number of counterparts, each of which shall be an
original, with the same effect as if the signatures thereto and hereto were upon
the same instrument. This Agreement constitutes the entire agreement and
understanding among the parties hereto and supersedes any and all prior
agreements and understandings, oral or written, relating to the subject matter
hereof. This Agreement shall become effective upon receipt by the Administrative
Agent of counterparts hereof signed by each of the parties hereto (or, in the
case of any party as to which an executed counterpart shall not have been
received, receipt by the Administrative Agent in form satisfactory to it of
telegraphic, telex or other written confirmation from such party of execution of
a counterpart hereof by such party).
SECTION 9.11. WAIVER OF JURY TRIAL. EACH OF THE BORROWER, THE
ADMINISTRATIVE AGENT AND THE BANKS HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT
TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
SECTION 9.12. Survival. All indemnities set forth herein shall
survive the execution and delivery of this Agreement and the other Loan
Documents and the making and repayment of the Loans hereunder.
SECTION 9.13. Domicile of Loans. Each Bank may transfer and carry
its Loans at, to or for the account of any domestic or foreign branch office,
subsidiary or affiliate of such Bank.
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SECTION 9.14. Limitation of Liability. No claim may be made by the
Borrower or any other Person against the Administrative Agent or any Bank or the
affiliates, directors, officers, employees, attorneys or agents of any of them
for any consequential or punitive damages in respect of any claim for breach of
contract or any other theory of liability arising out of or related to the
transactions contemplated by this Agreement or by the other Loan Documents, or
any act, omission or event occurring in connection therewith; and the Borrower
hereby waives, releases and agrees not to sue upon any claim for any such
damages, whether or not accrued and whether or not known or suspected to exist
in its favor.
SECTION 9.15. Recourse. All obligations, covenants and agreements of
Borrower contained in or evidenced by this Agreement, the Notes and any Loan
Document shall be fully recourse to Borrower and each and every asset of
Borrower. Notwithstanding the foregoing, no recourse under or upon any
obligation, covenant, or agreement contained in this Agreement or the Note or
any Loan Document shall be had against any officer, director, limited partner
or employee of Borrower (a "Non-Recourse Party") and no such Non-Recourse Party
shall be personally liable for payment of the Loans or other amounts due in
respect thereof (all such liability being expressly waived and released by each
Bank and the Agents). In no event shall the foregoing limitation of recourse
with respect to any Non-Recourse Party be deemed to limit the liability of the
Guarantor under the Guaranty, which shall be fully recourse to the Guarantor and
each and every asset of the Guarantor.
SECTION 9.16. Confidentiality. Each Bank and each of the Agents
agrees that it shall maintain confidentiality with regard to nonpublic
information concerning the Borrower obtained from the Borrower in connection
with this Agreement, provided that the Banks and the Administrative Agent shall
not be precluded from making disclosure regarding such information: (1) to the
Banks' and Administrative Agent's counsel, accountants and other professional
advisors (who are, in each case, subject to this confidentiality agreement),
(ii) to officers, directors, employees, agents and partners of each Bank, and
the Administrative Agent who need to know such information (who are, in each
case, subject to
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this confidentiality agreement), (iii) in response to a subpoena or order of a
court or governmental agency, (iv) to any entity participating or considering
participating in any credit made under this Agreement, provided, the Banks and
Administrative Agent shall require that any such entity be subject to this
Section 9.16, however, Banks and Administrative Agent shall have no duty to
monitor any participating entity and shall have no liability in the event that
any participating entity violates this Section 9.16, or (v) as required by law,
GAAP or applicable regulation. In connection with enforcing its rights pursuant
to this Section 9.16, Borrower shall be entitled to the equitable remedies of
specific performance and injunctive relief against the Administrative Agent or
any Bank which shall breach the confidentiality provisions of this Section 9.16.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
TOWER REALTY OPERATING PARTNERSHIP, L.P.
By: TOWER REALTY TRUST, INC., its general
partner
By: /s/ Lawrence H. Feldman
------------------------------------
Name: Lawrence H. Feldman
Title: President
120 West 45th Street
24th Floor
New York, New York 10036
Attention: Chief Financial Officer
Facsimile No.: (212) 768-9479
(Bank Signatures follow)
<PAGE> 111
Commitment Bank
- ---------- -----
$100,000,000.00 MERRILL LYNCH CAPITAL CORPORATION
By: /s/ Christopher Birosak
----------------------------------
Name: Christopher Birosak
Title: Vice President
<PAGE> 112
Commitment Bank
- ---------- -----
$25,000,000.00 FLEET NATIONAL BANK
By: /s/ Allison Gauthier
----------------------------------
Name: Allison Gauthier
Title: AVP
<PAGE> 113
Commitment Bank
- ---------- -----
$25,000,000.00 NATIONSBANK, N.A.
By: /s/ Terence J. Hatton
----------------------------------
Name: Terence J. Hatton
Title: SVP
<PAGE> 114
Commitment Bank
- ---------- -----
$25,000,000.00 KEYBANK, NATIONAL ASSOCIATION
By: /s/ Rex E. Rudy
----------------------------------
Name: Rex E. Rudy
Title: Vice President
<PAGE> 115
Commitment Bank
- ---------- -----
$25,000,000.00 BANK ONE ARIZONA, N.A.
By: /s/ Matthew C. Bern
----------------------------------
Name: Matthew C. Bern
Title: Vice President
<PAGE> 116
Total Commitments Administrative Agent:
$200,000,000 FLEET NATIONAL BANK
By: /s/ Allison Gauthier
----------------------------------
Name: Allison Gauthier
Title: AVP
111 Westminster
Suite 800
Providence, RI 02903
Attn: Allison M. Gauthier
Syndication Agent and Arranger:
MERRILL LYNCH & CO.
By:
----------------------------------
Name:
Title:
World Financial Center
North Tower
250 Vesey Street
New York, New York 10281
Attention: Mr. Frederick Kelly
Telecopy: 212-449-9143
Documentation Agent:
NATIONSBANK, N.A.
By:
----------------------------------
Name:
Title:
8300 Greensboro Drive
Suite 300
McLean, Virginia 22102
Attn: Eleanor Mitchell-Wharton
Telecopy:
<PAGE> 117
Total Commitments Administrative Agent:
$200,000,000 FLEET NATIONAL BANK
By:
----------------------------------
Name:
Title:
111 Westminster
Suite 800
Providence, RI 02903
Attn: Mr. Christopher Thomas
Syndication Agent and Arranger:
MERRILL LYNCH & CO.
By: /s/ Christopher Birosak
----------------------------------
Name: Christopher Birosak
Title: Managing Director
World Financial Center
North Tower
250 Vesey Street
New York, New York 10281
Attention: Mr. Frederick Kelly
Telecopy: 212-449-9143
Documentation Agent:
NATIONSBANK, N.A.
By:
----------------------------------
Name:
Title:
8300 Greensboro Drive
Suite 300
McLean, Virginia 22102
Attn: Eleanor Mitchell-Wharton
Telecopy:
<PAGE> 118
Total Commitments Administrative Agent:
$200,000,000 FLEET NATIONAL BANK
By:
----------------------------------
Name:
Title:
111 Westminster
Suite 800
Providence, RI 02903
Attn: Mr. Christopher Thomas
Syndication Agent and Arranger:
MERRILL LYNCH & CO.
By:
----------------------------------
Name:
Title:
World Financial Center
North Tower
250 Vesey Street
New York, New York 10281
Attention: Mr. Frederick Kelly
Telecopy: 212-449-9143
Documentation Agent:
NATIONSBANK, N.A.
By: /s/ Terence J. Hatton
----------------------------------
Name: Terence J. Hatton
Title: Senior Vice President
8300 Greensboro Drive
Suite 300
McLean, Virginia 22102
Attn: Eleanor Mitchell-Wharton
Telecopy: 703-761-8060
<PAGE> 1
Exhibit 10.74
CONSOLIDATED, AMENDED AND RESTATED
MORTGAGE NOTE
New York, New York
$107,000,000 November 26, 1997
WHEREAS, MERRILL LYNCH MORTGAGE CAPITAL INC., a Delaware
corporation, having its principal office at World Financial Center, North Tower,
New York, New York 10281-1326 ("Payee"), is the holder by assignment of those
certain mortgage notes described on Schedule A annexed hereto and made a part
hereof (the "Original Notes") made by Magnolia Associates, LTD., a Florida
limited partnership ("Magnolia"), 286 Madison, L.P., 290 Madison, L.P. and 292
Madison, L.P., each a New York limited partnership (the "Madison Partnerships",
and collectively with Magnolia, "Maker"), each having its principal office c/o
Tower Realty Operating Partnership, L.P., 120 West 45th Street, 24th Floor, New
York, New York 10036;
WHEREAS, Payee is the holder of that certain supplemental mortgage
note more particularly described on Schedule B annexed hereto (the "Supplemental
Note");
WHEREAS, the principal indebtedness evidenced by the Original Notes
and the Supplemental Note is One Hundred Seven Million Dollars ($107,000,000);
and
WHEREAS, Maker and Payee desire to consolidate, amend and restate
the terms and conditions of the Original Notes and the Supplemental Note in
their entirety, in the manner set forth in this Consolidated, Amended and
Restated Mortgage Note (the "Note"), to evidence a joint indebtedness in the
amount of One Hundred Seven Million Dollars ($107,000,000).
NOW THEREFORE, by Maker's execution and delivery of this Note and
Payee's acceptance of delivery from Maker of this Note, this Note is deemed to
consolidate and amend the Original Notes and the Supplemental Note and the same
are hereby restated in their entirety to read as follows:
<PAGE> 2
FOR VALUE RECEIVED, Maker promises to pay to the order of Payee, or
its assigns, the Principal Amount (as defined below), together with interest
from the date hereof at the Applicable Interest Rate (as defined below).
Interest accruing hereunder shall be calculated on the basis of a 360-day year
of twelve 30-day months.
WHEN USED HEREIN, the following capitalized terms shall have the
following meanings:
"Applicable Interest Rate" shall mean (a) from the date of this Note
through but not including the Reset Date (as hereinafter defined), a rate of
6.8174 percent (6.8174%) per annum (the "Initial Interest Rate") and (b) from
and after the Reset Date through and including the date this Note is paid in
full, a rate per annum equal to the greater of (i) the Initial Interest Rate
plus two percent or (ii) the Treasury Rate (as hereinafter defined) plus two
percent (2.0%) (the "Revised Interest Rate"). For purposes of this Note, (A) the
term "Reset Date" shall mean November 1, 2004, and (B) the term "Treasury Rate"
shall mean, as of the Reset Date, the yields, calculated by linear interpolation
(rounded to the nearest one-thousandth of one percent (1%)) of noncallable
United States Treasury obligations with a term of fifteen years, on the basis of
Federal Reserve Statistical Release H.15 Selected Interest Rates under the
heading U.S. Governmental Security/Treasury Constant Maturities or other
recognized source of comparable financial market information selected by Payee
for the week prior to the Reset Date.
"Commencement Date" shall be January 1, 1998.
"Closing Date" shall be November 26, 1997.
"Default Rate" shall be Applicable Interest Rate plus five percent
per annum.
"Maturity Date" shall be November 1, 2027.
"Monthly Amount" shall be the amount referenced on Schedule C.
"Mortgage" shall have the meaning set forth in Paragraph 2 hereof.
"Payment Date" shall be the first business day of each month
commencing on the first business day of the second full month after the Closing
Date and continuing to and including the Maturity Date.
"Principal Amount" shall be One Hundred Seven Million Dollars
($107,000,000).
2
<PAGE> 3
All capitalized terms not otherwise defined herein shall have the
meanings set forth in the Mortgage.
1. The Principal Amount and interest thereon shall be due and
payable in lawful money of the United States as follows:
(a) On the date hereof, all interest on the unpaid balance through
the end of the month in which the Closing Date occurs shall be due and
payable. Thereafter, commencing on the Commencement Date and continuing
until November 1, 1999, 23 equal monthly installments of interest at the
Monthly Amount each shall be due and payable. Thereafter, commencing on
December 1, 1999 and continuing until the Maturity Date, 336 equal monthly
installments of principal and interest at the Monthly Amount each shall be
due and payable. Each installment of the Monthly Amount shall be applied
first to the interest at the Initial Interest Rate and the remainder
thereof to reduction of principal. Each monthly installment shall be due
on each Payment Date. In addition, all amounts advanced by Payee pursuant
to applicable provisions of the Loan Documents (as hereinafter defined),
together with any interest at the Default Rate (payable after any
applicable grace period set forth herein or in the Mortgage) or other
charges as therein provided, shall be immediately due and payable
hereunder. In the event any such advance is not so repaid by Maker, Payee
may, at its option, first apply any payments received hereunder to repay
said advances together with any interest thereon or other charges as
provided in the Loan Documents, and the balance, if any, shall be applied
in payment of any installment then due. The entire remaining unpaid
balance of principal of this Note, all interest accrued thereon and all
other sums payable hereunder or under the Loan Documents (collectively,
the "Debt") shall be due and payable in full on the Maturity Date.
(b) In the event that the Maker does not prepay the entire principal
balance of this Note and any other amounts outstanding on or before the
Reset Date, the following subparagraphs shall also apply:
(i) From and after the Reset Date, interest shall accrue on
the unpaid principal balance from time to time outstanding on this
Note at the Revised Interest Rate. Subject to the provisions of this
subparagraph (b), Maker shall continue to make payments in the
Monthly Amount on each Payment Date. Each Monthly Amount paid on and
after the Reset Date shall be applied first to the payment of
interest computed at the Initial Interest Rate with the remainder of
the Monthly Amount applied to the reduction of the outstanding
principal balance of this Note. Interest accrued at the Revised
Interest Rate and not paid pursuant to the preceding sentence shall
be deferred and added to the Debt and shall earn interest at the
Revised Interest Rate to the extent permitted by applicable law
(such accrued interest is hereafter defined as "Accrued
3
<PAGE> 4
Interest"). All of the Debt, including Accrued Interest, shall be
due and payable at the Maturity Date.
(ii) Maker shall pay on the Reset Date and on each Payment
Date thereafter up to and including the Maturity Date the following
payments from the Rents (as defined in the Mortgage) received on or
before such day (but not before the Reset Date), in the listed order
of priority:
(1) First to payment of interest accruing at the Default
Rate, and late payment charges, if any;
(2) Second, to payment of the amounts due pursuant to
Section 8(a) of the Mortgage;
(3) Third, to payment of the Monthly Amount;
(4) Fourth, to payment of Monthly Cash Expenses (defined
in paragraph 18 below) pursuant to the terms and conditions of the
related approved Annual Budget (defined in paragraph 18, below);
(5) Fifth, to payment of Extraordinary Expenses (defined
in paragraph 18, below) approved by Payee, if any;
(6) Sixth, to payments to the Payee to be applied
against the outstanding principal due under this Note until such
principal amount is paid in full;
(7) Seventh, to payments to the Payee for Accrued
Interest (which shall not be duplicative of amounts payable in
clause (6) hereof;
(8) Eighth, to payments to the Payee of any other
amounts then due and payable under the Loan Documents; and
(9) Lastly, to payment to the Maker of any excess
amounts.
(c) Amounts due on this Note shall be payable, without any
counterclaim, setoff or deduction whatsoever, at the office of Payee or
its agent or designee at the address set forth in Exhibit 1 or at such
other place as Payee or its agent or designee may from time to time
designate in writing.
2. This Note is secured by (i) a Consolidated, Amended and Restated
Mortgage, Security Agreement, Financing Statement, Fixture Filing and Assignment
of Leases, Rents and Security Deposits, of even date herewith, from Maker to
Payee, recorded in
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<PAGE> 5
the Recorder's Office of New York County, New York and in the Office of the
County Recorder of Orange County, Florida (the "Mortgage") and (ii) an Amended
and Restated Assignment of Rents and Leases of even date herewith from Maker to
Payee, recorded in the above referenced recording offices (the "Assignment ").
The Mortgage, Assignment and any other instrument given at any time to secure
this Note are hereinafter collectively called the "Loan Documents."
3. Maker shall have no right to prepay the principal of this Note in
full or in part at any time prior to the Reset Date except as hereinafter set
forth in this paragraph 3. This Note may be prepaid in whole, but not in part,
in the event the Loan secured hereby has not become an asset of a Securitization
as of the first anniversary of the Closing Date. Such prepayment shall be made
upon not less than sixty (60) days' prior written notice to Payee, on a Payment
Date (such date of prepayment shall hereinafter be referred to as the
"Prepayment Date") and shall be subject to a prepayment premium calculated as
specified in Appendix 1 (but in no event less than one percent (1%) of the
portion of the principal amount of this Note) ("Prepayment Premium"). Maker's
right to prepay shall cease upon notification by Payee that the Loan will become
an asset of a Securitization, which shall occur within sixty (60) days of
Payee's notice, or Maker's prepayment right shall be reinstated; provided,
however, Payee shall have the ability to extend such period for an additional
(60) day period upon notice to Maker given no later than the forty-fifth (45th)
day of the initial period, provided that Payee shall be continuing to pursue a
Securitization during such additional period. This Note may also be prepaid,
without premium or penalty, during the term of the Loan, as a result of Payee's
application of proceeds paid in connection with a casualty or condemnation of
the Property. Maker agrees to pay a Prepayment Premium upon an acceleration of
this Note in accordance with its terms and the terms of the Loan Documents. A
tender of payment of the amount necessary to pay and satisfy the entire unpaid
principal balance of this Note or any portion thereof at any time after an Event
of Default under the Mortgage or an acceleration by Payee of the indebtedness
evidenced hereby, whether such payment is tendered voluntarily, during or after
foreclosure of the Mortgage, or pursuant to realization upon other security,
shall constitute a purposeful evasion of the prepayment terms of this Note,
shall be deemed to be a voluntary prepayment hereof, and Maker shall be required
to pay the prepayment premium as described above. Partial prepayments of
principal shall not change the Payment Dates or amounts of subsequent monthly
installments, unless Payee shall otherwise agree in writing.
4. If Maker defaults in the payment of any installment of principal
and interest on the date on which it shall fall due or in the performance of any
of the agreements, conditions, covenants, provisions or stipulations contained
in this Note or in the Loan Documents, and if such default shall continue beyond
any applicable notice or grace period provided for in the Mortgage so as to
constitute an Event of Default thereunder, then Payee, at its option and without
further notice to Maker, may declare immediately due and payable the
5
<PAGE> 6
entire unpaid principal balance of this Note, together with interest thereon at
an annual rate after the date of such default equal to the Default Rate,
together with all sums due from Maker under the Loan Documents, anything herein
or in the Loan Documents to the contrary notwithstanding. The foregoing
provision shall not be construed as a waiver by Payee of its right to pursue any
other remedies available to it under the Mortgage, this Note or any other
Security Document, nor shall it be construed to limit in any way the application
of the Default Rate. Any payment hereunder may be enforced and recovered in
whole or in part at such time by one or more of the remedies provided to Payee
in this Note or in the Loan Documents. In the event that: (i) this Note or any
Security Document is placed in the hands of an attorney for collection or
enforcement or is collected or enforced through any legal proceeding; (ii) an
attorney is retained to represent Payee in any bankruptcy, reorganization,
receivership, or other proceedings affecting creditors' rights and involving a
claim under this Note or any Security Document; (iii) an attorney is retained to
protect or enforce the lien of the Mortgage or any Security Document; or (iv) an
attorney is retained to represent Payee in any other proceedings whatsoever in
connection with this Note, the Mortgage, any of the Loan Documents or any
portion of the Mortgaged Property subject thereto, then Maker shall pay to Payee
all reasonable attorney's fees, costs and expenses incurred in connection
therewith, including costs of appeal, together with interest on any judgment
obtained by Payee at the Default Rate or at the rate permitted by applicable
law.
5. If Maker defaults in the payment of any monthly installment on
the Payment Date and such default is not cured within ten (10) days, then Maker
shall pay to Payee a late payment charge in an amount equal to five percent (5%)
of the amount of the installment not paid as aforesaid. Said late charge
payments, if payable, shall be secured by the Mortgage and the other Loan
Documents, shall be payable without notice or demand by Payee, and are
independent of and have no effect upon the rights of Payee under paragraph 4
above. No late charge will be assessed on principal payable on the Maturity
Date.
6. Maker and all endorsers, sureties and guarantors hereby jointly
and severally waive all applicable exemption rights, valuation and appraisement,
presentment for payment, demand, notice of demand, notice of nonpayment or
dishonor, protest and notice of protest of this Note, and all other notices in
connection with the delivery, acceptance, performance, default or enforcement of
the payment of this Note. Maker and all endorsers, sureties and guarantors
consent to any and all extensions of time, renewals, waivers or modifications
that may be granted by Payee with respect to the payment or other provisions of
this Note and to the release of the collateral or any part thereof, with or
without substitution, and agree that additional makers, endorsers, guarantors or
sureties may become parties hereto without notice to them or affecting their
liability hereunder.
7. Payee shall not be deemed, by any act of omission or commission,
to have waived any of its rights or remedies hereunder unless such waiver is in
writing and signed by Payee, and then only to the extent specifically set forth
in writing. A waiver of one
6
<PAGE> 7
event shall not be construed as continuing or as a bar to or waiver of any right
or remedy to a subsequent event.
8. This Note has been negotiated, executed and delivered in the
State of New York and shall be governed by and construed in accordance with the
laws of the State of New York (the "State").
9. The parties hereto intend and believe that each provision in this
Note comports with all applicable law. However, if any provision in this Note is
found by a court of law to be in violation of any applicable law, and if such
court should declare such provision of this Note to be unlawful, void or
unenforceable as written, then it is the intent of all parties hereto that such
provision shall be given full force and effect to the fullest possible extent
that is legal, valid and enforceable, that the remainder of this Note shall be
construed as if such unlawful, void or unenforceable provision were not
contained therein, and that the rights, obligations and interest of Maker and
the holder hereof under the remainder of this Note shall continue in full force
and effect; provided, however, that if any provision of this Note which is found
to be in violation of any applicable law concerns the imposition of interest
hereunder, the rights, obligations and interests of Maker and Payee with respect
to the imposition of interest hereunder shall be governed and controlled by the
provisions of the following paragraph.
10. It being the intention of Payee and Maker to comply with the
laws of the State with regard to the rate of interest charged hereunder, it is
agreed that, notwithstanding any provision to the contrary in this Note, the
Mortgage, or any of the other Loan Documents, no such provision, including
without limitation any provision of this Note providing for the payment of
interest or other charges, shall require the payment or permit the collection of
any amount ("Excess Interest") in excess of the maximum amount of interest
permitted by law to be charged for the use or detention, or the forbearance in
the collection, of all or any portion of the indebtedness evidenced by this
Note. If any Excess Interest is provided for, or is adjudicated to be provided
for, in this Note, the Mortgage, or any of the other Loan Documents, then in
such event:
(i) the provisions of this paragraph shall govern;
(ii) Maker shall not be obligated to pay any Excess Interest;
(iii) any Excess Interest that Payee may have received
hereunder shall, at the option of Payee, be (x) applied as a credit
against the unpaid principal balance then due under this Note,
accrued and unpaid interest thereon not to exceed the maximum amount
permitted by law, or both, (y) refunded to the payor thereof or (z)
any combination of the foregoing;
7
<PAGE> 8
(iv) the applicable interest rate or rates provided for herein
shall be automatically subject to reduction to the maximum lawful
rate allowed to be contracted for in writing under the applicable
usury laws of the aforesaid State, and this Note, the Mortgage and
the other Loan Documents shall be deemed to have been, and shall be,
reformed and modified to reflect such reduction in such interest
rate or rates; and
(v) Maker shall not have any action or remedy against Payee
for any damages whatsoever or any defense to enforcement of this
Note, the Mortgage or any other Security Document arising out of the
payment or collection of any Excess Interest (provided such Excess
Interest is paid as set forth above).
11. Upon any endorsement, assignment, or other transfer of this Note
by Payee or by operation of law, the term "Payee," as used herein, shall mean
such endorsee, assignee, or other transferee or successor to Payee then becoming
the holder of this Note. This Note shall inure to the benefit of Payee and its
successors and assigns and shall be binding upon the undersigned and its
successors and assigns. The term "Maker" as used herein shall include the
respective successors and assigns, legal and personal representatives,
executors, administrators, devisees, legatees and heirs of Maker.
12. Any notice, demand or other communication which any party may
desire or may be required to give to any other party shall be in writing and
shall be given as provided in the Mortgage.
13. To the extent that Maker makes a payment or Payee receives any
payment or proceeds for Maker's benefit, which are subsequently invalidated,
declared to be fraudulent or preferential, set aside or required to be repaid to
a trustee, debtor in possession, receiver, custodian or any other party under
any bankruptcy law, common law or equitable cause, then, to such extent, the
obligations of Maker hereunder intended to be satisfied shall be revived and
continue as if such payment or proceeds had not been received by Payee.
14. Maker shall execute and acknowledge (or cause to be executed and
acknowledged) and deliver to Payee all documents, and take all actions,
reasonably required by Payee from time to time to confirm the rights created or
now or hereafter intended to be created under this Note and the Loan Documents,
to protect and further the validity, priority and enforceability of this Note
and the Loan Documents, to subject to the Loan Documents any property of Maker
intended by the terms of any one or more of the Loan Documents to be encumbered
by the Loan Documents, or otherwise carry out the purposes of the Loan Documents
and the transactions contemplated thereunder; provided, however, that no such
further actions, assurances and confirmations shall increase Maker's obligations
under this Note.
8
<PAGE> 9
15. No modification, amendment, extension, discharge, termination or
waiver (a "Modification") of any provision of this Note, or any one or more of
the other Loan Documents, nor consent to any departure by Maker therefrom, shall
in any event be effective unless the same shall be in a writing signed by the
party against whom enforcement is sought, and then such waiver or consent shall
be effective only in the specific instance, and for the purpose, for which
given. Except as otherwise expressly provided herein, no notice to, or demand
on, Maker shall entitle Maker to any other or future notice or demand in the
same, similar or other circumstances. Payee does not hereby agree to, nor does
Payee hereby commit itself to, enter into any Modification.
16. Maker hereby expressly and unconditionally waives, in connection
with any suit, action or proceeding brought by Payee on this Note, any and every
right it may have to (a) a trial by jury, (b) interpose any counterclaim therein
(other than a counterclaim which if not asserted in the suit, action or
proceeding brought by Payee on this Note could be barred) and (c) have the same
consolidated with any other or separate suit, action or proceeding.
17. Notwithstanding anything in this Note, the Mortgage or the other
Loan Documents, no personal liability shall be asserted or enforceable against
(i) Maker, (ii) any Affiliate of Maker, (iii) any Person owning directly or
indirectly, any legal or beneficial interest in Maker or any Affiliate of Maker,
or (iv) any partner, principal, officer, controlling person, beneficiary,
trustee, advisor, shareholder, employee, agent, Affiliate or director of any
Persons described in clauses (i) through (iii) above (collectively, the
"Exculpated Parties") by Payee in respect of the Obligations, this Note, the
Mortgage or any other Loan Document, or the making, issuance or transfer
thereof, all such liability, if any, being expressly waived by Payee, and each
successive holder of this Note shall accept the Mortgage and this Note upon the
express condition of this provision and limitation that in the case of the
occurrence and continuance of an Event of Default, Payee's remedies in its sole
discretion shall be any or all of:
(1) Foreclosure of the lien of the Mortgage in accordance with
the terms and provisions set forth in the Mortgage;
(2) Action against any other security at any time given to
secure the payment of this Note and under the other Loan Documents; and
(3) Exercise of any other remedy set forth in the Mortgage or
any other Loan Document.
The lien of any judgment against Maker and any proceeding instituted
on, under or in connection with this Note or the Mortgage, or both, shall not
extend to any property now or hereafter owned by Maker or any Exculpated Party
other than the Net Operating Income from, and the ownership interest of Maker
in, the Mortgaged Property and the other security for the payment of the
Mortgage or this Note.
9
<PAGE> 10
Notwithstanding anything to the contrary in this Note or any of the
Loan Documents, Payee shall not be deemed to have waived any right which Payee
may have under Section 506(a), 506(b), 1111(b) or any other provisions of the
Bankruptcy Code to file a claim for the full amount of the Debt evidenced by
this Note or to require that all collateral shall continue to secure all of the
Debt owing to Payee in accordance with the Loan Documents.
Notwithstanding anything in this Note to the contrary, there shall
at no time be any limitation on Maker's liability for the payment to Payee of:
(1) condemnation awards or insurance proceeds which Maker has received and to
which Payee is entitled pursuant to the terms of this Note or any of the Loan
Documents to the extent the same have not been applied toward payment of sums
due under this Note or the Mortgage, or used for the repair or replacement of
the Mortgaged Property pursuant to the Mortgage, or (2) all loss, damage and
expense as incurred by Payee and arising from any fraud, or intentional
misrepresentation of Maker, or (3) any misappropriation of Rents or security
deposits by Maker or any Affiliate of Maker after an Event of Default, to the
extent of such misappropriation.
18. Maker has executed the Cash Collateral Agreement (as defined in
the Mortgage). For each calendar year commencing on the first day of January
following the Reset Date and for each calendar year thereafter, the Maker shall
submit to the Payee for the Payee's written approval an annual budget (an
"Annual Budget") not later than sixty (60) days prior to the commencement of
such calendar year, in form satisfactory to Payee setting forth in reasonable
detail budgeted monthly operating income and monthly operating capital and other
expenses for the Mortgaged Property. Each Annual Budget shall contain, among
other things, limitations on management fees, third party service fees, and
other expenses as the Maker may reasonably determine. Payee shall have the right
to approve such Annual Budget and in the event that Payee objects to the
proposed Annual Budget submitted by Maker, Payee shall advise Maker of such
objections within fifteen (15) days after receipt thereof (and deliver to Maker
a reasonably detailed description of such objections) and Maker shall within
three (3) days after receipt of notice of any such objections revise such Annual
Budget and resubmit the same to Payee. Payee shall advise Maker of any
objections to such revised Annual Budget within ten (10) days after receipt
thereof (and deliver to Maker a reasonably detailed description of such
objections) and Maker shall promptly revise the same in accordance with the
process described in this subparagraph until the Payee approves an Annual
Budget, provided, however, that if Payee shall not advise Maker of its
objections to any proposed Annual Budget within the applicable time period set
forth in this paragraph, then such proposed Annual Budget shall be deemed
approved by Payee. Each such Annual Budget approved by Payee in accordance with
terms hereof shall hereinafter be referred to as an "Approved Annual Budget."
Until such time that Payee approves a proposed Annual Budget, the most recently
Approved Annual Budget shall apply provided that, such Approved Annual Budget
shall be adjusted to reflect actual increases in real estate taxes, insurance
premiums and utilities expenses.
In the event that the Maker must incur during any calendar year
after the Reset Date an extraordinary operating expense or capital expense not
set forth in the Annual Budget
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<PAGE> 11
(each an, "Extraordinary Expense"), the Maker shall promptly deliver to Payee a
reasonably detailed explanation of such proposed Extraordinary Expense for the
Payee's approval. For the purposes of this Note, "Cash Expenses" shall mean, for
any period, the operating expenses for the operation and maintenance of the
Mortgaged Property as set forth in an Approved Annual Budget to the extent that
such expenses are actually incurred by Maker minus Tax and Insurance Deposits
(as defined in the Mortgage) for such period.
19. Any legal action or proceeding with respect to this Note and any
action for enforcement of any judgment in respect thereof may be brought in the
courts of the State of New York or of the United States of America for the
Southern District of New York, and, by execution and delivery of this Note,
Maker hereby accepts for itself and in respect of its property, generally and
unconditionally, the non-exclusive jurisdiction of the aforesaid courts and
appellate courts from any thereof. Maker irrevocably consents to the service of
process out of any of the aforementioned courts in any such action or proceeding
by service of process upon Maker at the address for notices set forth herein.
Maker hereby irrevocably waives any objection which it may now or hereafter have
to the laying of venue of any of the aforesaid actions or proceedings arising
out of or in connection with this Maker brought in the courts referred to above
and hereby further irrevocably waives and agrees not to plead or claim in any
such court that any such action or proceeding brought in any such court has been
brought in an inconvenient forum. Nothing herein shall affect the right of Payee
to serve process in any other manner permitted by law or to commence legal
proceedings or otherwise proceed against Maker in any other jurisdiction.
20. This Note may be executed in counterparts, which together shall
constitute one and the same instrument.
21. Payee shall maintain a register, setting forth the name of the
holder or holders of this Note. From time to time, at the request of Maker,
Payee shall inform Maker of the name or name of such holder(s).
22. Maker and Payee agree that the Applicable Interest Rate computed
after the Reset Date in accordance with the provisions hereof shall not exceed
the Maximum Lawful Rate (as hereinafter defined). Maker and Payee agree that the
Default Rate hereunder shall not exceed the Maximum Lawful Rate, and in no event
shall the late charges set forth in paragraph 5 hereof, together with all other
interest on the indebtedness evidenced by this Note, exceed the Maximum Lawful
Rate. Maker and Payee agrees that if the Prepayment Premium is deemed to be
interest under applicable law, in no event shall interest in excess of the
Maximum Lawful Rate be due or payable. As used herein, "Maximum Lawful Rate
"means the maximum rate (or, if the context so permits or requires, an amount
calculated at such rate) of interest that, at the time in question, would not
cause the interest charged on this Note at such time to exceed the maximum
amount that Payee would be allowed to contract for, charge, take, reserve or
receive under applicable law after taking into account, to the extent required
by applicable law, any and all relevant payments, fees or charges under this
Note or the other Loan Documents. If under applicable law there is no legal
limitation on the amount
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<PAGE> 12
or rate of interest that may be charged on amounts outstanding under this Note,
there shall be no Maximum Lawful Rate, notwithstanding any reference thereto
herein or in any of the other Loan Documents. This paragraph shall control over
any contrary provision set forth in this Note or in the other Loan Documents.
23. THIS NOTE IS GIVEN AS A CONSOLIDATION, AMENDMENT AND RESTATEMENT
OF THE ORIGINAL NOTES AND THE SUPPLEMENTAL NOTE. FLORIDA DOCUMENTARY STAMP TAX
AND INTANGIBLE TAX IN THE PROPER AMOUNTS, WITH RESPECT TO THE ORIGINAL NOTES,
HAVE BEEN PAID IN FULL. THE ORIGINAL NOTES SHALL IN THEIR ENTIRETY BE SUPERSEDED
BY THIS NOTE. THIS NOTE CONSOLIDATES, AMENDS AND RESTATES THE ORIGINAL NOTES AND
THE SUPPLEMENTAL NOTE BUT DOES NOT ENLARGE THE PRINCIPAL INDEBTEDNESS ALLOCABLE
TO THE PROPERTY LOCATED IN THE STATE OF FLORIDA.
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<PAGE> 13
IN WITNESS WHEREOF, Maker and Payee have caused this Consolidated,
Amended and Restated Mortgage Note to be executed and delivered as of the day
and year first above written.
MAKER:
Magnolia Associates, LTD.,
a Florida limited partnership
By: Tower Orlando GP LLC,
a Delaware limited liability company,
its general partner
By: Tower QRS No. 3 Corp.,
a Delaware corporation,
its managing member
By: /s/ Lawrence H. Feldman
---------------------------------------
Name: Lawrence H. Feldman
Title: President
286 Madison, L.P.,
a New York limited partnership
By: Tower Madison GP LLC,
a Delaware limited liability company,
its general partner
By: Tower QRS No. 4 Corp.,
a Delaware corporation,
its managing member
By: /s/ Lawrence H. Feldman
---------------------------------------
Name: Lawrence H. Feldman
Title: President
<PAGE> 14
290 Madison, L.P.,
a New York limited partnership
By: Tower Madison GP LLC,
a Delaware limited liability company,
its general partner
By: Tower QRS No. 4 Corp.,
a Delaware corporation,
its managing member
By: /s/ Lawrence H. Feldman
---------------------------------------
Name: Lawrence H. Feldman
Title: President
292 Madison, L.P.,
a New York limited partnership
By: Tower Madison GP LLC,
a Delaware limited liability company,
its general partner
By: Tower QRS No. 4 Corp.,
a Delaware corporation,
its managing member
By: /s/ Lawrence H. Feldman
---------------------------------------
Name: Lawrence H. Feldman
Title: President
<PAGE> 15
PAYEE:
Merrill Lynch Mortgage Capital Inc.
a Delaware corporation
By: /s/ Lawrence Miller
---------------------------------------
Name: Lawrence Miller
Title: Director
<PAGE> 16
APPENDIX 1
Calculation of Prepayment Premium
The prepayment premium shall be equal to the product of (i) a fraction
whose numerator is an amount equal to the portion of the principal balance of
this Note being prepaid and whose denominator is the entire outstanding
principal balance of this Note on the date of such prepayment (after subtracting
the amount of any scheduled principal payment due on such Payment Date),
multiplied by (ii) an amount equal to the remainder obtained by subtracting (x)
an amount equal to the entire outstanding principal balance of this Note as of
the date of such prepayment (after subtracting the amount of any scheduled
principal payment due on such Payment Date) from (y) the present value as of the
date of such prepayment of the remaining scheduled payments of principal and
interest on this Note (including any final installment of principal payable on
the Reset Date) determined by discounting such payments at the Discount Rate (as
hereinafter defined).
For purposes of this Note, "Discount Rate" shall mean the rate which, when
compounded monthly, is equivalent to the Treasury Rate, which for purposes of
this Appendix 1 shall mean, as of the date of such prepayment, the yield,
calculated by linear interpolation (rounded to the nearest one-thousandth of one
percent) of the yields of noncallable United States Treasury obligations with
terms (one longer and one shorter) most nearly approximating the period from the
date of such prepayment to the Reset Date, as determined by Payee on the basis
of Federal Reserve Statistical Release H.15 Selected Interest Rates under the
heading U.S. Governmental Security/Treasury Constant Maturities or other
recognized source of financial market information selected by Payee for the week
prior to the date of such prepayment.
<PAGE> 17
Schedule A
Assigned Notes
1. Promissory Note dated July 21, 1995 made, executed and delivered by East
Broadway 5151 Limited Partnership, a Delaware limited partnership,
Magnolia Associates, LTD., a Florida limited partnership, 286 Madison,
L.P., a New York limited partnership, 290 Madison, L.P., a New York
limited partnership, and 292 Madison, L.P., a New York limited partnership
("Borrower ") to General Electric Capital Corporation, a New York
corporation ("Lender") in the original principal amount of
$129,406,000.00, as amended by First Modification to Promissory Note
Agreement dated as of December 13, 1996 between Borrower and Lender, as
assigned to Midland Loan Services, L.P. ("Midland") by Allonge dated
October 16, 1997 (East Broadway 5151 Limited Partnership having been
released by Lender prior to assignment to Midland), as amended and
restated by Amended and Restated Mortgage Note dated October 16, 1997
made, executed and delivered by Maker for the benefit of Midland, and
simultaneously assigned to Payee by note endorsement attached thereto.
2. Consolidated Promissory Note A (1993 Restructuring) dated as of June 23,
1993 made by Tower 45 Associates Limited Partnership, as maker, to the
Bank of New York ("BONY"), as holder, in the original principal amount of
$115,000,000, as amended by the First Amendment (1997) to Consolidated
Promissory Note A (1993 Restructuring) dated as of January 1, 1997, as
assigned by Assignment of Loan Documents dated as of October 16, 1997 made
by BONY, as assignor, to Itochu Corporation, as assignee, as such Note was
reduced to the principal amount of $34,541,560.69 by Certificate of
Reduction dated as of October 16, 1997 made by BONY.
<PAGE> 18
Schedule B
Supplemental Note
Promissory Note dated as of the date hereof in the original principal amount of
$10,458,439.31 made by Magnolia Associates, LTD., a Florida limited partnership,
for the benefit of Payee.
18
<PAGE> 19
Schedule C
Monthly Amount
As of the Closing Date, the Monthly Amount of interest on the Principal
Amount shall be $607,884.83. As of December 1, 1999, the Monthly Amount of
interest and principal shall be $714,360.64.
<PAGE> 1
Exhibit 10.75
CONSOLIDATED, AMENDED AND RESTATED
FEE AND SUBLEASEHOLD MORTGAGE, SECURITY AGREEMENT,
FINANCING STATEMENT, FIXTURE FILING AND
ASSIGNMENT OF LEASES, RENTS AND SECURITY DEPOSITS
Dated as of November 26, 1997
from
MAGNOLIA ASSOCIATES, LTD.,
286 MADISON, L.P., 290 MADISON, L.P. and 292 MADISON, L.P.
having an address
c/o Tower Realty Operating Partnership, L.P.
120 West 45th Street, 24th floor
New York, New York 10036
as Mortgagor
to
MERRILL LYNCH MORTGAGE CAPITAL, INC.
having an address at
World Financial Center
North Tower
New York, New York 10281-1326
as Mortgagee
------------------------------------------------------------------------------
Prepared and drafted by and after recording, return to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Attn: Martha Feltenstein, Esq.
THIS CONSOLIDATED, AMENDED AND RESTATED MORTGAGE SECURITY AGREEMENT, FINANCING
STATEMENT, FIXTURE FILING AND ASSIGNMENT OF LEASES, RENTS AND SECURITY DEPOSITS
(THE "MORTGAGE") SECURES A CONSOLIDATED, AMENDED AND RESTATED MORTGAGE NOTE IN
THE PRINCIPAL AMOUNT OF ONE HUNDRED SEVEN MILLION DOLLARS ($107,000,000) WHICH
PROMISSORY NOTE HAS BEEN EXECUTED AND DELIVERED OUTSIDE OF THE STATE OF FLORIDA.
THIS MORTGAGE ENCUMBERS PROPERTY LOCATED IN THE STATES OF FLORIDA AND NEW YORK.
THE VALUE OF THE A REAL PROPERTY LOCATED IN THE STATE OF FLORIDA IS SIXTY ONE
MILLION DOLLARS ($61,000,000) AND RECOVERY AGAINST THE ORLANDO PROPERTY UNDER
THIS MORTGAGE HAS BEEN LIMITED TO FIFTY FOUR MILLION DOLLARS ($54,000,000).
FLORIDA DOCUMENTARY STAMP TAXES IN THE AMOUNT OF TWO HUNDRED FORTY FIVE THOUSAND
DOLLARS ($245,000,000) HAVE BEEN AFFIXED TO THE ORIGINAL MORTGAGE (AS DEFINED
HEREIN) RECORDED IN THE STATE OF FLORIDA BASED UPON A TAX BASE EQUAL TO THE
LIMITED AMOUNT OF RECOVERY AGAINST THE ORLANDO PROPERTY
<PAGE> 2
UNDER THIS MORTGAGE. FLORIDA INTANGIBLE PERSONAL PROPERTY TAXES HAVE BEEN PAID
ON THE ORIGINAL MORTGAGE RECORDED IN THE STATE OF FLORIDA IN THE AMOUNT OF ONE
HUNDRED TWENTY TWO THOUSAND DOLLARS ($122,000) UPON A TAX BASE EQUAL TO THE
VALUE OF THE ORLANDO PROPERTY.
v
<PAGE> 3
TABLE OF CONTENTS
1. Definitions............................................................ 8
2. Warranty............................................................... 28
3. Payment and Performance of Obligations Secured. ....................... 30
4. Negative Covenants..................................................... 30
5. Insurance.............................................................. 31
6. Condemnation and Insurance Proceeds.................................... 36
7. Impositions, Liens and Other Items..................................... 42
8. Funds for Taxes and Insurance.......................................... 44
9. License to Collect Rents............................................... 46
10. Security Agreement..................................................... 46
11. Transfers, Indebtedness and Subordinate Liens.......................... 48
12. Maintenance of Mortgaged Property; Alterations; Inspection; Utilities.. 51
13. Legal Compliance....................................................... 54
14. Books and Records, Financial Statements, Reports and Other Information. 55
15. Compliance with Leases and Agreements.................................. 57
16. Mortgagee's Right to Perform........................................... 59
17. Mortgagor's Existence; Organization and Authority...................... 59
18. Protection of Security; Costs and Expenses............................. 60
19. Management of the Mortgaged Property................................... 61
20. Remedies............................................................... 62
21. Application of Proceeds................................................ 68
i
<PAGE> 4
22. CERTAIN WAIVERS........................................................ 68
23. Notice of Certain Occurrences.......................................... 69
24. Trust Funds............................................................ 69
25. Taxation............................................................... 69
26. Notices................................................................ 70
27. No Oral Modification................................................... 70
28. Partial Invalidity..................................................... 70
29. Successors and Assigns................................................. 70
30. Governing Law.......................................................... 71
31. Certain Representations, Warranties and Covenants...................... 71
32. No Waiver.............................................................. 76
33. Non-Recourse Obligations............................................... 76
34. Further Assurances..................................................... 78
35. Estoppel Certificates.................................................. 78
36. Subleasehold Estate.................................................... 78
37. Indemnification by Mortgagor........................................... 80
38. Release of Property.................................................... 82
39. Rating Agency Monitoring............................................... 85
40. Environmental Matters.................................................. 86
41. Recourse Nature of Certain Indemnifications............................ 87
42. Counterparts........................................................... 88
43. Merger, Conversion, Consolidation or Succession to Business of
Mortgagee............................................................. 88
ii
<PAGE> 5
44. No Endorsement......................................................... 88
45. Intentionally Omitted.................................................. 88
46. Defeasance............................................................. 88
47. Defeasance Collateral Account.......................................... 91
48. Reserves............................................................... 92
49. Intentionally Omitted.................................................. 94
50. Liability of Mortgagee................................................. 95
51. Intentionally Omitted.................................................. 95
52. As to Property in Florida.............................................. 95
53. As to Property in New York............................................. 97
54. Intentionally Omitted.................................................. 99
55. Liability of Assignees of Mortgagee.................................... 99
56. Securitization......................................................... 99
57. Air Rights Lease...................................................... 105
EXHIBIT A Legal Description of Property
EXHIBIT B Environmental Reports
EXHIBIT C Subordination, Nondisturbance and Attornment Agreement
EXHIBIT D Original Mortgage
EXHIBIT E Additional Notes
EXHIBIT F Additional Mortgages
SCHEDULE 1 Allocated Loan Amounts
SCHEDULE 2 Operating Agreements
SCHEDULE 3 Special Assessments
SCHEDULE 4 Capital Expenditures
iii
<PAGE> 6
CONSOLIDATED, AMENDED AND RESTATED
FEE AND SUBLEASEHOLD MORTGAGE, SECURITY AGREEMENT,
FINANCING STATEMENT, FIXTURE FILING AND
ASSIGNMENT OF LEASES, RENTS AND SECURITY DEPOSITS
THIS CONSOLIDATED, AMENDED AND RESTATED FEE AND SUBLEASEHOLD
MORTGAGE, SECURITY AGREEMENT, FINANCING STATEMENT, FIXTURE FILING AND ASSIGNMENT
OF LEASES, RENTS AND SECURITY DEPOSITS (herein, together with all amendments and
supplements thereto, this "Mortgage"), dated as of the 26th day of November,
1997, is made by MAGNOLIA ASSOCIATES, LTD., a Florida limited partnership, 286
MADISON, L.P., 290 MADISON, L.P. and 292 MADISON, L.P., each a New York limited
partnership, and each limited partnership having an address c/o Tower Realty
Operating Partnership, L.P., 120 West 45th Street, 24th floor, New York, New
York 10036 (collectively referred to herein as "Mortgagor"), to MERRILL LYNCH
MORTGAGE CAPITAL INC., a Delaware corporation, having an address at World
Financial Center, North Tower, New York, New York 10281-1326, together with its
successors and assigns, "Mortgagee").
W I T N E S S E T H :
WHEREAS, Mortgagor is the record and beneficial owner of a fee
simple interest in those certain properties located on and comprising the land
described in Exhibit "A-1 and A-2" attached hereto (the "Initial Land") which
properties are encumbered by the Amended and Restated Mortgage, Security
Agreement, Financing Statement, Fixture Filing and Assignment of Leases, Rents
and Security Deposits dated as of October 16, 1997 made by Mortgagor to Midland
Loan Services, L.P., as mortgagee, and assigned simultaneously therewith to
Mortgagee (the "Original Mortgage"), which mortgage is more particularly
described on Exhibit "D" attached hereto and securing that certain Amended and
Restated Mortgage Note in the original principal amount of Fifty Four Million
Dollars ($54,000,000) (the "Original Note");
WHEREAS, Mortgagor is the record and beneficial owner of a fee
simple interest (the "Tower Fee Estate ") and ground subleasehold interest in
the property (the "Subleasehold Estate") comprising and located on the land
described in Exhibit "A-3" attached hereto (the "Additional Land", collectively
with the Initial Land, the "Land");
WHEREAS, Mortgagor is the owner of a leasehold interest in certain
development rights (the "Air Rights") appurtenant to the property located on the
land described in Exhibit "A-4" attached hereto (the "Air Rights Parcel");
<PAGE> 7
WHEREAS, by Mortgage Modification and Spreader Agreement dated as of
the date hereof, the Original Mortgage was spread over the whole of the
Additional Property and the Air Rights Parcel;
WHEREAS, Mortgagor has heretofore executed and delivered those
certain promissory notes more particularly described on Exhibit "E" attached
hereto (the "Additional Notes") secured by those certain mortgages more
particularly described on Exhibit "F" attached hereto (the "Additional
Mortgages");
WHEREAS, the Original Note and the Additional Notes have been
consolidated, amended and restated by Mortgagor and Mortgagee pursuant to the
Consolidated, Amended and Restated Mortgage Note (together with all amendments,
modifications, supplements, restatements, substitutions and replacements thereof
and thereto, the "Note"), which Note evidences indebtedness in the original
principal amount of One Hundred Seven Million Dollars ($107,000,000) (the
"Loan"). The Note shall be payable as specified therein, with a maturity date of
November 1, 2027 or if such date is not a Business Day, on the next preceding
Business Day (the "Maturity Date") or such earlier date as may be required under
the terms of the Note;
WHEREAS, in connection with the consolidation, amendment and
restatement of the Note, Mortgagor and Mortgagee hereby desire to consolidate,
amend and restate the Original Mortgage and the Additional Mortgages in their
entirety to form a single lien on the Mortgaged Property in the amount equal to
the Loan Amount, securing the principal amount due and owing under the Note; and
WHEREAS, Mortgagor and Mortgagee intend these recitals to be a
material part of this Mortgage.
NOW, THEREFORE, in consideration of the Loan to Mortgagor evidenced
by the Note and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Mortgagor and Mortgagee hereby
agree that the Original Mortgage and Additional Mortgages are hereby
consolidated, amended and restated as follows:
TO SECURE:
(i) payment and performance of all covenants, conditions,
liabilities and obligations of Mortgagor to Mortgagee contained in, and
payment of the indebtedness evidenced by, the Note plus all interest
payable thereunder; and
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<PAGE> 8
(ii) payment and performance of all covenants, conditions,
liabilities and obligations contained in this Mortgage and any extensions,
renewals or modifications hereof; and
(iii) payment and performance of all covenants, conditions,
liabilities and obligations of Mortgagor contained in the Amended and
Restated Assignment of Leases, Rents and Security Deposits, dated as of
the date hereof (together with any extensions, renewals or modifications
thereof, the "Assignment of Leases"), between Mortgagor, as assignor, and
Mortgagee, as assignee and the Amended and Restated Cash Collateral
Account, Security, Pledge and Assignment Agreement, dated as of the date
hereof (together with any extensions, renewals or modifications thereof,
the "Cash Collateral Agreement"), among Magnolia Associates, LTD., as
pledgor, The Chase Manhattan Bank, as agent, and Mortgagee, as pledgee;
and
(iv) payment and performance of all covenants, conditions,
liabilities and obligations of Mortgagor contained in each of the other
Loan Documents (as defined below); and
(v) without limiting the foregoing, payment of all
indebtedness, liabilities, and amounts from time to time incurred by
Mortgagee pursuant to the Note, this Mortgage or such other Loan
Documents, even if the aggregate amount of the monetary obligation
outstanding at any one time exceeds the face amount of the Note (all of
the foregoing indebtedness, monetary liabilities and obligations set forth
in clauses (i)-(iv) above and this clause (v), collectively, the
"Indebtedness"); and
(vi) payment of the Indebtedness together with the payment and
performance of all other covenants, conditions, liabilities and
obligations described and set forth in clauses (i)-(v) above and in this
clause (vi), collectively, the "Obligations."
NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED HEREIN, THE
MAXIMUM PRINCIPAL INDEBTEDNESS SECURED BY THE LIEN OF THIS MORTGAGE (i) WITH
RESPECT TO THE PROPERTY DESCRIBED IN EXHIBIT A-1 (THE "ORLANDO PROPERTY") IS
FIFTY FOUR MILLION DOLLARS ($54,000,000), (ii) WITH RESPECT TO THE PROPERTY
DESCRIBED IN EXHIBIT A-2 (THE "MADISON PROPERTIES") IS THIRTY TWO MILLION
DOLLARS ($32,000,000), AND (iii) WITH RESPECT TO THE PROPERTY DESCRIBED IN
EXHIBIT A-3 AND EXHIBIT A-4 ("TOWER 45") IS SEVENTY SEVEN MILLION DOLLARS
($77,000,000).
3
<PAGE> 9
GRANTING CLAUSES
NOW, THEREFORE, THIS MORTGAGE WITNESSETH: that Mortgagor, in
consideration of the premises, the Indebtedness secured by the Note, and other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged (a) has mortgaged, warranted, granted, bargained, sold, alienated,
released, confirmed, conveyed, pledged and assigned and (b) by these presents
does hereby irrevocably grant and create a first priority Lien (as defined
below), subject to the Permitted Encumbrances and the provisions hereof and of
the other Loan Documents, on and security interest in, and does hereby MORTGAGE,
WARRANT, GRANT A SECURITY INTEREST IN, GRANT, BARGAIN, SELL, ALIENATE, RELEASE,
CONFIRM, CONVEY, PLEDGE, ASSIGN, TRANSFER AND SET OVER TO MORTGAGEE, WITH POWER
OF SALE AND RIGHT OF ENTRY AND POSSESSION, for the benefit and use of Mortgagee
and its successors and assigns forever, in the trusts created hereby all its
estate, right, title and interest now owned or hereafter acquired in, to and
under any and all the property (collectively, the "Mortgaged Property")
described in the following Granting Clauses:
(A) the Land;
(B) the Subleasehold Estate and all right, title and interest
of Mortgagor in, to and under the Belasco Sublease, with all rights of
use, occupancy and enjoyment and in and to all rents, income and profits
arising from or pursuant to the Belasco Sublease together with all
amendments, extensions, renewals and modifications of the Belasco Sublease
and all credits, deposits, options and privileges of Mortgagor as tenant
under the Belasco Sublease including, without limitation, the right to
renew or extend the Belasco Sublease for a succeeding term or terms and
all rights of Mortgagor under the Belasco Sublease in connection with any
bankruptcy or insolvency proceeding of the lessor under the Belasco
Sublease, if any;
(C) the Air Rights and all right, title and interest of
Mortgagor in, to and under the Air Rights Lease, with all rights of use
and enjoyment of the development rights granted therein and in and to all
rents, income and profits arising from or pursuant to the Air Rights Lease
together with all amendments, extensions, renewals and modifications of
the Air Rights Lease and all credits, deposits, options and privileges of
Mortgagor as tenant under the Air Rights Lease including, without
limitation, the right to renew or extend the Air Rights Lease for a
succeeding term or terms and all rights of Mortgagor under the Air Rights
Lease in connection with any bankruptcy or insolvency proceeding of the
lessor under the Air Rights Lease, if any;
4
<PAGE> 10
(D) all of Mortgagor's right, title and interest in and to the
buildings, foundations, structures, improvements and fixtures now or
hereafter located or erected on the Land (the "Improvements");
(E) all of Mortgagor's right, title and interest, if any, in
and to (i) all streets, avenues, roads, alleys, passages, places,
sidewalks, strips and gores of land and ways, existing or proposed, public
or private, adjacent to the Land, and all reversionary rights with respect
to the vacation of said streets, avenues, roads, alleys, passages, places,
sidewalks and ways in the land lying thereunder, (ii) all air, lateral
support, drainage, oil, gas and mineral rights, options to purchase or
lease, waters, water courses and riparian rights now or hereafter
pertaining to or used in connection with the Land and/or Improvements,
(iii) all and singular, the tenements, hereditaments, rights of way,
easements, appendages and appurtenances and property now or hereafter
belonging or in any way appertaining to the Land, and (iv) all estate,
right, title, claim or demand whatsoever, either at law or in equity, in
possession or expectancy, of, in and to the Land (collectively, the
"Appurtenances");
(F) all of Mortgagor's right, title and interest in and to all
of the machinery, appliances, apparatus, equipment, fittings, fixtures,
materials, articles of personal property and goods of every kind and
nature whatsoever, and all additions to and renewals and replacements
thereof, and all substitutions therefor, now or hereafter affixed to,
attached to, placed upon or located upon or in the Land, or any part
thereof, and used in connection with the use, ownership, management,
maintenance, enjoyment or operation of the Land in any present or future
occupancy or use thereof and now owned or leased or hereafter owned or
leased (to the extent permitted by the applicable Lease) by Mortgagor
including, but without limiting the generality of the foregoing, all
heating, lighting, laundry, cooking, incinerating, loading, unloading and
power equipment, boilers, dynamos, stokers, engines, pipes, pumps, tanks,
motors, conduits, switchboards, plumbing, lifting, cleaning, fire
prevention, fire extinguishing, refrigerating, ventilating, and
communications apparatus, air cooling and air conditioning apparatus,
building materials and equipment, elevators, escalators, carpeting,
shades, draperies, awnings, screens, doors and windows, blinds, stoves,
ranges, refrigerators, dishwashers, cabinets, office equipment, furniture
and furnishings, partitions, ducts and compressors (other than equipment
and personal property of tenants of the Land or the Improvements, or any
part thereof) (hereinafter collectively called "Building Equipment"), and
Mortgagor agrees to execute and deliver, from time to time, such further
instruments (including, without limitation, any financing statements under
the Uniform Commercial Code of the applicable State in which a Property is
located (the "UCC")) as may be reasonably
5
<PAGE> 11
requested by Mortgagee to confirm the lien of this Mortgage on any
Building Equipment or any Intangible;
All such right, title and interest of Mortgagor in and to each of
the five (5) distinct parcels or sets of parcels of the Land and Mortgagor's
interest in and to the Improvements and Building Equipment located thereon and
such other property with respect thereto described in the foregoing Granting
Clauses is herein called a "Property" and all such Properties are herein
collectively called the "Properties".
(G) all of Mortgagor's right, title and interest as lessor or
licensor, as the case may be, in, to and under all leases, underlettings,
concession agreements and licenses of the Properties, or any part thereof,
now existing or hereafter entered into by Mortgagor including, without
limitation, any cash and securities deposited thereunder (collectively,
the "Leases"), the grant of such cash and securities hereunder being
expressly subject to the provisions of the applicable Leases, and all of
Mortgagor's right, title and interest, subject to the provisions of
Section 9, in the right to receive and collect the revenues, income,
rents, issues, profits, royalties and other benefits payable under any of
the Leases or otherwise arising from the use or enjoyment of all or any
portion of the Properties (collectively, the "Rents");
(H) subject to the provisions of Section 6 hereof, all of
Mortgagor's right, title and interest in and to all proceeds, judgments,
claims, compensation, awards or payments hereafter made to Mortgagor for
the taking, whether permanent or temporary, by condemnation, eminent
domain, or for any conveyance made in lieu of such taking, of the whole or
any part of the Properties, including, without limitation, all proceeds,
judgments, claims, compensation awards or payments for changes of grade of
streets or any other injury to or decrease in the value of the Properties,
whether direct or consequential, which said awards and payments are hereby
assigned to Mortgagee, who is hereby authorized to collect and receive the
proceeds thereof and to give proper receipts and acquittances therefor,
and to apply the same toward the payment of the Indebtedness in such order
as Mortgagee may determine in accordance with the provisions of this
Mortgage without regard to the adequacy of Mortgagee's security hereunder
and notwithstanding the fact that the amount thereof may not then be due
and payable, and toward the payment of reasonable counsel fees, costs and
disbursements incurred by Mortgagee in connection with the collection of
such awards or payments; and Mortgagor hereby agrees, upon request, to
make, execute and deliver any and all further assignments and other
instruments sufficient for the purpose of confirming this assignment of
said proceeds, judgments, claims, compensation awards or payments to
Mortgagee, subject to
6
<PAGE> 12
Section 6 hereof, free, clear and discharged of any encumbrances of any
kind or nature whatsoever other than the Permitted Encumbrances;
(I) subject to the provisions of Section 6 hereof, all of
Mortgagor's right, title and interest in and to all unearned premiums paid
under insurance policies now or hereafter obtained by Mortgagor to the
extent the same insure the Properties and any other insurance policies
required to be maintained pursuant to Section 5 hereof to the extent the
same insure the Properties including, without limitation, liability
insurance policies and Mortgagor's interest in and to all proceeds of the
conversion and the interest payable thereon, voluntary or involuntary, of
the Mortgaged Property, or any part thereof, into cash or liquidated
claims including, without limitation, proceeds of casualty insurance,
title insurance (other than liability insurance) or any other insurance
maintained on or with respect to the Properties;
(J) all right, title and interest of Mortgagor in and to all
extensions, improvements, betterments, renewals, substitutes and
replacements of, and all additions and Appurtenances to, the Properties,
hereafter acquired by or released to Mortgagor or constructed, assembled
or placed by Mortgagor on the Properties, and all conversions of the
security constituted thereby; immediately upon such acquisition, release,
construction, assembling, placement or conversion, as the case may be, and
in each such case, to the extent permitted by law, without any further
mortgage, conveyance, assignment or other act by Mortgagor, any of such
extensions, improvements, betterments, renewals, substitutes and
replacements shall become subject to the Lien of this Mortgage as fully
and completely, and with the same effect, as though now owned by Mortgagor
and specifically described herein;
(K) all of Mortgagor's right, title and interest in, to and
under, to the extent the same may be encumbered or assigned by Mortgagor
pursuant to the terms thereof without occurrence of a breach of default
thereunder or a violation under applicable law, and without impairment of
the validity or enforceability thereof, (i) any Operating Agreements (as
defined below) and all contracts and agreements relating to the Properties
(other than the Leases), and other documents, books and records related to
the ownership and operation of the Properties; (ii) to the extent
permitted by law, all consents, licenses (including, to the extent
permitted by law, any licenses held by Mortgagor permitting the sale of
liquor at the Properties the transfer and/or assignment of which is
permitted by law without filing or other qualification), warranties,
guaranties, building permits and government approvals relating to or
required for the construction, completion, occupancy and operation of the
Properties; (iii) all plans and specifications for the construction of the
Improvements, including, without limitation, installations of
7
<PAGE> 13
curbs, sidewalks, gutters, landscaping, utility connections and all
fixtures and equipment necessary for the construction, operation and
occupancy of the Improvements; (iv) all such other contracts and
agreements (other than the Leases) from time to time executed by Mortgagor
relating to the ownership, leasing, construction, maintenance, operation,
occupancy or sale of the Properties, together with all rights of Mortgagor
to compel performance of the terms of such contracts and agreements; and
(v) subject to the terms of the Cash Collateral Agreement, the Accounts
(as defined below) and any funds in such Accounts from time to time (it
being understood that at such time as Mortgagor shall withdraw any amounts
from any Accounts in accordance with the provisions of the Cash Collateral
Agreement, the same shall cease to constitute part of the Mortgaged
Property);
(L) to the extent the same may be encumbered or assigned by
Mortgagor pursuant to the terms thereof and to the extent permitted by
law, all of Mortgagor's right, title and interest in, to and under
escrows, documents, instruments, and general intangibles, as the foregoing
terms are defined in the UCC, in any case which now or hereafter relate
to, are derived from, or are used in connection with the Properties, and
all contract rights, franchises, books, records, plans, specifications,
permits, licenses, approvals, actions and causes of action which now or
hereafter relate to, are derived from or used in connection with the
Properties or the use, operation, maintenance, occupancy or enjoyment
thereof or the conduct of any business or activities thereon
(collectively, the property described in the foregoing paragraphs (G),
(H), (I), (J), (K) and this paragraph (L), the "Intangibles"); and
(M) subject to the terms of Section 57 hereof with respect to
the disposition of the Madison Properties and Intangibles located thereon,
all of Mortgagor's right, title and interest in all proceeds, both cash
and noncash, of the foregoing which may be sold or otherwise be disposed
of pursuant to the terms hereof.
TO HAVE AND TO HOLD the Mortgaged Property hereby conveyed, or
mentioned and intended so to be, whether now owned or held or hereafter
acquired, subject only to the Permitted Encumbrances, unto Mortgagee for the
benefit and use of Mortgagee, its successors and assigns, forever, upon the
terms and conditions set forth herein and to secure the performance of, and
compliance with, the obligations, covenants and conditions of this Mortgage and
the other Loan Documents all as herein set forth.
1. Definitions. Wherever used in this Mortgage, the following terms,
and the singular and plural thereof, shall have the following meanings. All
capitalized terms used but not otherwise defined herein shall have the meanings
assigned to them in the Note:
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<PAGE> 14
Accounts: Shall mean, collectively, the Operating Account, the
Mortgage Escrow Account, the Property Account, the P&I Escrow Account, the
Capital Expenditure Reserve Account, the TI and Leasing Reserve Account (each as
defined in the Cash Collateral Agreement) and any and all of Mortgagor's other
accounts, general intangibles, chattel paper, cash or monies, wherever located,
whether in the form of cash or checks, and all cash equivalents including all
deposits and certificates of deposit, instruments, whether negotiable or
non-negotiable, debt notes both certificated and uncertificated, repurchase
obligations for underlying notes of the types described herein, and commercial
paper (it being agreed that all of the foregoing must at all times qualify as
Eligible Investments (as defined in the Cash Collateral Agreement)), (a)
received in connection with the sale or other disposition of the Properties, (b)
maintained by Mortgagor in a segregated account in trust for the benefit of
Mortgagee, or (c) held by Mortgagee, but not any account maintained by Mortgagor
or an Affiliate of Mortgagor or cash or cash equivalents that have been
disbursed to Mortgagor in accordance with the Cash Collateral Agreement.
Additional Land: As defined in the recitals hereof.
Additional Mortgages: As defined in the recitals hereof.
Additional Notes: As defined in the recitals hereof.
Affiliate: Shall mean, with respect to any specified Person, any
other Person directly or indirectly controlling or controlled by or under direct
or indirect common control with, or any general partner in, such specified
Person. For the purposes of this definition, "control" when used with respect to
any specified Person means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities or other beneficial interest, by contract or otherwise; and the terms
"controlling" and "controlled" have the meanings correlative to the foregoing.
Agent: As defined in the Cash Collateral Agreement.
Aggregate Alteration Threshold Amount: Shall mean Eight Million
Dollars ($8,000,000).
Air Rights: As defined in the recitals hereof.
Air Rights Lease: Shall mean that certain Indenture of Air-Rights
Lease dated as of November 13, 1986 by and between Belasco Theatre Corporation,
an New York corporation,
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as landlord, and Tower 45 Associates Limited Partnership, a New York limited
partnership and predecessor in interest to Magnolia Associates, Ltd., as tenant.
Air Rights Parcel: As defined in the recitals hereof.
Allocated Loan Amount: Shall mean the portion of the Principal
Indebtedness allocated, solely for the purposes of performing certain
calculations hereunder, to each Property as set forth in Schedule 1 annexed
hereto and made a part hereof, as such amounts shall be adjusted from time to
time as hereinafter set forth. In the case of a Total Loss in accordance with
Section 6(i) where the Proceeds are less than 125% of the Allocated Loan Amount,
each Allocated Loan Amount for each of the remaining Properties shall be
increased by an amount equal to the product of (a) the difference between 125%
of the applicable Allocated Loan Amount and the Proceeds, and (b) a fraction,
the numerator of which is the applicable Allocated Loan Amount (prior to the
adjustment in question) and the denominator of which is the aggregate of the
Allocated Loan Amounts for the remaining Properties (prior to the adjustment in
question). All calculations made pursuant to this Mortgage with respect to an
Allocated Loan Amount (including Premium or scheduled interest payments on an
Allocated Loan Amount) shall be certified to Mortgagee by Mortgagor pursuant to
an Officer's Certificate.
Alteration: As defined in Section 12(c) hereof.
Approved Banks: Shall mean banks or other financial institutions
which have a minimum long-term unsecured debt rating of at least "AA" by each of
the Rating Agencies, or if any such bank or other financial institution is not
rated by all the Rating Agencies, then a minimum long-term rating of at least
"AA" or its equivalent by the Rating Agencies involved in the Securitization.
Appurtenances: As defined in Granting Clause (E) hereof.
Assignee: As defined in Section 54 hereof.
Assignment of Leases: As defined in the recitals hereof.
Belasco Sublease: Shall mean that certain Indenture of Sublease
dated as of November 13, 1986 by and between Belasco Theatre Corporation, a New
York corporation, as landlord, and Tower 45 Associates Limited Partnership, a
New York limited partnership and predecessor in interest to Magnolia Associates,
Ltd., as tenant.
Best: As defined in Section 5(b).
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Building Equipment: As defined in Granting Clause (F) hereof.
Business Day: Shall mean any day except a Saturday, a Sunday or any
other day on which commercial banks in the State of New York are authorized or
obligated by law, governmental decree or executive order to be closed.
Capital Expenditure Reserve Amount: As defined in Section 48(a)
hereof.
Cash: Coin or currency of the government of the United States of
America.
Cash and Cash Equivalents: Shall mean any or a combination of the
following: (i) Cash, and (ii) U.S. Government Obligations.
Cash Collateral Agreement: As defined in the recitals hereof.
Closing Date: Shall mean the date the Loan and the transactions
contemplated hereby are consummated.
Code: Shall mean the Internal Revenue Code of 1986, as amended, and
any successor thereto, and any temporary or final regulations promulgated
thereunder.
Debt: Shall mean, with respect to any Person at any time, (a)
indebtedness or liability of such Person for borrowed money whether or not
evidenced by bonds, debentures, notes or other instruments, or for the deferred
purchase price of property or services (excluding trade obligations); (b)
obligations of such Person as lessee under leases which should have been or
should be, in accordance with GAAP, recorded as capital leases; (c) current
liabilities of such Person in respect of unfunded vested benefits under plans
covered by Title IV of ERISA; (d) obligations issued for, or liabilities
incurred on the account of, such Person; (e) obligations or liabilities of such
Person arising under acceptance facilities; (f) obligations of such Person under
any guarantees or other agreement to become secondarily liable for any
obligation of any other Person, endorsements (other than for collection or
deposit in the ordinary course of business) and other contingent obligations to
purchase, to provide funds for payment, to supply funds to invest in any Person
or otherwise to assure a creditor against loss; (g) obligations of such Person
secured by any Lien on any property of such Person, whether or not the
obligations have been assumed by such Person; or (h) obligations of such Person
under any interest rate or currency exchange agreement.
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Debt Service: Shall mean the amount of interest and principal due
and payable in accordance with the Note, during any month, multiplied by the
number of months with respect to the applicable period.
Debt Service Coverage Ratio: Shall mean for any period the ratio of
Net Operating Income to Debt Service on the Note for such period.
Default: Shall mean the occurrence or existence of any event or
condition which, with the giving of notice or the passage of time, or both,
would constitute an Event of Default hereunder.
Default Rate: Shall have the meaning set forth in the Note.
Defeasance: As defined in Section 46 hereof.
Defeasance Collateral: Shall mean Defeasance Eligible Investments
included in the Mortgaged Property as collateral pursuant to Sections 38, 45 and
46 hereof (including, without limitation, all amounts then on deposit in the
Defeasance Collateral Account).
Defeasance Collateral Account: As defined in Section 47 hereof.
Defeasance Eligible Investments: Shall mean obligations or
securities not subject to prepayment, call or early redemption which are direct
obligations of, or obligations fully guaranteed as to timely payment by, the
United States of America or any agency or instrumentality of the United States
of America, or the obligations of which are backed by the full faith and credit
of the United States of America, the ownership of which will not cause Mortgagee
to be an "investment company" under the Investment Company Act of 1940, as
amended, as evidenced by an Opinion of Counsel acceptable to Mortgagee, and
which qualify under ss. 1.860G-2(a)(8) of the Treasury regulations. All such
obligations or securities shall mature or be redeemable, or provide for payments
of interest thereon, on or prior to the Business Day preceding the date such
amounts are required to be applied under this Mortgage.
Direct Beneficial Owner: Shall mean such Persons who own any direct
ownership interest in Mortgagor.
Environmental Certificate: As defined in Section 40(b) hereof.
Environmental Claim: Shall mean any claim, action, cause of action,
investigation or written notice by any Person alleging potential liability
(including potential
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liability for investigatory costs, cleanup costs, natural resource damages,
property damages, personal injuries or penalties) arising out of, based upon or
resulting from (a) the presence, threatened presence, release or threatened
release into the environment of any Hazardous Substances from or at any of the
Properties, or (b) the violation, or alleged violation, of any Environmental
Law, relating to the Properties.
Environmental Event: As defined in Section 40(b) hereof.
Environmental Laws: Shall mean all present or future federal, state
and local laws, statutes, rules, ordinances, and regulations relating to
pollution or protection of human health or the environment (including, without
limitation, ambient air, surface water, ground water, land surface or subsurface
strata), including, without limitation laws, statutes, rules, ordinances and
regulations relating to emissions, discharges, releases of Hazardous Substances,
or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Hazardous Substances
including, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, 42 U.S.C. ss.ss. 9601 et seq.; the
Resource Conservation and Recovery Act of 1976, 42 U.S.C. ss.ss. 6901 et seq.;
the Toxic Substance Control Act, 15 U.S.C. ss.ss. 2601 et seq.; the Water
Pollution Control Act (also known as the Clean Water Act), 33 U.S.C. ss. 1251 et
seq.; the Clean Air Act, 42 U.S.C. ss. 7401 et seq.; and the Hazardous Materials
Transportation Act, 49 U.S.C. ss. 1801 et seq., as the same may be hereafter
amended or modified.
Environmental Reports: As defined in Section 40(a) hereof.
ERISA: Shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated thereunder.
Events of Default: Shall mean the occurrence of any of the
following, each of which shall constitute an Event of Default under this
Mortgage:
(a) (i) Failure to make any payment of interest or principal on the
Note when due provided, however, that in the event of any such failure occurring
prior to the Reset Date (as defined in the Note) the same shall constitute a
default if it continues for a period of one (1) day after the same is due (with
Default Interest payable as set forth in the Note), or (ii) failure to pay the
principal balance of the Note when due, provided, however, that in the event of
any such failure occurring on or prior to the Reset Date (as defined in the
Note) the same shall continue for a period of one (1) day after the same is due;
or
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(b) Mortgagor fails to pay any other amount payable pursuant to this
Mortgage or the Note when due and payable in accordance with the provisions
hereof, with such failure continuing for ten (10) days after Mortgagee delivers
written notice thereof to Mortgagor; or
(c) (i) Failure to keep in force the insurance required by Section 5
of this Mortgage, or (ii) failure to comply with any other covenants set forth
in Section 5 with such failure in this clause (ii) continuing for five (5)
Business Days after Mortgagee delivers written notice thereof to Mortgagor; or
(d) Any default under the terms of Section 7(b) (subject to the
terms of Section 7(c)) beyond any applicable time periods set forth therein,
with such default continuing for five (5) days after Mortgagee delivers written
notice thereof to Mortgagor, or the incurrence of any Debt in violation of
Section 11(c) of this Mortgage or the occurrence of any Transfer in violation of
Sections 11(a) or 11(b) (but subject to the terms of Section 11(d)) of this
Mortgage; or
(e) Any attempt by Mortgagor to assign its rights under this
Mortgage in violation of the terms hereof; or
(f) Any other default in the performance or payment, or breach, of
any material covenant, warranty, representation or agreement of Mortgagor
contained herein or in any other Loan Document (other than a covenant,
representation or agreement, a default in the performance or payment of or the
breach of which is specifically addressed elsewhere in this definition), which
default is not cured within thirty (30) Business Days after receipt by Mortgagor
of notice from Mortgagee in writing of such breach. If cure of such default (a)
would require performance of an Obligation other than payment of Indebtedness to
Mortgagor and (b) cannot be effected within said thirty (30) Business Day period
despite Mortgagor's diligence in prosecuting such cure, then, provided Mortgagor
commences to cure within said thirty (30) Business Day period and diligently
prosecutes said cure to completion, subject only to Excusable Delays, the cure
period provided hereunder shall be extended to such time as may be reasonably
necessary to cure the default; provided, however, that such extended period
shall in no event exceed one hundred-twenty (120) days plus time permitted for
Excusable Delays; and provided, further, that Mortgagor shall provide Mortgagee
with a written report and evidence of the progress of Mortgagor's cure efforts
(90) days after commencement of such one hundred-twenty (120) day cure period.
Notwithstanding the foregoing sentence, the cure period provided hereunder may
be extended for one (1) additional one hundred-twenty (120) day period, subject
to Excusable Delays, if and only if (x) such default involves breach of a
covenant (as distinct from a representation) and cure of such default would
require physical construction or remedial
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work, and (y) such cure cannot with diligence be completed within the initial
one hundred-twenty (120) day period. Mortgagor shall provide Mortgagee with an
additional written report and evidence of the progress of Mortgagor's cure
efforts ninety (90) days after commencement of such additional one
hundred-twenty (120) day cure period.
(g) The entry by a court of (A) a decree or order for relief in
respect of Mortgagor or its General Partner in an involuntary case or proceeding
under any applicable Federal or state bankruptcy, insolvency, reorganization or
other similar law or (B) a decree or order adjudging Mortgagor or its General
Partner a bankrupt or insolvent, or approving as properly filed a petition
seeking reorganization, arrangement, adjustment or composition of or in respect
of Mortgagor or its General Partner under any applicable Federal or state
bankruptcy, insolvency, reorganization or other similar law, or appointing a
custodian, receiver, liquidator, assignee, trustee, sequestrator or other
similar official of Mortgagor or its General Partner or of any substantial part
of either of their respective property, or ordering the winding up or
liquidation of either of their respective affairs, and the continuance of any
such decree or order for relief or any such other decree or order unstayed and
in effect for a period of more than ninety (90) consecutive days; or
(h) The commencement by Mortgagor or its General Partner of a
voluntary case or proceeding under any applicable Federal or state bankruptcy,
insolvency, reorganization or other similar law or of any other case or
proceeding to be adjudicated a bankrupt or insolvent, or the consent by it to
the entry of a decree or order for relief in respect of it in an involuntary
case or proceeding under any applicable Federal or state bankruptcy, insolvency,
reorganization or other similar law or to the commencement of any bankruptcy or
insolvency case or proceeding against it, or the filing by Mortgagor or its
General Partner of a petition or answer or consent seeking reorganization or
relief under any applicable Federal or state bankruptcy, insolvency,
reorganization or other similar law, or the consent by Mortgagor or its General
Partner to the filing of such petition or to the appointment of or taking
possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator
or similar official of Mortgagor or its General Partner or of any substantial
part of any of either of their respective property, or the making by Mortgagor
or its General Partner of an assignment for the benefit of creditors, or the
admission by Mortgagor or its General Partner in writing of its inability to pay
its debts generally as they become due, or the taking of official partnership
action of Mortgagor or limited liability company action of its General Partner
(or if, at any time, Mortgagor shall no longer be a partnership or the General
Partner shall no longer be a limited liability company) in furtherance of any
such action; or
(i) This Mortgage or any other Loan Document or any Lien granted
hereunder or thereunder shall, in whole or in part, terminate, cease to be
effective or cease to be a
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legally valid, binding and enforceable obligation of Mortgagor, or any Lien
securing the Indebtedness shall, in whole or in part, cease to be a perfected
first priority Lien, subject to the Permitted Encumbrances (except in any of the
foregoing cases in accordance with the terms hereof or under any other Loan
Document); or
(j) Any "Event of Default" as defined in any Loan Document other
than this Mortgage occurs.
Exculpated Parties: As defined in Section 33 hereof.
Excusable Delay: Shall mean a delay due to acts of God, governmental
restrictions, stays, judgments, orders, decrees, enemy actions, civil commotion,
fire, casualty, strikes, work stoppages, shortages of labor or materials or
other causes beyond the reasonable control of Mortgagor, but lack of funds in
and of itself shall not be deemed a cause beyond the control of Mortgagor.
First Class: Shall mean, with respect to each of the Properties, a
standard of operation and maintenance consistent with first-class properties
comparable to and in the same metropolitan area as a Property.
GAAP: Shall mean the generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board and
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board (or agencies with
similar functions of comparable stature and authority within the accounting
profession), or in such other statements by such entity as may be in general use
by significant segments of the United States accounting profession, to the
extent such principles are applicable to the facts and circumstances on the date
of determination.
General Partner: Shall mean, Tower Orlando GP LLC, a Delaware
limited liability company, which is the general partner of Magnolia Associates,
LTD., and Tower Madison GP LLC, a Delaware limited liability company, which is
the general partner of 286 Madison, L.P., 290 Madison, L.P. and 292 Madison,
L.P.
Governmental Authority: Shall mean any Federal, state or local
government or any other political subdivision thereof exercising executive,
legislative, judicial, regulatory or administrative functions.
Hazardous Substance: Shall mean any material waste or material
substance which is:
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(a) included within the definition of "hazardous substances,"
"hazardous materials," "toxic substances," or "solid waste" in or pursuant to
any Environmental Law, or subject to regulation under any Environmental Law;
(b) listed in the United States Department of Transportation
Optional Hazardous Materials Table, 49 C.F.R. ss. 172.101 enacted as of the date
hereof or hereafter amended, or in the United States Environmental Protection
Agency List of Hazardous Substances and Reportable Quantities, 40 C.F.R. Part
302, as enacted as of the date hereof or as hereafter amended; or
(c) an explosive, radioactive, asbestos, polychlorinated biphenyl,
oil or petroleum product.
Impositions: Shall mean all taxes (including all ad valorem, sales
(including those imposed on lease rentals), use, single business, gross
receipts, value added, intangible transaction, privilege or license or similar
taxes), governmental assessments (including all assessments for public
improvements or benefits, whether or not commenced or completed prior to the
date hereof and whether or not commenced or completed within the term of this
Mortgage), water, sewer or other rents and charges, excises, levies, fees
(including license, permit, inspection, authorization and similar fees), and all
other governmental charges, in each case whether general or special, ordinary or
extraordinary, or foreseen or unforeseen, of every character in respect of the
Mortgaged Property and/or any Rents (including all interest and penalties
thereon), which at any time prior to, during or in respect of the term hereof
may be assessed or imposed on or in respect of or be a Lien upon (a) Mortgagor
(including all income, franchise, single business or other taxes imposed on
Mortgagor for the privilege of doing business in the jurisdiction in which the
Mortgaged Property is located), (b) the Mortgaged Property, or any other
collateral delivered or pledged to Mortgagee in connection with the Loan, or any
part thereof, or any Rents therefrom or any estate, right, title or interest
therein, or (c) any occupancy, operation, use or possession of, or sales from,
or activity conducted on, or in connection with the Mortgaged Property or the
leasing or use of all or any part thereof. Nothing contained in this Mortgage
shall be construed to require Mortgagor to pay any tax, assessment, levy or
charge imposed on (i) any tenant occupying any portion of a Property or (ii)
Mortgagee in the nature of a franchise, capital levy, estate, inheritance,
succession, income or net revenue tax.
Improvements: As defined in Granting Clause (D) hereof.
Indebtedness: As defined in the recitals hereof.
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Indemnified Environmental Parties: As defined in Section 40(c)
hereof.
Indemnified Parties: As defined in Section 37 hereof.
Independent Accountant: Shall mean Coopers & Lybrand LLP, or another
firm of nationally recognized, independent certified public accountants selected
by Mortgagor which is reasonably acceptable to Mortgagee.
Independent Appraiser: Shall mean an independent appraiser which is
a member of the American Institute of Real Estate Appraisers selected by
Mortgagor and having at least five (5) years of experience in the applicable
real estate market where a Property is located in the valuation of properties of
the type being appraised.
Independent Architect: Shall mean an independent architect, engineer
or construction consultant selected by Mortgagor, licensed to practice in the
State where a Property is located and having at least five (5) years of
experience.
Independent Director: Shall mean an individual reasonably
satisfactory to Mortgagee who shall not have been at the time of such
individual's appointment, and may not have been at any time during the preceding
two (2) years (i) a shareholder of, or an officer or employee of, Mortgagor or
any of its shareholders, subsidiaries or affiliates, (ii) a customer of, or
supplier to, Borrower or any of its shareholders, subsidiaries or affiliates,
(iii) a person or other entity controlling any such shareholder, supplier or
customer, or (iv) a member of the immediate family of any such shareholder,
officer, employee, supplier or customer of any other director of Mortgagor. As
used herein, the term "control" means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of a
person or entity, whether through ownership of voting securities, by contract or
otherwise.
Initial Land: As defined in the recitals hereof.
Insurance Requirements: Shall mean all terms of any insurance policy
required hereunder covering or applicable to any Property or any part thereof,
all requirements of the issuer of any such policy, and all orders, rules,
regulations and other requirements of which Mortgagor has notice of the national
board of fire underwriters (or any other body exercising similar functions)
applicable to or affecting any Property or any part thereof or any use of any
Property or any part thereof.
Intangibles: As defined in Granting Clause (L) hereof.
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Land: As defined in the recitals hereof.
Lease Expiration Reserve Amounts: As defined in Section 48(b).
Leases: As defined in Granting Clause (G) hereof.
Legal Requirements: As defined in Section 13(a) hereof.
Letter of Credit: Shall mean an irrevocable, unconditional,
transferable, clean sight draft letter of credit in favor of Mortgagee and
entitling Mortgagee to draw thereon in New York, New York, issued by a domestic
Approved Bank or the United States agency or branch of a foreign Approved Bank,
or if there are no domestic Approved Banks or U.S. agencies or branches of a
foreign Approved Bank then issuing letters of credit, then such letter of credit
may be issued by a domestic bank, the long term unsecured debt rating of which
is the highest such rating then given by the Rating Agencies to a domestic
commercial bank. If at any time the bank issuing any such Letter of Credit shall
cease to be an Approved Bank, Mortgagee shall have the right immediately to draw
down the same in full and hold the proceeds of such draw in accordance with the
applicable provisions hereof, unless Mortgagor shall deliver a replacement
Letter of Credit within thirty (30) days after Mortgagee delivers written notice
to Mortgagor that such bank shall have ceased to be an Approved Bank.
Liabilities: As defined in Section 55(D)(ii)(B) hereof.
Lien: Shall mean any mortgage, deed of trust, lien, pledge,
hypothecation, assignment, security interest, or any other encumbrance of, on or
affecting the Mortgaged Property or any portion thereof or any interest therein
(but excluding any such encumbrance or interest granted by a Tenant), including,
without limitation, any conditional sale or other title retention agreement, any
financing lease having substantially the same economic effect as any of the
foregoing, the filing of any financing statement, and mechanic's, materialmen's
and other similar liens and encumbrances.
Limited Partnership: Shall mean Magnolia Associates, LTD., a Florida
limited partnership, and 286 Madison, L.P., 290 Madison, L.P. and 292 Madison,
L.P, each a New York limited partnership.
Loan: As defined in the recitals hereof.
Loan Amount: Shall mean the Principal Amount from time to time of
the Loan, which initially shall be One Hundred Seven Million Dollars
($107,000,000).
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Loan Documents: Shall mean this Mortgage, the Assignment of Leases,
the Cash Collateral Agreement, the Note, and any and all other agreements,
instruments or documents executed by Mortgagor evidencing, securing or delivered
in connection with the Loan and the transactions contemplated hereby.
Madison Properties: As defined in the recitals hereof.
Material Adverse Effect: Shall mean any event or condition that has
a material adverse effect on (i) all of the Properties taken as a whole, (ii)
the business, prospects, profits, operations or condition (financial or
otherwise) of Mortgagor, or (iii) the ability of Mortgagor to repay the
principal and interest of the Indebtedness as it becomes due.
Material Alteration: Shall mean any Alteration which, when
aggregated with all related Alterations constituting a single project, involves
an estimated cost exceeding the Threshold Amount with respect to Alterations
(including the Alteration in question) being undertaken at a single Property at
such time or the Aggregate Alteration Threshold Amount with respect to
Alterations (including the Alteration in question) being undertaken at all the
Properties at such time, but in either event, excluding any Alteration for which
a Tenant is obligated to pay directly.
Material Lease: Shall mean a Lease demising not less than (i) 20,000
rentable square feet at the Orlando Property, (ii) 10,000 rentable square feet
at each of the Madison Properties and (iii) 25,000 rentable square feet at Tower
45.
Maturity Date: As defined in the recitals hereof.
Maximum Foreseeable Casualty Loss: As defined in Section 5(b)
hereof.
Minimum Defeasance Collateral Requirement: Shall mean, with respect
to a Property Release resulting in a Defeasance, Defeasance Collateral in an
amount sufficient to pay (x) 125% of the Allocated Loan Amount applicable to the
Property which is the subject of the Property Release, and sufficient to pay
scheduled interest and principal payments (such payments, the "Defeasance Debt
Service Payments") on the portion of the Loan equal to such Allocated Loan
Amount on such Property, through and including the Reset Date (as defined in the
Note) together with the outstanding principal balance of the Note as of the
Reset Date. Sufficient portions of the Defeasance Collateral must mature on or
before the dates when such amounts are required to be applied to pay Defeasance
Debt Service Payments when due.
ML: As defined in Section 55(D)(ii)(B) hereof.
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ML Group: As defined in Section 55(D)(ii)(B) hereof.
Mortgage: As defined in the recitals hereof.
Mortgage Escrow Account: As defined in Section 8(a) hereof.
Mortgage Escrow Amounts: As defined in Section 8(a) hereof.
Mortgage Escrow Security: As defined in Section 8(b) hereof.
Mortgaged Property: As defined in the Granting Clauses hereof.
Mortgagee: As defined in the introductory paragraph hereof.
Mortgagor: As defined in the introductory paragraph hereof.
Net Income: Shall mean, with respect to any period, all Operating
Income less (x) all Operating Expenses for such period, (y) the Monthly Amount
and all other amounts payable under the Loan (as such term is defined in the
Note) and (z) the amount of Mortgage Escrow Amounts, the Capital Expenditure
Reserve Amounts, the TI and Leasing Reserve Amounts for such period and other
reserves reasonably created by Mortgagor, as disclosed in an annual budget
submitted to Mortgagee pursuant to the terms of Section 18 of the Note.
Net Operating Income: Shall mean, with respect to any period, the
excess of Operating Income over Operating Expenses for such period.
Nondisqualification Opinion: Shall mean an opinion of tax counsel,
which shall be independent outside counsel, to the effect that a contemplated
action would not materially adversely affect the federal income tax status as a
REMIC, trust or other vehicle of any REMIC, trust or other vehicle in which the
Loan may be included at the time such opinion is required.
Nondisturbance Agreement: As defined in Section 15(d) hereof.
Note: As defined in the recitals hereof.
Obligations: As defined in the recitals hereof.
Officer's Certificate: Shall mean a certificate delivered to
Mortgagee and signed by an officer of the General Partner of Mortgagor.
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Operating Agreements: Shall mean the reciprocal easement agreements,
operating agreements and similar agreements affecting the ownership, use and
operation of a Property included in the Permitted Encumbrances listed on
Schedule 2 hereto, as such agreements have been or may hereafter be amended,
modified or supplemented.
Operating Expenses shall mean, for any period, without duplication,
all expenses paid or to be paid by Mortgagor during such period in connection
with the operation, management, maintenance, repair, leasing and use of the
Mortgaged Property, determined on an accrual basis, including management fees
and leasing expenses with the exception of leasing commissions.
Operating Income: Shall mean, for any period, all income of
Mortgagor during such period, determined on an accrual basis, from the operation
of the Mortgaged Property as follows:
(i) all amounts payable to Mortgagor by any Person as rent and
other amounts under Leases, license agreements, occupancy agreements or
other agreements relating to the Mortgaged Property or, as applicable, a
Property (including reimbursements and percentage rents);
(ii) rent insurance proceeds; and
(iii) casualty and condemnation proceeds and security
deposits, applied pursuant to the terms of the applicable Leases.
Opinion of Counsel: Shall mean an opinion of counsel of a nationally
recognized law firm or other law firm reasonably acceptable to Mortgagee and, at
any time that the Loan is included in any securitization transaction, the Rating
Agencies, procured by Mortgagor and rendered at Mortgagor's sole cost and
expense.
Original Mortgage(s): As defined in the recitals hereof.
Original Note(s): As defined in the recitals hereof.
Orlando Property: As defined in the recitals hereof.
Permitted Debt: As defined in Section 11(c) hereof.
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Permitted Encumbrances: Shall mean:
(i) Liens for Impositions not yet due and payable or Liens
arising after the date hereof which are being contested in good faith by
appropriate proceedings promptly instituted and diligently conducted in
accordance with Section 7(c) hereof;
(ii) In the case of Liens arising after the date hereof,
statutory Liens of carriers, warehousemen, mechanics, materialmen and
other similar Liens arising by operation of law, which are incurred in the
ordinary course of business for sums which are being contested in good
faith in accordance with Section 7(c);
(iii) All immaterial easements, rights-of-way, restrictions
and other similar charges or non-monetary encumbrances against real
property and other agreements which do not materially and adversely affect
(A) the ability of Borrower to pay any of its obligations to any Person as
and when due, (B) the marketability of title to the Mortgaged Property,
(C) the fair market value of the Mortgaged Property, or (D) the use or
operation of the Mortgaged Property as of the Closing Date and thereafter;
(iv) Those matters set forth in the "marked-up" commitment for
Mortgagee's loan policy of title insurance concerning each of the
Properties issued by the Title Company and agreed to by Mortgagee in
Mortgagee's sole discretion;
(v) Liens in favor of Mortgagee under this Mortgage and the
other Loan Documents;
(vi) Rights of existing and future Tenants, as tenants only,
pursuant to Leases; and
(vii) Such other title exceptions as Mortgagee and the
applicable Rating Agencies may approve in writing in their sole
discretion.
Person: Shall mean any individual, corporation, partnership, joint
venture, estate, trust, unincorporated association, and any federal, state,
county or municipal government or any political subdivision thereof.
Pledge: Shall have the meaning set forth in the recitals hereto.
Principal Amount: Shall mean the principal amount of the Note, as
defined therein.
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Principal Indebtedness: Shall mean the Principal Amount payable by
Mortgagor under the Note.
Proceeds: As defined in Section 6(b) hereof.
Property: As defined in Granting Clause (F) hereof.
Property Release: As defined in Section 38(d) hereof.
Properties: As defined in Granting Clause (F) hereof.
Qualifying Manager: As defined in Section 19(a) hereof.
Rating Agencies: Shall mean Standard & Poor's Ratings Services, Duff
& Phelps Credit Rating Co., Moody's Investors Services, Inc. and Fitch Investor
Services, L.P. or, if such corporation shall for any reason no longer perform
the functions of a securities rating agency, any other nationally recognized
statistical rating agency designated by Mortgagee, provided, however, that at
any time during which the Loan is an asset of a securitization, "Rating
Agencies" shall mean the rating agencies that from time to time rate the
securities issued in connection with such securitization.
Registration Statement: As defined in Section 55(d)(B) hereof.
Release Date: As defined in Section 38(b) hereof.
Renewal Lease: As defined in Section 15(b) hereof.
Rents: As defined in Granting Clause (G) hereof.
Required Opinion: Shall mean an Opinion of Counsel addressed to
Mortgagee and dated as of the date of delivery to the effect that (i) the
Defeasance Collateral has been duly and validly assigned and delivered to
Mortgagee, (ii) the security interest of Mortgagee for the ratable benefit of
any certificateholder, with respect to the Defeasance Collateral, is a first
priority perfected security interest as security for payment of the Note, which
opinion may contain, and be subject to, conditions, exceptions and
qualifications customarily included in such opinion, and (iii) making the
payment which accompanies such opinion would not constitute an avoidable
preference under Section 547 of the Bankruptcy Code or under applicable state
law in the event of a filing of a petition for relief under the Bankruptcy Code
or such applicable state
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law by or against Mortgagor, as to the portion of the defeasance Collateral that
is equal to the fair market value of the Property being released in connection
with such payment.
Reset Date: As defined in the Note.
Securities Act: As defined in Section 55(d)(B) hereof.
Single Purpose Entity: Shall mean a Person, other than an
individual, which (i) is formed or organized solely for the purpose of holding,
directly, or, in the case of the General Partner, indirectly, an ownership
interest in the Properties, (ii) does not engage in any business unrelated to
the Properties and the financing thereof, (iii) has not and will not have any
assets other than those related to its interest in the Properties or the
financing thereof or any indebtedness other than the Loan and trade payables
incurred in the ordinary course of business and paid within the time periods set
forth in the Loan Documents, and in amounts not to exceed those set forth in the
Loan Documents, (iv) maintains its own separate books and records and its own
accounts, in each case which are separate and apart from the books and records
and accounts of any other Person, (v) holds itself out as being a Person,
separate and apart from any other Person, (vi) does not and will not commingle
its funds or assets with those of any other Person, (vii) conducts its own
business in its own name; (viii) maintains separate financial statements, (ix)
pays its own liabilities out of its own funds, (x) observes all partnership
formalities or corporate formalities or limited liability company formalities,
as applicable, (xi) maintains an arm's-length relationship with its Affiliates,
(xii) pays the salaries of its own employees and maintains a sufficient number
of employees in light of its contemplated business operations, (xiii) does not
guarantee or otherwise obligate itself with respect to the debts of any other
Person or hold out its credit as being available to satisfy the obligations of
any other Person, (xiv) does not acquire obligations or securities of its
partners, members or shareholders, (xv) allocates fairly and reasonably shared
expenses, including, without limitation, any overhead for shared office space,
(xvi) uses separate stationery, invoices, and checks, (xvii) does not and will
not pledge its assets for the benefit of any other Person or make any loans or
advances to any other Person, (xviii) does and will correct any known
misunderstanding regarding its separate identity, (xix) maintains adequate
capital in light of its contemplated business operations, and (xx) has and will
have a partnership or operating agreement, certificate of incorporation or other
organizational document which complies with the standards and requirements for a
Single Purpose Entity set by the Rating Agencies at such time. In addition, if
such Person is a limited partnership, (1) all general partners of such Person
shall be Single Purpose Entities, and (2) if such Person has more than one
general partner, then the organizational documents shall provide that such
Person shall continue (and not dissolve) for so long as a solvent general
partner exists. In addition, if such Person is a corporation, then, at all
times: (a) such Person shall have at least one (1) Independent Director, and (2)
the board of directors of such Person may not take any action requiring the
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unanimous affirmative vote of one hundred percent (100%) of the members of the
board of directors unless all of the directors, including an Independent
Director, shall have participated in such vote. In addition, if such Person is a
limited liability company, (1) each managing member shall be a Single Purpose
Entity, (2) its articles of organization, certificate of formation and/or
operating agreement, as applicable, shall provide that such entity will dissolve
only upon the bankruptcy of each managing member, and (3) if such Person has
more than one managing member, then the organizational documents shall provide
that such Person shall continue (and not dissolve) for so long as a solvent
managing member exists. In addition, such Person (1) without the unanimous
consent of all of the partners, directors or members, as applicable, has not and
will not with respect to itself or to any other Person in which it has a direct
or indirect legal or beneficial interest (a) seek or consent to the appointment
of a receiver, liquidator, assignee, trustee, sequestrator, custodian or other
similar official for such Person or all or any portion of such Person's
properties, or (b) take any action that might cause such Person to become
insolvent, (2) has and will maintain its books, records, resolutions and
agreements as official records, (3) has held and will hold its assets in its own
name, (4) has and will maintain its financial statements, accounting records and
other entity documents separate and apart from any other Person, (5) has not and
will not identify its partners, members or shareholders, or any affiliates of
any of them as a division or part of it.
Subleasehold Estate: As defined in the recitals hereof.
TI and Leasing Reserve Amount: As defined in Section 48(b) hereof.
Taking: Shall mean a temporary or permanent taking by any
Governmental Authority as the result or in lieu or in anticipation of the
exercise of the right of condemnation or eminent domain, of all or any part of
the Mortgaged Property, or any interest therein or right accruing thereto,
including any right of access thereto or any change of grade affecting a
Property or any part thereof.
Tax Opinion: Shall mean an Opinion of Counsel to the effect that a
contemplated action (a) will not result in any deemed exchange pursuant to
Section 1001 of the Code of the Note; and (b) will not adversely affect the
Note's or such other note's status as indebtedness for federal income tax
purposes.
Tenant: Shall mean any Person leasing, subleasing or otherwise
occupying any portion of a Property.
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Threshold Amount: Shall mean (i) Three Million Dollars ($3,000,000)
with respect to the Orlando Property and (ii) Five Million Dollars ($5,000,000)
with respect to Tower 45.
Title Company: Shall mean Commonwealth Title Insurance Company,
Lawyers Title Insurance Corporation, Chicago Title Insurance Corporation or such
other title insurance companies acceptable to and issuing title policies to
Mortgagee.
Total Defeasance Collateral Requirement: Shall mean with respect to
a Defeasance of the Lien of this Mortgage, Defeasance Collateral in an amount
sufficient to pay all principal indebtedness outstanding as of the date of
Defeasance under the Note as it becomes due and sufficient to pay scheduled
interest payments on the Loan and the actual average interest rate on the Note.
All Defeasance Collateral must mature on or before the dates when such amounts
are required to be applied to pay interest and principal on the Note when due.
Total Loss: Shall mean (i) a casualty, damage or destruction of a
Property, the cost of restoration of which (calculated in accordance with the
provisions of Section 6 hereof) would exceed fifty percent (50%) of the
applicable Allocated Loan Amount, and with respect to which Mortgagor is not
required, under the applicable Leases to apply Proceeds to the restoration of
such Property or (ii) a permanent Taking of fifty percent (50%) or more of the
gross leasable area of a Property or so much of a Property, in either case, such
that it would be impracticable, in Mortgagee's sole discretion, even after
restoration, to operate such Property as an economically viable whole and with
respect to which the applicable Lease does not require such restoration.
Tower Fee Estate: As defined in the recitals hereof.
Tower 45: As defined in the recitals hereof.
Transfer: Shall mean sell, assign, convey, transfer, pledge or
otherwise dispose of, or where used as a noun, a sale, assignment, conveyance,
transfer, pledge or other disposition.
UCC: As defined in Granting Clause (F) hereof.
Underwriter Group: As defined in Section 55(D)(ii)(B) hereof.
U.S. Government Obligations: Any direct obligations of the United
States Government, including, without limitation, treasury bills, notes and
bonds.
Work: As defined in Section 6(b) hereof.
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All accounting terms not specifically defined herein shall be
construed in accordance with GAAP. When used herein, the term "financial
statements" shall include the notes and schedules thereto. Unless otherwise
specified herein or therein, all terms defined in this Mortgage shall have the
defined meanings when used in any other Loan Document or in any certificate or
other document made or delivered pursuant thereto.
The words "hereof," "herein" and "hereunder" and words of similar
import when used in this Mortgage shall refer to this Mortgage as a whole and
not to any particular provision of this Mortgage, and section, schedule and
exhibit references are to this Mortgage unless otherwise specified. The words
"includes" and "including" are not limiting and mean "including without
limitation."
In the computation of periods of time from a specified date to a
later specified date, the word "from" means "from and including;" the words "to"
and "until" each mean "to but excluding," and the word "through" means "to and
including."
References to agreements and other documents shall be deemed to
include all subsequent amendments and other modifications thereto executed in
writing by all of the parties thereto and, if Mortgagee's consent was required
for the original of any such document, consented to by Mortgagee. All references
in this Mortgage to the plural of any document described herein shall mean all
of such documents collectively.
References to statutes or regulations are to be construed as
including all statutory and regulatory provisions consolidating, amending, or
replacing the statute or regulation.
The captions and headings of this Mortgage are for convenience of
reference only and shall not affect the construction of this Mortgage.
REPRESENTATIONS, WARRANTIES AND COVENANTS
Mortgagor represents and warrants to, and covenants and agrees with,
Mortgagee as follows:
2. Warranty. (a) Mortgagor owns good, indefeasible and insurable fee
simple title to the Land and the Improvements, and good, indefeasible and
insurable leasehold title to the Subleasehold Estate and the Air Rights, subject
only to the Permitted Encumbrances. This Mortgage upon its due execution and
proper recordation is and will remain a valid and enforceable (and, with respect
to all personalty (as to which security interests are governed by the
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UCC), upon proper recordation and the filing of a financing statement) perfected
first Lien on and security interest on the Land, Improvements and such
personalty subject to the Permitted Encumbrances. Mortgagor represents and
warrants that none of the Permitted Encumbrances will impair (i) the ability of
Borrower to pay any of its obligations to any Person as and when due, (ii) the
marketability of title to the Mortgaged Property, (iii) the fair market value of
the Mortgaged Property, or (iv) the use or operation of the Mortgaged Property
as of the Closing Date and thereafter. Mortgagor will preserve its fee simple
title to the Mortgaged Property for so long as the Note remains outstanding and
will warrant and defend same and the validity and priority of the Lien hereof
from and against any and all claims whatsoever other than the Permitted
Encumbrances.
(b) This Mortgage and each of the Loan Documents executed by
Mortgagor, is the legal, valid and binding obligation of Mortgagor, enforceable
against Mortgagor in accordance with their terms, subject to applicable
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
other laws affecting creditor's rights generally in effect from time to time.
(c) On the date hereof, no portion of the Improvements at a Property
has been materially damaged, destroyed or injured by fire or other casualty
which is not now fully restored or in the process of being restored;
(d) Mortgagor (i) has full power and authority to carry on its
business at each Property as currently conducted and (ii) has and will maintain
or cause to be maintained in effect at all times until the Indebtedness and the
Obligations are satisfied in full, all necessary material licenses, permits,
authorizations, registrations and approvals to own, use and occupy each of the
Properties, and (iii) except as otherwise disclosed, has not received any
written notice of any violation of any such licenses, permits, authorizations,
registrations or approvals that materially impair the value of a Property for
which such notice was given or which would adversely affect the use or operation
of any Property in any material respect;
(e) As of the date hereof, Mortgagor has not received any written
notice of any Taking or threatened Taking of any Property or any portion
thereof;
(f) Each Property and the Equipment located on the Property
constitutes all of the real property, equipment and fixtures currently owned by
Mortgagor or used in the operation of the business located on such Property;
(g) Each Property has adequate access to public streets, roads or
highways;
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(h) Each Property constitutes a separate tax lot, with a separate
tax assessment, independent of any other land or improvements, except as
previously disclosed to Mortgagee in writing;
(i) All utility services necessary for the operation of each
Property have been connected and are available in adequate capacities directly
from utility lines and without the need for private easements not presently
existing;
(j) For so long as the Note remains unpaid, Mortgagor is not and
shall not be an "employee benefit plan" (within the meaning of Section 3(3) of
ERISA) to which ERISA applies and Mortgagor's assets do not and will not
constitute plan assets; and
(k) Since the date of the Original Mortgage Mortgagor has been, is
and shall remain a Single Purpose Entity.
3. Payment and Performance of Obligations Secured. Mortgagor shall
promptly pay when due the principal of and interest on the Indebtedness and all
other payment Obligations secured by this Mortgage, all in lawful money of the
United States of America, and shall further perform fully and in a timely manner
all Obligations of Mortgagor. All sums payable by Mortgagor hereunder shall be
paid without demand, counterclaim, offset, deduction (except as required by law)
or defense. Mortgagor waives all rights now or hereafter conferred by statute or
otherwise to any such demand, counterclaim (other than mandatory counterclaims),
setoff, deduction or defense.
4. Negative Covenants. Mortgagor covenants and agrees that it shall
not:
(a) incur, create or assume any indebtedness for borrowed money or
Transfer or lease the Mortgaged Property or any interest therein, except as
permitted under Sections 11 and 15 hereof;
(b) engage, directly or indirectly, in any business other than that
of entering into this Mortgage and the other Loan Documents to which Mortgagor
is a party and the ownership, management, leasing, construction, development,
operation and maintenance of the Mortgaged Property for its present and related
uses;
(c) make advances or make loans to any Persons or entities
(including Affiliates of Mortgagor) or hold any investments (other than
Permitted Investments, Defeasance Collateral and Cash and Cash Equivalents)
under this Mortgage;
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(d) partition a Property;
(e) commingle its assets with the assets of any of its Affiliates
except in connection with the Cash Collateral Agreement;
(f) guarantee any obligations of any Person;
(g) enter into any management agreement for any of the Properties
without Mortgagee's consent, except in accordance with Section 19 hereof;
(h) enter into any agreement for the sale of any asset or transfer
of any interest except as may be permitted hereby;
(i) amend or modify any of its organizational documents needed to
maintain its status as a Single Purpose Entity without Mortgagee's consent;
(j) dissolve, wind-up, terminate, liquidate, merge with or
consolidate into another Person, except as expressly permitted pursuant to this
Mortgage;
(k) engage in any activity that would subject it to regulation under
ERISA; or
(l) voluntarily file or consent to the filing of a petition for
bankruptcy, insolvency, reorganization, assignment for the benefit of creditors
or similar proceeding under any Federal or state bankruptcy, insolvency,
reorganization or other similar law or otherwise seek any relief under any laws
relating to the relief of debts or the protection of debtors generally, without
the unanimous consent of its general partners (including the unanimous consent
of the directors of the corporate general partner or shareholders, as the case
may be, which at all times shall include the consent of the Independent
Director.
5. Insurance.
(a) Insurance Coverage Requirements. Mortgagor shall, at its sole
cost and expense, keep in full force and effect insurance coverage of the types
and minimum limits as follows during the term of this Mortgage:
(i) Property Insurance. Insurance with respect to the
Improvements and the Building Equipment against any peril included within
the classification "All Risks of Physical Loss" with extended coverage in
amounts at all times sufficient to prevent Mortgagor from becoming a
co-insurer within the terms of the applicable
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policies, but in any event such insurance shall be maintained in an amount
equal to the full insurable value of the Improvements and the Building
Equipment (and must provide coverage of any additional costs associated
with applicable Legal Requirements), and such policies shall be subject
only to exclusions that are standard and customary for property comparable
to the applicable Property and acceptable to the Rating Agencies and
Mortgagee. The term "full insurable value" means the actual replacement
cost of the Improvements and the Building Equipment (without taking into
account any depreciation, and exclusive of excavations, footings and
foundations, landscaping and paving) (but in no event less than 125% of
the applicable Allocated Loan Amount) determined annually by an insurer, a
recognized independent insurance broker or an Independent Appraiser
selected and paid by Mortgagor and in no event less than the coverage
required pursuant to the terms of any Lease; provided, however, if the
terms of the applicable insurance policies expressly provide for insurance
to be provided in the amount of the actual replacement cost of the
Improvements and the Building Equipment or such policies contain a
replacement cost endorsement, no such annual determination will be
necessary;
(ii) Liability Insurance. Comprehensive general liability
insurance, including bodily injury, contractual injury, death and property
damage liability, and excess and/or umbrella liability insurance against
any and all claims, including all legal liability that could be imposed
upon Mortgagee, to the extent insurable, and all court costs and
attorneys' fees and expenses, arising out of or connected with the
possession, use, leasing, operation, maintenance or condition of each
Property in such amounts as are generally required by institutional
lenders for properties comparable to the Properties written on a per
occurrence basis with a per occurrence limit of not less than Five Million
Dollars ($5,000,000) and with an aggregate limit of not less than Ten
Million Dollars ($10,000,000) per Property;
(iii) Workers' Compensation Insurance. Statutory workers'
compensation insurance (to the extent the risks to be covered thereby are
not already covered by other policies of insurance maintained by
Mortgagor), with respect to any work by or for Mortgagor performed on or
about any Property;
(iv) Loss of Rental Value. Loss of "rental value" or "business
interruption" insurance in an amount sufficient to avoid any co-insurance
penalty and to provide Proceeds which will cover the loss of rents
sustained during the period of at least twelve (12) months following the
date of casualty. Such policies of insurance shall be subject only to
exclusions that are acceptable to Mortgagee and the Rating Agencies. The
term "rental value" means the sum of (A) the total then ascertainable
Rents payable under the Leases and (B) the total ascertainable amount of
all other amounts to be received by
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Mortgagor from third parties which are the legal obligation of Tenants,
reduced to the extent such amounts would not be received because of
Operating Expenses not incurred during a period of non-occupancy of that
portion of such Property then not being occupied;
(v) Builder's All-Risk Insurance. During any period of repair
or restoration, builder's "all risk" insurance in an amount equal to not
less than the full insurable value of the applicable Property against such
risks (including fire and extended coverage and collapse of the
Improvements to agreed limits as Mortgagee may request), in form and
substance acceptable to Mortgagee.
(vi) Boiler and Machinery Insurance. To the extent applicable,
broad form boiler and machinery insurance (without exclusion for
explosion) covering all boilers or other pressure vessels, machinery and
equipment, if any, located in, on or about each Property and insurance
against loss of occupancy or use arising from any such breakdown in such
amounts as are generally available at commercially reasonable premiums and
are generally required by institutional lenders for property comparable to
each of the Properties;
(vii) Flood Insurance. If any Improvement on any Property is
located within an area designated as "flood prone" or a "special flood
hazard area" (as defined under the regulations adopted under the National
Flood Insurance Act of 1968 and the Flood Disaster Protection Act of
1973), flood insurance if available, in an amount equal to the lesser of
the Allocated Loan Amount for the applicable Property and the maximum
limit of coverage available with respect to the Property, acceptable to
Mortgagee, provided, however, that if flood insurance shall be unavailable
from private carriers, flood insurance provided by the federal or state
government, if available;
(viii) FLORIDA PROPERTIES ONLY - Windstorm Insurance.
Windstorm coverage with such limits and deductibles as are generally
required by institutional lenders for similar properties in the geographic
area where the Orlando Property is located, in any event at least equal to
the lesser of the Allocated Loan Amount for the Orlando Property and the
maximum limit of coverage available with respect to the Orlando Property.
Such coverage shall be placed with one or more reputable insurers and may
insure additional properties on a pooled risk basis; and
(ix) Other Insurance. At Mortgagee's reasonable request, such
other insurance, including but not limited to earthquake insurance, with
respect to the
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Mortgaged Property against loss or damage of the kinds from time to time
customarily insured against and in such amounts as are generally required
by institutional lenders on loans of similar amounts and secured by
properties comparable to the Properties.
(b) Ratings of Insurers. Mortgagor will maintain the insurance
coverage described in Section 5(a) above, in all cases, with one or more
domestic primary insurers acceptable to Mortgagee, having both (x) a
claims-paying-ability rating by Standard & Poor's Ratings Services of not less
than "AA" and its equivalent by any other Rating Agency, and (y) an Alfred M.
Best Company, Inc. ("Best") rating of "A" or better and a financial size
category of not less than IX. All insurers providing insurance required by this
Mortgage shall be authorized to issue insurance in the state where the insured
Property is located.
For the purposes hereof, "Maximum Foreseeable Casualty Loss" shall
mean the estimate of a qualified fire protection engineer in connection with
Mortgagor's existing insurance package of the maximum probable casualty loss
which would be suffered in respect of the Improvements and Building Equipment as
a result of damage caused by the perils covered by the insurance described in
Section 5(a)(i).
The insurance coverage required under Section 5(a) may be effected
under a blanket policy or policies covering the Mortgaged Property and other
properties and assets not constituting a part of the Mortgaged Property;
provided that any such blanket policy shall specify, except in the case of
public liability insurance, the portion of the total coverage of such policy
that is allocated to the Mortgaged Property, and any sublimits in such blanket
policy applicable to the Mortgaged Property, which amounts shall not be less
than the amounts required pursuant to Section 5(a) and which shall in any case
comply in all other respects with the requirements of this Section 5.
(c) Form of Insurance Policies; Endorsements. All insurance policies
shall be in such form and with such endorsements and in such amounts
satisfactory to Mortgagee (and Mortgagee shall have the right to approve
amounts, form, risk coverage, deductibles, loss payees and insureds). A
certificate of insurance with respect to all of the above-mentioned insurance
policies has been delivered to Mortgagee and originals or certified copies of
all such policies shall be delivered to Mortgagee when the same are available
and shall be held by Mortgagee. Mortgagor shall deliver to Mortgagee annually,
simultaneously with the renewal of the insurance policies required hereunder, an
Officer's Certificate stating that the insurance policies required to be
delivered to Mortgagee pursuant to this Section 5(c) are maintained with
insurers who comply with the terms of Section 5(b) hereof, setting forth a
schedule describing all premiums required to be paid by Mortgagor to maintain
the policies of insurance required under this Section 5, and stating that
Mortgagor has paid such premiums. All such policies shall name Mortgagee as an
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additional named insured, shall provide that all Proceeds (except with respect
to Proceeds of general liability and workers' compensation insurance) be payable
to Mortgagee as and to the extent set forth in Section 6 hereof, and shall
contain: (i) a standard "non-contributory mortgagee" endorsement or its
equivalent relating, inter alia, to recovery by Mortgagee notwithstanding the
negligent or willful acts or omissions of Mortgagor; (ii) a waiver of
subrogation endorsement in favor of Mortgagee; (iii) an endorsement providing
that no policy shall be impaired or invalidated by virtue of any act, failure to
act, negligence of, or violation of declarations, warranties or conditions
contained in such policy by Mortgagor, Mortgagee or any other named insured,
additional insured or loss payee, except for the willful misconduct of Mortgagee
knowingly in violation of the conditions of such policy; (iv) an endorsement
providing for a deductible per loss of an amount not more than that which is
customarily maintained by prudent owners of First Class properties comparable to
and in the general vicinities of the Properties, but in no event in excess of
$100,000, except in the case of earthquake coverage, for which such deductible
shall not be in excess of that generally required by institutional lenders on
loans of similar amounts secured by comparable properties; and (v) a provision
that such policies shall not be cancelled, terminated or expired without at
least thirty (30) days' prior written notice to Mortgagee, in each instance.
Certificates of insurance with respect to all replacement policies shall be
delivered to Mortgagee not less than ten (10) Business Days prior to the
expiration date of any of the insurance policies required to be maintained
hereunder which certificates shall bear notations evidencing payment of
applicable premiums. Originals (or certified copies) of such replacement
insurance policies shall be delivered to Mortgagee promptly after Mortgagor's
receipt thereof but in any case within thirty (30) days after the effective date
thereof. If Mortgagor fails to maintain and deliver to Mortgagee the
certificates of insurance required by this Mortgage, upon five (5) Business
Days' prior notice to Mortgagor, Mortgagee may, in accordance with the
provisions of Section 8 hereof, procure such insurance, and all costs thereof
(and interest thereon at the Default Rate) shall be added to the Indebtedness.
Mortgagee shall not, by the fact of approving, disapproving,
accepting, preventing, obtaining or failing to obtain any insurance, incur any
liability for or with respect to the amount of insurance carried, the form or
legal sufficiency of insurance contracts, solvency of insurance companies, or
payment or defense of lawsuits, and Mortgagor hereby expressly assumes full
responsibility therefor and all liability, if any, with respect thereto.
(d) Compliance with Insurance Requirements. Mortgagor shall comply
with all Insurance Requirements and shall not bring or keep or permit to be
brought or kept any article upon any of the Properties or cause or permit any
condition to exist thereon which would be prohibited by any Insurance
Requirement, or would invalidate insurance coverage required hereunder to be
maintained by Mortgagor on or with respect to any part of any Property pursuant
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to this Section 5. Notwithstanding anything to the contrary, it is expressly
understood and agreed that any insurance which Mortgagor shall cause any Tenant
to provide that shall otherwise be in compliance with all of the terms and
conditions of this Section 5 shall satisfy Mortgagor's obligations with respect
thereto hereunder.
(e) Separate Insurance. Mortgagor will not take out separate
insurance contributing in the event of loss with that required to be maintained
pursuant to this Section 5 unless such insurance complies with this Section 5.
(f) Blanket Policies. Except in the case of public liability
insurance, upon Mortgagee's request, Mortgagor shall deliver to Mortgagee an
Officer's Certificate setting forth (i) the number of properties covered by such
policy, (ii) the location by city (if available, otherwise, county) and state of
the properties, (iii) the average square footage of the properties (or the
aggregate square footage), (iv) a brief description of the typical construction
type included in the blanket policy and (v) such other information as Mortgagee
may reasonably request.
6. Condemnation and Insurance Proceeds.
(a) Mortgagor will promptly notify Mortgagee in writing upon
obtaining knowledge of (i) the institution of any proceedings relating to any
Taking, or (ii) the occurrence of any casualty, damage or injury to, any
Property or any portion thereof the restoration of which is estimated by
Mortgagor in good faith to cost more than the Threshold Amount. In addition,
notice of any casualty, damage, injury or Taking, the restoration of which is
estimated by Mortgagor in good faith to cost more than the Threshold Amount,
shall set forth such good faith estimate of the cost of repairing or restoring
such casualty, damage, injury or Taking in reasonable detail if the same is then
available and, if not, as soon thereafter as it can reasonably be provided.
(b) In the event of any Taking of or casualty or other damage or
injury to a Property, Mortgagor's rights, titles and interests in and to all
compensation, awards, proceeds, damages, claims, insurance recoveries, causes
and rights of action (whether accrued prior to or after the date hereof) and
payments which Mortgagor may receive or to which Mortgagor may become entitled
with respect to the Mortgaged Property or any part thereof other than payments
received in connection with any liability or loss of rental value or business
interruption insurance (collectively, "Proceeds"), in connection with any such
Taking of, or casualty or other damage or injury to, any Property or any part
thereof are hereby assigned by Mortgagor to, and shall be paid to, Mortgagee.
Such Proceeds shall be applied by Mortgagee to prepay the Note in accordance
with the provisions thereof if (i) the Proceeds shall equal or exceed the
Allocated Loan Amount with respect to the applicable Property, (ii) an Event of
Default shall have occurred and be
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continuing, (iii) a Total Loss with respect to the applicable Property shall
have occurred, (iv) the Work is not capable of being completed before the
earlier to occur of (x) the date which is six (6) months prior to the Maturity
Date, and (y) the date on which the business interruption insurance carried by
Mortgagor shall expire, (v) the applicable Property is not capable of being
restored substantially to its condition prior to such Taking or casualty, or
(vi) Mortgagor is unable to demonstrate to Mortgagee's reasonable satisfaction
its continuing ability to pay the Loan. Notwithstanding anything to the contrary
set forth in this Mortgage, however, and excluding situations requiring
prepayment of the Note, to the extent such Proceeds do not exceed the Threshold
Amount, or, if less than the Threshold Amount but when aggregated with all other
then unapplied Proceeds with respect to any Property, do not exceed $8,000,000
in the aggregate, such Proceeds are to be paid directly to Mortgagor to be
applied to restoration of the Mortgaged Property in accordance with the terms
hereof. Subject to the provisions of this Section 6(b) and Sections 6(d) and
6(f) hereof (except that Proceeds paid in respect of the insurance described in
Section 6(b) shall be deposited directly into the Operating Account (as defined
in the Cash Collateral Agreement), promptly after the occurrence of any damage
or destruction to all or any portion of such Property or a Taking of a portion
of such Property, in either case which shall not constitute a Total Loss,
Mortgagor shall either cause such Property to be released from the lien of this
Mortgage in accordance with Section 38 hereof, or shall commence and diligently
prosecute to completion, subject to Excusable Delays, the repair, restoration
and rebuilding of such Property (in the case of a partial Taking, to the extent
it is capable of being restored) (such repair, restoration and rebuilding are
sometimes hereinafter collectively referred to as the "Work") so damaged,
destroyed or remaining after such Taking in full compliance with all material
Legal Requirements and free and clear of any and all Liens except Permitted
Encumbrances; it being understood, however, that Mortgagor shall not be
obligated to restore such Property to the precise condition of the Property
prior to any partial Taking of, or casualty or other damage or injury to the
Property, if the Work actually performed, if any, or failed to be performed,
shall have no material adverse effect on the value of the Property from the
value that the Property would have had if the same had been restored to its
condition immediately prior to such Taking or casualty. Mortgagor will, in good
faith and in a commercially reasonable manner, file and prosecute the
adjustment, compromise or settlement of any claim for Proceeds and, subject to
Mortgagor's right to receive the direct payment of any Proceeds as provided
above, and, with respect to Proceeds from a Total Loss, subject to the
provisions below and subject to the applicable terms of the Leases, including
any rights of the Tenants thereunder, will cause the same to be paid directly to
Mortgagee, to be held and applied in accordance with the provisions of this
Mortgage. Except upon the occurrence and during the continuance of an Event of
Default, Mortgagor may settle any insurance claim with respect to Proceeds which
does not exceed the Threshold Amount. If an Event of Default shall have occurred
and be continuing, or if Mortgagor fails to file and/or prosecute any insurance
claim for a period of fifteen (15) Business Days following Mortgagor's receipt
of written notice from Mortgagee, Mortgagor
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hereby irrevocably empowers Mortgagee, in the name of Mortgagor as its true and
lawful attorney-in-fact, to file and prosecute such claim (including settlement
thereof) with counsel satisfactory to Mortgagee and to collect and to make
receipt for any such payment, all at Mortgagor's expense (including payment of
interest at the Default Rate for any amounts advanced by Mortgagee pursuant to
this Section 6(b)). In the event of (i) a Total Loss resulting from a casualty,
damage or destruction, if either (A) the cost to repair the Property as
estimated by the Independent Architect would exceed the Threshold Amount and the
restoration of the Property cannot reasonably be completed before the date which
is the later to occur of the date of expiration of any business interruption
insurance or the date of expiration of any Letter of Credit posted in lieu
thereof or in addition thereto and under such circumstances Mortgagor is not
required under the applicable Lease to make Proceeds available for restoration
of the Property, or (B) Mortgagee elects not to permit Mortgagor to restore the
Property or (ii) a Total Loss resulting from a Taking, Mortgagor shall be
required to comply with the provisions of Section 6(i) below and Mortgagee shall
apply such Proceeds, first toward reimbursement of Mortgagee's reasonable costs
and expenses in connection with recovery of the Proceeds (as further described
below), including, without limitation, reasonable administrative costs and
inspection fees, and then as required by Section 6(i) hereof. Any Proceeds
remaining after prepayment in part as set forth in Section 6(i) hereof shall be
paid to Mortgagor or as it may direct in writing. Whether or not an Event of
Default shall have occurred and be continuing, Mortgagee shall have the right to
approve, such approval not to be unreasonably withheld, any settlement which is
for Proceeds in excess of the Threshold Amount and Mortgagor will deliver or
cause to be delivered to Mortgagee all instruments reasonably requested by
Mortgagee to permit such approval. Mortgagor will pay all reasonable costs, fees
and expenses reasonably incurred by Mortgagee (including all reasonable
attorneys' fees and expenses, the reasonable fees of insurance experts and
adjusters and reasonable costs incurred in any litigation or arbitration), and
interest thereon at the Default Rate to the extent not paid within five (5)
Business Days after delivery of a request for reimbursement by Mortgagee, in
connection with the settlement of any claim for insurance or Taking Proceeds and
seeking and obtaining of any payment on account thereof in accordance with the
foregoing provisions. If any Proceeds are received by Mortgagor and may be
retained by Mortgagor pursuant to this Section 6, such Proceeds shall, until the
completion of the related Work, be held in trust for Mortgagee and shall be
segregated from other funds of Mortgagor to be used to pay for the cost of the
Work in accordance with the terms hereof, and in the event such Proceeds exceed
the Threshold Amount, such Proceeds shall be forthwith paid directly to and held
by Mortgagee in a segregated account in trust for Mortgagor, in each case to be
applied or disbursed in accordance with this Section 6.
(c) In the event that any Proceeds (other than Proceeds paid with
respect to the insurance described in Section 6(b)) are in excess of the
Threshold Amount, then all Proceeds (other than any portion of any Proceeds paid
with respect to the insurance described in Section
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6(b) which shall be deposited directly into the Operating Account) shall be paid
over to Mortgagee and shall be applied as follows: first, toward reimbursement
of Mortgagee's or its agent's reasonable costs and expenses in connection with
recovery of the Proceeds and disbursement of the Proceeds (as further described
below), including, without limitation, reasonable administrative costs and
inspection fees, and then, to the prepayment of the Indebtedness secured hereby
(which prepayment shall be made on the next Payment Date occurring after an
elected or required prepayment hereunder), without prepayment premium or
penalty, only if:
(i) (A) the amount of the Proceeds is equal to or
greater than the outstanding Principal Amount of the Note, or
(B) the casualty or Taking occurs on a date which
is less than one hundred-eighty (180) days prior to the final Maturity
Date (as defined in the Note), or
(C) more than twenty-five percent (25%) of the
rentable area of the applicable Property shall have been the subject of a
casualty or shall have been taken, or
(ii) such Proceeds were the result of a Taking, and
after restoration is completed, there are excess Proceeds which were not
required to effect such restoration, in which event prepayment shall be
made to the extent of such unneeded Proceeds. Any excess Proceeds shall be
applied to the prepayment of the Indebtedness secured hereby (which
prepayment shall be made on the next Payment Date occurring after
completion of the Work, without penalty or premium).
(d) Upon the occurrence and during the continuance of an Event of
Default hereunder, or in the event that any Proceeds are required to be paid to
Mortgagee pursuant to subparagraph (b) above, then all Proceeds while an Event
of Default exists, and any such Proceeds so required to be paid to Mortgagee
shall be paid over to Mortgagee (if not paid directly to Mortgagee) and shall be
applied first toward reimbursement of Mortgagee's reasonable costs and expenses
(plus interest thereon at the Default Rate to the extent not paid within five
(5) Business Days after delivery of a request for reimbursement by Mortgagee)
actually incurred in connection with recovery of the Proceeds and disbursement
of the Proceeds (as further described below), including reasonable
administrative costs and inspection fees, and then to be applied or disbursed in
accordance with this Section 6.
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Subject to Mortgagor's rights pursuant to Section 38(b) to cause the
Property to be released from the Lien of this Mortgage, Mortgagor shall be
obligated to restore, or cause the applicable Tenant to restore, the Property
following casualty or which has been subject to a partial Taking in accordance
with the provisions of this Section 6, whether or not the Proceeds shall be
sufficient, provided that, if applicable, the Proceeds shall be made available
to Mortgagor by Mortgagee in accordance with this Mortgage.
(e) Upon the occurrence and during the continuance of an Event of
Default hereunder, all Proceeds shall be paid over to Mortgagee and shall be
applied first toward reimbursement of Mortgagee's reasonable costs and expenses
actually incurred in connection with recovery of the Proceeds and disbursement
of the Proceeds (as further described below), including, without limitation,
reasonable administrative costs and inspection fees, and then to the payment or
prepayment of the Indebtedness secured hereby in accordance with Sections 20 and
21.
(f) If Proceeds are not required to be applied towards payment of
the Indebtedness pursuant to the terms hereof, then Mortgagee shall make the
Proceeds which it is holding pursuant to the terms hereof (after payment of any
reasonable expenses actually incurred by Mortgagee in connection with the
collection thereof plus interest thereon at the Default Rate to the extent the
same are not paid within five (5) Business Days after request for reimbursement
by Mortgagee) available to Mortgagor for payment of or reimbursement of
Mortgagor's or the applicable Tenant's expenses incurred with respect to the
Work, upon the terms and subject to the conditions set forth below and in
Section 6(g) hereof:
(i) at the time of loss or damage or at any time thereafter
while Mortgagor is holding any portion of the Proceeds, there shall be no
continuing Event of Default hereunder;
(ii) if the estimated cost of the Work (as estimated by the
Independent Architect referred to in clause (iii) below) shall exceed the
Proceeds, Mortgagor shall, at its option (within a reasonable period of
time after receipt of such estimate) either deposit with or deliver to
Mortgagee (and promptly following any such deposit or delivery, Mortgagor
shall provide written notice of same to the Rating Agencies) (A) Cash and
Cash Equivalents, (B) a Letter or Letters of Credit in an amount equal to
the estimated cost of the Work less the Proceeds available, or (C) such
other evidence of Mortgagor's ability to meet such excess costs and which
is reasonably satisfactory to Mortgagee and the Rating Agencies; and
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(iii) Mortgagee shall, within a reasonable period of time
prior to request for initial disbursement, be furnished with an estimate
of the cost of the Work accompanied by an Independent Architect's
certification as to such costs and appropriate plans and specifications
for the Work. The plans and specifications shall require that the Work be
done in a First Class workmanlike manner at least equivalent to the
quality and character of the original work in the Improvements (provided,
however, that in the case of a partial Taking, the Property restoration
shall be done to the extent reasonably practicable after taking into
account the consequences of such partial Taking), so that upon completion
thereof, the Property shall be at least equal in value and general utility
to the Property prior to the damage or destruction; it being understood,
however, that neither Mortgagor shall be obligated to restore the Property
to the precise condition of the Property prior to any partial Taking of,
or casualty or other damage or injury to, the Property, if the Work
actually performed, if any, or failed to be performed, shall have no
material adverse effect on the value of the Property from the value that
such Property would have had if the same had been restored to its
condition immediately prior to such Taking or casualty. Mortgagor shall
restore all Improvements such that when they are fully restored and/or
repaired, such Improvements and their contemplated use fully comply with
all applicable material Legal Requirements including zoning, environmental
and building laws, codes, ordinances and regulations.
(g) Disbursement of the Proceeds in Cash or Cash Equivalents to
Mortgagor shall be made from time to time (but not more frequently than once in
any month) by Mortgagee but only for so long as no Event of Default shall have
occurred and be continuing, as the Work progresses upon receipt by Mortgagee of
(i) an Officer's Certificate dated not more than ten (10) days prior to the
application for such payment, requesting such payment or reimbursement and
describing the Work performed that is the subject of such request, the parties
that performed such Work and the actual cost thereof, and also certifying that
such Work and materials are or, upon disbursement of the payment requested to
the parties entitled thereto, will be free and clear of Liens other than
Permitted Encumbrances and (ii) an Independent Architect's certificate
certifying performance of the Work together with an estimate of the cost to
complete the Work. No payment made prior to the final completion of the Work,
except for payment made to contractors whose Work shall have been fully
completed and from which final lien waivers have been received, shall exceed
ninety-five percent (95%) of the value of the Work performed and materials
furnished and incorporated into the Improvements from time to time, and at all
times the undisbursed balance of said Proceeds together with all amounts
deposited, bonded, guaranteed or otherwise provided for pursuant to clause
6(c)(ii) above, shall be at least sufficient to pay for the estimated cost of
completion of the Work; final payment of all Proceeds remaining with Mortgagee
shall be made upon receipt by Mortgagee of a certification by an Independent
Architect, as to the completion of the Work substantially in accordance with the
submitted plans
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and specifications, final lien releases, and the filing of a notice of
completion and the expiration of the period provided under the law of the State
in which the applicable Property is located for the filing of mechanic's and
materialmen's liens which are entitled to priority as to other creditors,
encumbrances and purchasers, as certified pursuant to an Officer's Certificate,
and delivery of a certificate of occupancy with respect to the Work, or, if not
applicable, an Officer's Certificate to the effect that a certificate of
occupancy is not required.
(h) If, after the Work is completed and all costs of completion have
been paid, there are excess Proceeds after repaying to Mortgagor any
out-of-pocket costs incurred by Mortgagor in connection with the performance of
the Work which costs were approved by Mortgagee in connection with its approval
of the Work, then upon ten (10) days' prior written notice from Mortgagor to
Mortgagee, provided no Event of Default has occurred and is then continuing,
Mortgagor shall have the option of directing Mortgagee to either (1) retain such
Proceeds in the Capital Expenditure Reserve Account to be applied by Mortgagor
to the cost of improvements, alterations, tenant improvements or other capital
improvements at the Property, or (2) apply such excess Proceeds with respect to
the Taking of or damage or injury to the Mortgaged Property to the payment or
prepayment of all or any portion of the Indebtedness secured hereby without
penalty or premium, provided, however, that any such prepayment shall not reduce
any Allocated Loan Amount.
(i) If (i) there is any casualty that constitutes a Total Loss and
Mortgagee elects not to permit Mortgagor to restore such Property, or (ii) there
is any Taking that constitutes a Total Loss and Mortgagee elects to apply the
Proceeds against the Indebtedness, or (iii) Mortgagor is otherwise required to
comply with this Section 6(i), then Mortgagor, in any such instance, must prepay
the Note, without premium or penalty, to the extent of the Proceeds received up
to an amount equal to 125% of the original Allocated Loan Amount with respect to
the relevant Property, and the Allocated Loan Amounts for all other Properties
shall be increased or decreased in the manner provided in the definition of
Allocated Loan Amount.
7. Impositions, Liens and Other Items.
(a) Mortgagor shall deliver to Mortgagee annually, no later than
twenty (20) Business Days after the first day of each fiscal year of Mortgagor,
and shall update as new information is received, a schedule describing all
Impositions payable or estimated to be payable during such fiscal year
attributable to or affecting the Mortgaged Property or Mortgagor. Subject to
Mortgagor's right of contest set forth in Section 7(c) hereof, as set forth in
the next two sentences, Mortgagee on behalf of Mortgagor shall pay all
Impositions which are attributable to or affect the Mortgaged Property or
Mortgagor, five (5) days prior to the date such Impositions shall become
delinquent or late charges may be imposed thereon, directly to the applicable
taxing
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authority with respect thereto. Mortgagee shall direct the Agent under the Cash
Collateral Agreement to pay to the taxing authority such amounts to the extent
funds in the Mortgage Escrow Account are sufficient to pay such Impositions. If
Mortgagor has delivered Mortgage Escrow Security in lieu of maintaining the
Mortgage Escrow Account, Mortgagor shall either deposit in the Mortgage Escrow
Account not less than five (5) days prior to the date the same are due an amount
sufficient to pay such Impositions, or Mortgagee shall draw down on the Mortgage
Escrow Security in such amount. Nothing contained in this Mortgage shall be
construed to require Mortgagor to pay any tax, assessment, levy or charge
imposed on Mortgagee in the nature of a franchise, capital levy, estate,
inheritance, succession, income or net revenue tax.
(b) Subject to its right of contest set forth in Section 7(c) hereof
and its rights set forth in Sections 11(c) and 11(d) hereof, Mortgagor shall at
all times keep the Mortgaged Property free from all Liens (other than the Lien
hereof and Permitted Encumbrances) and shall pay when due and payable all claims
and demands of mechanics, materialmen, laborers and others which, if unpaid,
might result in or permit the creation of a Lien on the Mortgaged Property or
any portion thereof and shall in any event cause the prompt, full and
unconditional discharge of all Liens imposed on or against the Mortgaged
Property or any portion thereof within thirty (30) days after receiving written
notice of the filing (whether from Mortgagee, the lienor or any other Person)
thereof. Mortgagor shall do or cause to be done, at the sole cost of Mortgagor,
everything reasonably necessary to fully preserve the first priority of the Lien
of this Mortgage against the Mortgaged Property subject to the Permitted
Encumbrances. Upon the occurrence of an Event of Default with respect to its
Obligations as set forth in this Section 7, Mortgagee may (but shall not be
obligated to) make such payment or discharge such Lien, and Mortgagor shall
reimburse Mortgagee on demand for all such advances pursuant to Section 16
hereof (together with interest thereon at the Default Rate).
(c) Nothing contained herein shall be deemed to require Mortgagor to
pay, or cause to be paid, any Imposition, to satisfy any Lien, or to comply with
any Legal Requirement or Insurance Requirement, so long as Mortgagor is in good
faith, and by proper legal proceedings, where appropriate, diligently contesting
the validity, amount or application thereof, provided that in each case, at the
time of the commencement of any such action or proceeding, and during the
pendency of such action or proceeding (i) no Event of Default shall exist and be
continuing hereunder, (ii) Mortgagor shall keep Mortgagee apprised of the status
of such contest, (iii) if Mortgagor is not providing security as provided in
clause (vi) below, adequate reserves with respect thereto are maintained on
Mortgagor's books in accordance with GAAP or in the Mortgage Escrow Account,
(iv) such contest operates to suspend collection or enforcement as the case may
be, of the contested Imposition or Lien and such contest is maintained and
prosecuted continuously and with diligence or the Imposition or Lien is bonded,
(v) in the case of any
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Insurance Requirement, the failure of Mortgagor to comply therewith shall not
impair the validity of any insurance required to be maintained by Mortgagor
under Section 5 hereof or the right to full payment of any claims thereunder,
and (vi) in the case of Impositions and Liens in excess of One Hundred Thousand
Dollars ($100,000) individually, or in the aggregate, during such contest,
Mortgagor, shall provide security in the form required by Section 6(f)(ii)
hereof in an amount reasonably requested by Mortgagee but in no event less than
one hundred twenty-five percent (125%) of (A) the amount of Mortgagor's
obligations being contested plus (B) any additional interest, charge, or penalty
arising from such contest. Notwithstanding the foregoing, the creation of any
such reserves or the furnishing of any bond or other security, Mortgagor
promptly shall comply with any contested Legal Requirement or Insurance
Requirement or shall pay any contested Imposition or Lien, and compliance
therewith or payment thereof shall not be deferred, if, at any time the
Mortgaged Property or any portion thereof shall be, in Mortgagee's reasonable
judgment, in imminent danger of being forfeited or lost or Mortgagee is likely
to be subject to civil or criminal damages as a result thereof. If such action
or proceeding is terminated or discontinued adversely to Mortgagor, Mortgagor
shall deliver to Mortgagee reasonable evidence of Mortgagor's compliance with
such contested Imposition, Lien, Legal Requirements or Insurance Requirements,
as the case may be.
8. Funds for Taxes and Insurance.
(a) Mortgagor shall pay into a segregated account (the "Mortgage
Escrow Account"), amounts sufficient to discharge the obligations of Mortgagor
under Sections 5 and 7(a) hereof as and when they become due (such amounts, the
"Mortgage Escrow Amounts"). As of the date hereof, Mortgagee shall initially
require payment into the Mortgage Escrow Account of a sum equal to one-twelfth
of the annual insurance premiums for individual policies required to be
maintained hereunder or one-twelfth of the pro-rata portion of the annual
insurance premiums due under any blanket policy affording the same required
coverage, for Impositions and all insurance being maintained by Mortgagor as of
the Closing Date. During each month thereafter, Mortgagee shall require payment
with respect to the annual Mortgage Escrow Amounts of a sum equal to one-twelfth
thereof, so that as each installment of such premiums and Impositions becoming
due and payable, Mortgagor shall have paid a sum sufficient to enable Mortgagee
to pay the same. If the amount of such premiums and Impositions has not been
definitely ascertained by Mortgagor at the time when any such monthly deposits
are to be paid, Mortgagee shall require payment of Mortgage Escrow Amounts based
upon the amount of such premiums and Impositions paid for the preceding year,
subject to adjustment as and when the amount of such premiums and Impositions
are ascertained by Mortgagor.
(b) At any time, Mortgagor may elect to replace any Mortgage Escrow
Amounts then being retained by Agent and satisfy its obligations under this
Section 8 by delivery
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of a Letter of Credit (which Letter of Credit shall be either an "evergreen"
Letter of Credit or shall not expire until a date two (2) months after the
Maturity Date (as defined in the Note) or Cash and Cash Equivalents (any such
security, "Mortgage Escrow Security") in an amount reasonably estimated by
Mortgagor to be one-half of the amount sufficient (including the amount of any
remaining Mortgage Escrow Amounts) to discharge the Impositions and insurance
premiums which shall become due during the twelve (12) month period immediately
after the date of delivery of such Mortgage Escrow Security (and for each twelve
(12) month period thereafter for so long as Mortgagor elects to post such
security in lieu of Mortgagee's retention of such amounts). Cash Equivalents
shall have maturities corresponding to the respective due dates of such
obligations. Notwithstanding the foregoing, it shall be a condition to
Mortgagor's delivery of any Mortgage Escrow Security (other than Cash) in
satisfaction of its obligations under this Section 8, that Mortgagor, at its
expense, execute, acknowledge and deliver or cause to be delivered to Mortgagee
such additional security agreements, financing statements and other documents or
instruments including an Opinion of Mortgagor's Counsel, and take all such
actions which in the reasonable opinion of Mortgagee or its counsel may be
necessary to grant and convey to Mortgagee a perfected security interest in and
to any and all of the Mortgage Escrow Security.
(c) The Mortgage Escrow Amounts shall be held by Agent pursuant to
the Cash Collateral Agreement (and any Mortgage Escrow Security posted in lieu
thereof pursuant to Section 8(b) hereof shall be held by Mortgagee), and shall
be applied in accordance with the Cash Collateral Agreement to the payment of
the obligations in respect of which such Mortgage Escrow Amounts were retained.
Upon the occurrence of an Event of Default and the acceleration of the Note, all
or any portion of such Mortgage Escrow Amounts (or any Mortgage Escrow Security
posted in lieu thereof) may be applied to the Indebtedness in such order or
priority as Mortgagee may elect (subject to Sections 20 and 21 hereof) and
Mortgagee may exercise any of its rights or remedies with respect to same
hereunder, at law or in equity. In the absence of such acceleration, any
Mortgage Escrow Amounts held by Agent (or Mortgage Escrow Security posted with
Mortgagee) that exceed the actual obligations for which they were retained,
shall be held and applied to the next due obligations or otherwise applied by
Mortgagee in accordance with the terms hereof. Nothing herein contained shall be
deemed to affect any right or remedy of Mortgagee under this Mortgage or
otherwise at law or in equity, to pay any such amount and to add the amount so
paid to the Indebtedness hereby secured. Any such application of said amounts or
any portion thereof to any Indebtedness secured hereby shall not be construed to
cure or waive any Default or notice of Default hereunder (or invalidate any act
done pursuant to any such Default or notice) until such amounts have been repaid
to Mortgagee by Mortgagor.
(d) Mortgagor shall deliver to Mortgagee all tax bills, bond and
assessment statements, statements of insurance premiums, and statements for any
obligations referred to
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above as soon as the same are received by Mortgagor, and Mortgagee shall cause
the same to be paid when due to the extent of Mortgage Escrow Amounts or
Mortgage Escrow Security available therefor. It is expressly acknowledged and
agreed that Mortgagee shall have no obligation whatsoever to advance from its
own funds any amounts in payment of all or any portion of such obligations.
9. License to Collect Rents. Mortgagee and Mortgagor hereby confirm
that Rents as they become due and payable under the Leases shall be deposited in
accordance with the provisions of the Assignment of Leases and the Cash
Collateral Agreement. Subject to the provisions of the Cash Collateral
Agreement, Mortgagee has granted to Mortgagor a license to cause the Rents to be
collected and deposited in accordance with the Cash Collateral Agreement. Any
rights of the Mortgagor hereunder shall not operate to subordinate this
assignment of leases to any subsequent assignment, in whole or in part by
Mortgagor, and any such subsequent assignment shall be subject to Mortgagee's
rights under this Mortgage. Mortgagor further agrees to execute and deliver such
assignments of leases as Mortgagee may from time to time reasonably request in
order to better assure, transfer and confirm to Mortgagee the rights intended to
be granted to Mortgagee with respect thereto. In accordance with the provisions
of the Assignment of Leases, upon the occurrence and during the continuance of
an Event of Default (1) Mortgagor agrees that Mortgagee may, but shall not be
obligated to, assume the management of the real property, and collect the Rents,
applying the same upon the Obligations and (2) Mortgagor hereby authorizes and
directs all tenants, purchasers or other persons occupying or otherwise
acquiring any interest in any part of the real property to pay the Rents due
under the Leases to Mortgagee upon Mortgagee's request. In the event Mortgagee
actually receives such Rents, after an Event of Default, any application of the
Rents by Mortgagee shall not constitute a misappropriation of the Rents by
Mortgagor pursuant to Section 33 hereof. Mortgagee shall have and hereby
expressly reserves the right and privilege (but assumes no obligation) to
demand, collect, sue for, receive and recover the Rents, or any part thereof,
now existing or hereafter made, and apply the same in accordance with this
Mortgage, the Assignment of Leases, and applicable law.
10. Security Agreement.
(a) Security Intended. Notwithstanding any provision of this
Mortgage to the contrary, the parties intend that this document constitutes
security for the payment and performance of the Obligations and shall be a
"mortgage" or "deed of trust" under applicable law. If, despite that intention,
a court of competent jurisdiction determines that this document does not qualify
as a "trust deed" or "deed of trust" under applicable law, then ab initio, this
instrument shall be deemed a realty mortgage under applicable law and shall be
enforceable as a realty mortgage, and Mortgagor shall be deemed a "mortgagor",
Mortgagee shall be deemed a
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"mortgagee", and Mortgagee shall have no capacity (but shall be disregarded and
all references to "Mortgagee" shall be deemed to refer to the "mortgagee" to the
extent not inconsistent with interpreting this instrument as though it were a
realty mortgage). As a realty mortgage, Mortgagor, as mortgagor, shall be deemed
to have conveyed the Property ab initio to Mortgagee as mortgagee, such
conveyance as a security to be void upon condition that Mortgagor pay and
perform all its Obligations. The remedies for any violation of the covenants,
terms and conditions of the agreements herein contained shall be as prescribed
herein or by general law, or, as to that part of the security in which a
security interest may be perfected under the UCC, by the specific statutory
consequences now or hereafter enacted and specified in the UCC, all at
Mortgagee's sole election.
(b) Fixture Filing. This Mortgage constitutes a financing statement
and, to the extent required under UCC ss.9-402(f) because portions of the
Property may constitute fixtures, this Mortgage is to be filed in the office
where a mortgage for the Land would be recorded. Mortgagee also shall be
entitled to proceed against all or portions of the Mortgaged Property in
accordance with the rights and remedies available under UCC ss.9-501(d).
Mortgagor is, for the purposes of this Mortgage, deemed to be the Debtor, and
Mortgagee is deemed to be the Secured Party, as those terms are defined and used
in the UCC. Mortgagor agrees that the Indebtedness and Obligations secured by
this Mortgage are further secured by security interests in all of Mortgagor's
right, title and interest in and to fixtures, equipment, and other property
covered by the UCC, if any, which are used upon, in, or about the Mortgaged
Property (or any part) or which are used by Mortgagor or any other person in
connection with the Mortgaged Property. Mortgagor grants to Mortgagee a valid
and effectual security interest in all of Mortgagor's right, title and interest
in and to such personal property (but only to the extent permitted in the case
of leased personal property), together with all replacements, additions, and
proceeds. Except for Permitted Encumbrances, Mortgagor agrees that, without the
written consent of Mortgagee, no other security interest will be created under
the provisions of the UCC and no lease will be entered into with respect to any
goods, fixtures, appliances, or articles of personal property now attached to or
used or to be attached to or used in connection with the Mortgaged Property
except as otherwise permitted hereunder. Mortgagor agrees that all property of
every nature and description covered by the lien and charge of this Mortgage
together with all such property and interests covered by this security interest
are encumbered as a unit, and upon and during the continuance of an Event of
Default by Mortgagor, all of the Mortgaged Property, at Mortgagee's option, may
be foreclosed upon or sold in the same or different proceedings or at the same
or different time, subject to the provisions of applicable law. The filing of
any financing statement relating to any such property or rights or interests
shall not be construed to diminish or alter any of Mortgagee's rights of
priorities under this Mortgage.
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11. Transfers, Indebtedness and Subordinate Liens. Unless such
action is permitted by the provisions of this Section 11, Section 15, Section 38
or Section 45 hereof, Mortgagor will not (i) Transfer all or any part of the
Mortgaged Property, (ii) incur Debt, (iii) mortgage, hypothecate or otherwise
encumber or grant a security interest in all or any part of the Mortgaged
Property, (iv) permit any transfer of any interest in Mortgagor (except as set
forth in clause (b) of this Section 11), or (iv) file a declaration of
condominium with respect to the Property. Mortgagor shall deliver to Mortgagee
written notice pursuant to the provisions of Section 26 hereof of any such
Transfer permitted pursuant to the provisions of this Section 11 or Section 15
hereof.
In connection with any Transfer or any series of Transfers that
affects (on a cumulative basis) more than ten percent (10%) of the value of the
Mortgaged Property, a Tax Opinion and a Nondisqualification Opinion shall be
furnished to Mortgagee.
(a) Sale of the Mortgaged Property. Mortgagor may transfer or
dispose of Building Equipment which is being replaced or which is no longer
necessary in connection with the operation of a Property free from the Lien of
this Mortgage provided that such transfer or disposal will not materially
adversely affect the value of the Mortgaged Property taken as a whole, will not
materially impair the utility of such Property, and will not result in a
reduction or abatement of, or right of offset against, the Rents payable under
any Lease, in either case as a result thereof, and provided that any new
Building Equipment acquired by Mortgagor (and not so disposed of) shall be
subject to the Lien of this Mortgage. Mortgagee shall, from time to time, upon
receipt of an Officer's Certificate requesting the same and confirming
satisfaction of the conditions set forth above, execute a written instrument in
form reasonably satisfactory to Mortgagee to confirm that such Building
Equipment which is to be, or has been, sold or disposed of is free from the Lien
of this Mortgage.
(b) Transfer of Interests in Mortgagor. Notwithstanding anything
contained herein to the contrary, Mortgagee's consent and Rating Agency
confirmation that the proposed transfer will not result in a downgrade,
withdrawal or qualification of the then current ratings of any securities backed
in part by this Mortgage shall be required with respect to Transfers of direct
or indirect beneficial interests in Mortgagor. For the purposes hereof, the sale
of stock in Tower Realty Trust, Inc. on a publicly traded exchange shall not be
deemed an indirect Transfer of a beneficial interest in Mortgagor. Mortgagor may
request Mortgagee's consent to such Transfers provided (i) no Event of Default
shall have occurred and be continuing, (ii) Mortgagor (or the transferor of such
interest) delivers such request for Mortgagee's consent to Mortgagee and the
Rating Agencies at least fifteen (15) Business Days prior to the proposed
effective date of such Transfer, (iii) Mortgagor remains a Single Purpose
Entity, (iv) no transfer of limited partner, non-managing member or shareholder
interests results in any one Person (or any group
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of Affiliates) owning, directly or indirectly, fifty percent (50%) of more of
the beneficial ownership interests of Mortgagor, and (iv) Tower Realty Operating
Partnership, L.P. shall at all times directly or indirectly own not less than
fifty-one percent (51%) of the beneficial interests in Mortgagor, and if
Mortgagor shall be a partnership, all general partners thereof shall be
wholly-owned subsidiaries of Tower Realty Operating Partnership, L.P. If ten
percent (10%) or more of direct beneficial interests in Mortgagor are
Transferred or if any Transfer shall result in a Person or a group of Affiliates
acquiring more than a fifty percent (50%) interest as set forth above, Mortgagor
shall also deliver or cause to be delivered to the Rating Agencies and Mortgagee
(x) an Opinion of Counsel addressed to the Rating Agencies and Mortgagee and
dated as of the date of the Transfer to the effect that in a properly presented
case, a bankruptcy court in a case involving such transferee, or any Affiliate
thereof, would not disregard the corporate or partnership forms of such entity,
their Affiliates and/or their partners, as the case may be, so as to consolidate
the assets and liabilities of such entity or entities and/or their Affiliates
with those of Mortgagor or their respective general partners, and (y) an
Officer's Certificate certifying that such Transfer is not an Event of Default.
(c) Indebtedness. Mortgagor shall not incur, create or assume any
Debt or incur any liabilities without the consent of Mortgagee; provided,
however, that if no Event of Default shall have occurred and be continuing,
Mortgagor may, without the consent of Mortgagee, incur, create or assume any or
all of the following indebtedness (collectively, "Permitted Debt"):
(i) the Note and the other obligations, indebtedness and
liabilities specifically provided for in any Loan Document and secured by
this Mortgage and the other Loan Documents;
(ii) amounts, not secured by Liens on the Mortgaged Property
(other than liens being properly contested in accordance with the
provisions of this Mortgage), not to exceed $2,000,000, payable by or on
behalf of Mortgagor for or in respect of the operation of the Mortgaged
Property or for trade debt incurred in the ordinary course of operating
Mortgagor's business, provided that (but subject to the terms of the next
sentence) each such amount shall be paid to trade creditors within sixty
(60) days following the date on which each such amount was actually due
and payable. Nothing contained herein shall be deemed to require Mortgagor
to pay any amount, so long as Mortgagor is in good faith, and by proper
legal proceedings, diligently contesting the validity, amount or
application thereof, provided that in each case, at the time of the
commencement of any such action or proceeding, and during the pendency of
such action or proceeding (i) no Event of Default shall exist and be
continuing hereunder, (ii) adequate reserves with respect thereto are
maintained on the books of Mortgagor in
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accordance with GAAP (as determined by the Independent Accountant), and
(iii) such contest operates to suspend collection or enforcement, as the
case may be, of the contested amount and such contest is maintained and
prosecuted continuously and with diligence. Notwithstanding anything set
forth herein, in no event shall Mortgagor be permitted under this
provision to enter into a note or other instrument for borrowed money; and
(iii) amounts, not secured by Liens on the Mortgaged Property
(other than liens being properly contested in accordance with the
provisions of this Mortgage), payable or reimbursable to any Tenant on
account of work performed at a Property by such Tenant or for costs
incurred by such Tenant in connection with its occupancy of space in the
Property, including for tenant improvements (provided, however, that
notwithstanding the foregoing, in no event shall Mortgagor be permitted
under this provision to enter into a note or other instrument for borrowed
money).
(d) Additional Permitted Transfers. Notwithstanding the above
provisions of this Section 11, Mortgagor may, without the consent of Mortgagee,
(i) make immaterial transfers of portions of a Property to Governmental
Authorities for dedication or public use (subject to the provisions of Section 6
hereof) or, portions of a Property to third parties, including owners of
outparcels, or other properties for the purpose of erecting and operating
additional structures whose use is integrated with the use of the Property, and
(ii) grant easements, restrictions, covenants, reservations and rights of way in
the ordinary course of business for access, water and sewer lines, telephone and
telegraph lines, electric lines or other utilities or for other similar purposes
or amend the Operating Agreements, provided that no such transfer, conveyance or
encumbrance set forth in the foregoing clauses (i) and (ii) shall materially
impair the utility and operation of such Property or materially adversely affect
the value of such Property taken as a whole. If Mortgagor shall receive any net
proceeds in connection with any such transfer or other conveyance, Mortgagor
shall have the right to use any such proceeds in connection with any Alterations
performed in connection with, or required as a result of, such conveyance.
Except as provided below with respect to any Taking, the amount of any net
proceeds received by Mortgagor in excess of the cost of such Alterations shall
be deposited in the Capital Reserve Account (which amounts shall be in addition
to, and not in lieu of, amounts otherwise required to be deposited pursuant to
Section 48(a) hereof, and shall be available to Mortgagor for use in performing
any further or other Alterations. Any amounts held in such account shall be
invested in accordance with Section 3(s) of the Cash Collateral Agreement. In
connection with any transfer, conveyance or encumbrance permitted pursuant to
this Section 11(d), Mortgagee shall execute and deliver any instrument
reasonably necessary or appropriate, in the case of the transfers referred to in
clause (i) above, to release the portion of such Property affected by such
Taking or such transfer from the Lien of this Mortgage or, in the case of clause
(ii) above, to
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subordinate the Lien of this Mortgage to such easements, restrictions,
covenants, reservations and rights of way or other similar grants by receipt by
Mortgagee of:
(i) a copy of the instrument of transfer; and
(ii) an Officer's Certificate stating (x) with respect to any
Transfer, the consideration, if any, being paid for the Transfer and (y)
that such Transfer does not materially impair the utility and operation of
the affected Property or materially reduce its value.
All Taking Proceeds shall be applied in accordance with the
provisions of Section 6 hereof.
(e) Not less than fifteen (15) Business Days prior to the closing of
any transaction subject to the provisions of this Section 11, transfers of a ten
percent (10%) direct or indirect beneficial interest in Mortgagor or of any
transfer that shall result in a Person acquiring a greater than forty-nine
percent (49%) interest in Mortgagor or of any transfer that shall result in a
Person that had a greater than forty-nine percent (49%) interest in Mortgagor
having less than a forty-nine percent (49%) interest in Mortgagor, Mortgagor
shall deliver to Mortgagee and the Rating Agencies (i) an Officer's Certificate
describing the proposed transaction and stating that such transaction is
permitted pursuant to the terms of this Section 11, together with any appraisal
or other documents upon which such Officer's Certificate is based, and (ii) an
Opinion of Counsel to the transferee, addressed to the Rating Agencies and
Mortgagee and dated as of the date of the Transfer, to the effect that, in a
properly presented case, a bankruptcy court in a case involving such transferee
would not disregard the corporate or partnership form of such transferee so as
to consolidate the assets and liabilities of such transferee with those of
Mortgagor or their respective general partners. Such Transfer shall be subject
to Rating Agency confirmation that the proposed transfer will not result in a
downgrade, withdrawal or qualification of the then current ratings of any
securities backed in part by this Mortgage. In addition, Mortgagor shall provide
Mortgagee and the Rating Agencies with copies of executed deeds, assignments of
Direct Beneficial Owner interests in Mortgagor, mortgages or other similar
closing documents within ten (10) days after such closing.
12. Maintenance of Mortgaged Property; Alterations; Inspection;
Utilities.
(a) Maintenance of Mortgaged Property. Mortgagor shall keep and
maintain the Mortgaged Property and every part thereof in good condition and
repair, subject to ordinary wear and tear, and, subject to Excusable Delays and
the provisions of this Mortgage with respect to damage or destruction caused by
casualty events or Takings, shall not permit or commit any
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waste, impairment, or deterioration of any portion of the Mortgaged Property in
any material respect. Mortgagor further covenants to do all other acts which
from the character or use of the Mortgaged Property may be reasonably necessary
to protect the security hereof, the specific enumerations herein not excluding
the general. Mortgagor shall not remove or demolish any Improvement except as
the same may be necessary in connection with an Alteration or a restoration in
connection with a Taking or casualty in accordance with the terms and conditions
hereof.
(b) No Changes in Use. Except as may be necessary in connection with
an Alteration permitted by Section 12(c) hereof, Mortgagor shall not make any
changes or allow any changes to be made in the nature of the use of a Property
or any part thereof or initiate or take any action in furtherance of any change
in any zoning or other land use classification affecting all or any portion of a
Property.
(c) Conditions to Alteration. Provided that no Event of Default
shall have occurred and be continuing hereunder, Mortgagor shall have the right,
without Mortgagee's consent, to undertake any alteration, improvement,
demolition or removal of a Property or any portion thereof (any such alteration,
improvement, demolition or removal, an "Alteration") so long as (i) Mortgagor
provides Mortgagee with prior written notice of any Material Alteration, and
(ii) any Alteration is undertaken in accordance with the applicable provisions
of this Mortgage and the other Loan Documents, is not prohibited by any relevant
Operating Agreements and the Leases and shall not upon completion (giving credit
to rent and other charges attributable to Leases executed upon such completion)
materially adversely (A) affect the value, use or operation of such Property
taken as a whole or (B) reduce the Net Operating Income for such Property from
the level available immediately prior to commencement of such Alteration. Any
Material Alteration with respect to any Property shall be conducted under the
supervision of an Independent Architect and no such Material Alteration shall be
undertaken until three (3) Business Days after there shall have been filed with
Mortgagee, for information purposes only and not for approval by Mortgagee,
detailed plans and specifications and cost estimates therefor, prepared by such
Independent Architect, as well as an Officer's Certificate stating that such
Alteration will involve an estimated cost of more than (I) the greater of the
Threshold Amount with respect to Alterations being undertaken at a single
Property at such time, or (II) the Aggregate Alteration Threshold Amount for
Alterations at all of the Properties. Such plans and specifications may be
revised at any time and from time to time by such Independent Architect provided
that material revisions of such plans and specifications are filed with
Mortgagee, for information purposes only. All work done in connection with any
Alteration shall be performed with due diligence in a good and workmanlike
manner, all materials used in connection with any Alteration shall not be less
than the standard of quality of the materials
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currently used at such Property and all materials used shall be in accordance
with all applicable material Legal Requirements and Insurance Requirements.
(d) Costs of Alteration. Notwithstanding anything to the contrary
contained in Section 12(c) hereof, no Material Alteration nor any Alteration
which when aggregated with all other Alterations (other than Material
Alterations) then being undertaken by Mortgagor (exclusive of Alterations being
directly paid for by Tenants) at the Properties exceeds the Aggregate Alteration
Threshold Amount, shall be performed by or on behalf of Mortgagor unless
Mortgagor shall have delivered to Mortgagee Cash and Cash Equivalents and/or a
Letter of Credit as security in an amount not less than the estimated cost
(exclusive of costs to be funded from amounts held in any Account) of the
Material Alteration or the Alterations in excess of the Threshold Amount (as set
forth in the Independent Architect's written estimate referred to above). In
addition to payment or reimbursement from time to time of Mortgagor's expenses
incurred in connection with any Material Alteration or any such Alteration, the
amount of such security shall be reduced on any given date by Mortgagee
delivering funds to Mortgagor in a sum equivalent to the Independent Architect's
written estimate of the cost to complete the Material Alterations or the
Alterations (including any retainages), free and clear of Liens, other than
Permitted Encumbrances. Costs which are subject to retainage (which in no event
shall be less than five percent (5%)) shall be treated as due and payable and
unpaid from the date they would be due and payable but for their
characterization as subject to retainage. In the event that any Material
Alteration or Alteration shall be made in conjunction with any restoration with
respect to which Mortgagor shall be entitled to withdraw Proceeds pursuant to
Sections 6(f) and 6(g) hereof, the amount of the Cash and Cash Equivalents
and/or Letter of Credit to be furnished pursuant hereto need not exceed the
aggregate cost of such restoration and such Material Alteration or Alteration
(as estimated by the Independent Architect), less the sum of the amount of any
Proceeds which Mortgagor may be entitled to withdraw pursuant to Sections 6(f)
and 6(g) hereof and which are held by Mortgagee in accordance with Section 6
hereof. Payment or reimbursement of Mortgagor's expenses incurred with respect
to any Material Alteration or any such Alteration shall be accomplished upon the
terms and conditions specified in Sections 6(f) through 6(g) hereof. At any time
after substantial completion of any Material Alteration or any such Alteration
in respect whereof Cash and Cash Equivalents and/or a Letter of Credit was
deposited pursuant hereto, the whole balance of any Cash and Cash Equivalents so
deposited by Mortgagee and then remaining on deposit (together with earnings
thereon), as well as all retainages, may be withdrawn by Mortgagor and shall be
paid by Mortgagee to Mortgagor, and any other Cash and Cash Equivalents and/or a
Letter of Credit so deposited or delivered shall, to the extent it has not been
called upon, reduced or theretofore released, be released to Mortgagor, within
ten (10) days after receipt by Mortgagee of an application for such withdrawal
and/or release together with an Officer's Certificate, and signed also (as to
the following clause (i)) by the Independent Architect, setting forth in
substance as follows:
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(i) that the Material Alteration or Alteration in respect of
which such Cash and Cash Equivalents and/or a Letter of Credit was
deposited has been substantially completed in all material respects in
accordance with any plans and specifications therefor previously filed
with Mortgagee under Section 12(c) hereof and that, if applicable, a
certificate of occupancy has been issued with respect to such Material
Alteration or Alteration by the relevant Governmental Authority(ies) or,
if not applicable, that a certificate of occupancy is not required; and
(ii) that to the knowledge of the certifying Person all
amounts which Mortgagor is or may become liable to pay in respect of such
Material Alteration or Alteration through the date of the certification
have been paid in full or adequately provided for or are being contested
in accordance with Section 7(c) hereof and that lien waivers have been
obtained from the general contractor and major subcontractors performing
such Material Alterations or Alterations (or such waivers are not
customary and reasonably obtainable by prudent managers in the area where
the Property is located).
(e) Right to Inspect. Mortgagee and any Persons authorized by it may
at all reasonable times and upon reasonable notice enter and examine each of the
Properties and may inspect all work done, labor performed and materials
furnished in and about the Property subject in all instances to the rights of
Tenants under Leases. Mortgagee shall have no duty to make any such inspection
and shall have no liability or obligation for making (except for its negligence
or willful misconduct) or not making any such inspection.
13. Legal Compliance. (a) Mortgagor and the Mortgaged Property and
the use thereof materially comply with all Legal Requirements (as defined
below). Mortgagor represents and warrants that, as of the date hereof, it has
not received notice of any violation of any Legal Requirement that remains
outstanding other than those to which Mortgagee has consented in writing.
Subject to Mortgagor's right to contest pursuant to Section 7(c) hereof,
Mortgagor shall comply with all material present and future laws, statutes,
codes, ordinances, orders, judgments, decrees, injunctions, rules, regulations
and requirements, and irrespective of the nature of the work to be done, of
every Governmental Authority including, without limitation, Environmental Laws,
consumer protection laws and all covenants, restrictions and conditions now or
hereafter of record which may be applicable to it or to any Property and the
Building Equipment thereon, or to the use, manner of use, occupancy, possession,
operation, maintenance, alteration, repair or reconstruction of any Property and
the Building Equipment thereon including, without limitation, building and
zoning codes and ordinances (collectively, the "Legal Requirements"), except
where the failure is not reasonably likely to have a Material Adverse Effect.
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(b) Mortgagor currently holds all certificates of occupancy,
licenses, registrations, permits, consents, franchises and approvals of any
Governmental Authority which are necessary for Mortgagor's ownership and
operation of the Properties or which are necessary for the conduct of
Mortgagor's business thereon. All such certificates of occupancy, licenses,
registrations, permits, consents, franchises and approvals are current and will
be kept current and in full force and effect.
14. Books and Records, Financial Statements, Reports and Other
Information.
(a) Books and Records. Mortgagor will keep and maintain on a fiscal
year basis proper books and records separate from any other Person, in which
accurate and complete entries shall be made of all dealings or transactions of
or in relation to the Note, the Mortgaged Property and the business and affairs
of Mortgagor relating to the Mortgaged Property, in accordance with GAAP, at
Mortgagor's election, prior to the original Maturity Date (as such term is
defined in the Note). Mortgagee and its authorized representatives shall have
the right at reasonable times and upon reasonable notice to examine the books
and records of Mortgagor relating to the operation of the Mortgaged Property and
to make such copies or extracts thereof as Mortgagee may reasonably require.
(b) Financial Statements.
(i) Quarterly Reports. Not later than forty-five (45) days
following the end of each calendar quarter (other than the fourth (4th)
quarter of any calendar year), Mortgagor will deliver to Mortgagee (with a
copy to the Rating Agencies) unaudited financial statements, internally
prepared, in accordance with GAAP, consistently applied, including a
balance sheet as of the end of such quarter, and a statement of revenues
and expenses through the end of such quarter, a statement of Net Operating
Income as to each Property for such quarter, and, only upon the request of
either the Rating Agencies or Mortgagee, a statement of profits and
losses. Such statements for each quarter shall be accompanied by an
Officer's Certificate certifying to the best of the signer's knowledge,
(A) that such statements fairly represent the financial condition and
results of operations of Mortgagor in accordance with GAAP consistently
applied, (B) that as of the date of such Officer's Certificate, no Default
exists under this Mortgage, the Note or any other Loan Document or, if so,
specifying the nature and status of each such Default and the action then
being taken by Mortgagor or proposed to be taken to remedy such Default,
(C) the Debt Service Coverage Ratio for the preceding calendar quarter and
calendar year, and (D) that as of the date of each Officer's Certificate,
no uninsured litigation exists involving Mortgagor or the Mortgaged
Property in which the amount involved is Two Hundred Fifty Thousand
Dollars ($250,000) or more, or, if so, specifying such litigation
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and the actions being taking in relation thereto in accordance with
Section 23 hereof. Such financial statements shall contain such other
information as shall be reasonably requested by Mortgagee for purposes of
calculations to be made by Mortgagee pursuant to the terms hereof.
In addition to the quarterly reports required under this
subsection (b)(i), Mortgagor shall deliver to Mortgagee and the Rating
Agencies, a list of all litigation and proceedings affecting Mortgagor or
the Mortgaged Property or any part thereof in which the amount involved is
Two Hundred Fifty Thousand Dollars ($250,000) or more, whether or not
covered by insurance and whether or not relief is being sought.
(ii) Annual Reports. Not later than ninety (90) days after the
end of each fiscal year of Mortgagor's operations, Mortgagor will deliver
to Mortgagee (with a copy to the Rating Agencies) audited financial
statements certified by an Independent Accountant, which statements shall
be prepared in accordance with GAAP consistently applied. Any statement
delivered under this sub-section shall include a balance sheet as of the
end of such year, a statement of Net Operating Income for each Property
for the year and for the fourth quarter thereof and a statement of
revenues and expenses for each Property for such year, and stating in
comparative form the figures for the previous fiscal year, as well as the
supplemental schedule of net income or loss presenting the net income or
loss and occupancy statistics for each Property. Such annual financial
statements shall also be accompanied by an Officer's Certificate in the
form required pursuant to Section 14(b)(i) hereof.
(c) Leasing Reports. Not later than forty-five (45) days after the
end of each fiscal quarter of Mortgagor's operations, Mortgagor will deliver to
Mortgagee (with a copy to the Rating Agencies) a true and complete rent roll for
each Property, dated as of the last month of such fiscal quarter, showing the
percentage of gross leasable area of each Property (and in the aggregate) leased
as of the last day of the preceding calendar quarter, the percentage of lease
rollovers for each Property (and in the aggregate) for the preceding calendar
quarter, a summary of new lease signings (including tenant name, square footage
occupied and designation of the tenant's operations as national, regional or
local) and lease terminations for the preceding calendar quarter, the current
annual rent for each Property, the expiration date of each lease, the various
options, if any, available to the tenant with respect to renewal (including the
amount of the rent in the event of renewal), whether to Mortgagor's knowledge
any portion of the Property has been sublet, and if it has, the name of the
subtenant, and the names of the Tenants under Material Leases expiring within
one (1) year of the date thereof, and such rent roll shall be accompanied by an
Officer's Certificate certifying that such rent roll is true, correct and
complete in all material respects as of its date and stating whether Mortgagor,
within the past three (3)
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months, has issued a notice of default with respect to any Lease which has not
been cured and the nature of such default.
(d) Capital Expenditures Summaries. Mortgagor shall, within
forty-five (45) days after the end of each calendar year during the term of the
Notes, deliver to Mortgagee and the Rating Agencies an annual summary of any and
all capital expenditures made at each Property during the prior twelve (12)
month period.
(e) Other Information. Mortgagor will, promptly after written
request by Mortgagee or the Rating Agencies, furnish or cause to be furnished to
Mortgagee, in such manner and in such detail as may be reasonably requested by
Mortgagee, such reasonable additional information as may be reasonably requested
by Mortgagee with respect to the Mortgaged Property, to the extent such
information is readily available to Mortgagor in the normal course of business
and will not result in additional expense to Mortgagor.
15. Compliance with Leases and Agreements.
(a) Leases and Operating Agreements. The Leases and the Operating
Agreements, if any, are in full force and effect. Mortgagor has neither given
to, nor received any notice of default from, any party to any of the Operating
Agreements, if any, or any Lease which remains uncured. To the best of
Mortgagor's knowledge, except as set forth in estoppel certificates delivered to
Mortgagee prior to the date hereof, no events or circumstances exist which with
or without the giving of notice, the passage of time or both, may constitute a
default under any of the Operating Agreements or the Leases on the part of
Mortgagor, or party thereunder. Mortgagor has complied with and performed all of
its material construction, improvement and alteration obligations with respect
to each Property required under the Operating Agreements and the Leases which
was required prior to the date hereof. Mortgagor will promptly after receipt
thereof deliver to Mortgagee a copy of any notice received with respect to the
Operating Agreements and the Leases, claiming that Mortgagor is in default in
the performance or observance of any of the material terms, covenants or
conditions of any of the Operating Agreements or the Leases.
(b) New Leases. Provided no Event of Default has occurred and is
then continuing, Mortgagor may, at all times, lease to any Person space within
each Property in a manner consistent with other First Class properties
comparable to the applicable Property and then current market conditions
existing in the applicable market area in which such Property is located, and
otherwise in accordance with this Mortgage. Each Lease entered into after the
date hereof (including the renewal or extension on or after the date hereof of
any Lease entered into prior to the date hereof if the rent payable during such
renewal or extension, or a formula or other
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method to compute such rent, is not provided for in such Lease (such a renewal
or extension a "Renewal Lease")) (A) shall provide for payment of rent and all
other material amounts payable thereunder at rates at least equal to the fair
market rental value (taking into account the type and creditworthiness of the
tenant, the length of tenancy, free rent periods and all other concessions to be
granted to the tenant by the landlord thereunder, and the location and size of
the unit so rented), as of the date such Lease is executed by Mortgagor, of the
space covered by such Lease or Renewal Lease for the term thereof, including any
renewal options, and (B) shall not contain any provision whereby the rent
payable thereunder would be based, in whole or in part, upon the net income or
profits derived by any Person from the Property (provided, however, that it may
contain a provision in which a portion of rent may be payable based on a
percentage of gross income), and (C) shall not prevent Proceeds from being held
and disbursed by Mortgagee in accordance with the terms hereof, and (D) shall
not entitle any tenant to receive and retain Proceeds except those that may be
specifically awarded to it in condemnation proceedings because of the Taking of
its trade fixtures and its leasehold improvements which have not become part of
the realty and such business loss as tenant may specifically and separately
establish. Mortgagor may not, without the consent of Mortgagee amend, modify or
waive the provisions of any Material Lease or terminate, reduce rents under or
shorten the term of any Material Lease in any manner which would have a material
adverse effect on the applicable Property taken as a whole.
(c) No Default Under Leases. Mortgagor shall (i) promptly perform
and observe all of the material terms, covenants and conditions required to be
performed and observed by Mortgagor under the Leases and the Operating
Agreements, if the failure to perform or observe the same would materially and
adversely affect the value of any Property; (ii) exercise, within fifteen (15)
Business Days after a written request by Mortgagee, any right to request from
the Tenant under any Lease or the party to any Operating Agreement a certificate
with respect to the status thereof; and (iii) not collect any of the Rents under
the Leases more than one (1) month in advance (except that Mortgagor may collect
(A) taxes semi-annually in advance from Tenants, (B) security deposits as are
permitted by Legal Requirements and are commercially reasonable in the
prevailing market and (C) other charges in accordance with the terms of each
Lease).
(d) Subordination, Non-Disturbance and Attornment. All Leases
entered into by Mortgagor after the date hereof, if any, shall be subject and
subordinate to this Mortgage; provided that, Mortgagee shall enter into, and, if
required by applicable law to provide constructive notice, record in the county
where the subject Property is located, a subordination, attornment and
non-disturbance agreement, in form and substance substantially similar to the
form attached hereto as Exhibit "C" (a "Nondisturbance Agreement"), with any
Tenant entering into a Lease after the date hereof provided that, with respect
to any Lease entered into after the
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date hereof, such request is accompanied by an Officer's Certificate stating
that such Lease complies in all respects with this Section 15. All reasonable
costs and expenses of Mortgagee in connection with the negotiation, preparation,
execution and delivery of any Nondisturbance Agreement including, without
limitation, reasonable attorneys' fees and disbursements shall be paid by
Mortgagor. Mortgagee shall enter into a Nondisturbance Agreement or an agreement
in any other form reasonably requested by such Tenant, provided that the same
does not materially increase the obligations or liabilities of Mortgagee from
what the same would have been under the form of Nondisturbance Agreement
attached hereto.
(e) Security Deposits. On the Closing Date, Mortgagor shall deposit
all security deposits received by Mortgagor required under the Leases and not
previously applied to satisfy obligations of Tenants under their respective
Leases, with interest thereon, if any, into the Security Deposit Account (as
defined in the Cash Collateral Agreement). For each Lease entered into after the
date hereof (including Renewal Leases), Mortgagor shall deliver irrevocable
written instructions to each Tenant to deposit the security deposit required
under the Lease, if any, directly into the Security Deposit Account. Within five
(5) Business Days after receipt of an Officer's Certificate stating that,
pursuant to the terms of the particular Lease, or upon termination of the Lease
as provided therein, the security deposit shall be released to the Tenant
thereunder, or to Mortgagor due to a default under the applicable Lease,
Mortgagee will instruct Agent to disburse funds in the amount equal to Tenant's
security deposit (and any related interest) from the Security Deposit Account
directly to Tenant or to Mortgagor as the case may be.
16. Mortgagee's Right to Perform. Upon the occurrence and during the
continuance of an Event of Default with respect to the performance of any of the
Obligations contained herein, Mortgagee may, without waiving or releasing
Mortgagor from any Obligation or Default under this Mortgage, but shall not be
obligated to, at any time perform the same, and the cost thereof, with interest
at the Default Rate from the date of payment by Mortgagee to the date such
amount is paid by Mortgagor, shall immediately be due from Mortgagor to
Mortgagee and the same shall be secured by this Mortgage and shall be a Lien on
the Mortgaged Property prior to any right, title to, interest in or claim upon
the Mortgaged Property attaching subsequent to the Lien of this Mortgage
(subject to the provisions of Section 11(d) hereof). No payment or advance of
money by Mortgagee under this Section 16 shall be deemed or construed to cure
Mortgagor's Default or waive any right or remedy of Mortgagee hereunder.
17. Mortgagor's Existence; Organization and Authority. For so long
as this Mortgage remains of record with respect to any of the Properties,
Mortgagor shall do all things necessary to preserve and keep in full force and
effect its existence, rights and privileges as a limited partnership, and its
right to own property or transact business in the states in which each
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of the Properties is located. For so long as any portion of the Indebtedness
shall remain outstanding, Mortgagor shall do all things necessary to continue to
be, a Single Purpose Entity (including without limitation, ensuring that its
general partner continues as a Single Purpose Entity), and shall prevent its
general partner from amending such general partner's formation documents, in any
manner that would enable such general partner to expand Mortgagor's business
purposes beyond those specified in such documents as of the date hereof.
Mortgagor hereby represents and warrants that it (i) is a duly organized and
validly existing limited partnership under the laws of the state of its
organization, (ii) has the power and authority to own its properties and to
carry on its business as now being conducted and as proposed to be conducted and
is qualified to do business in the states in which each Property is located, and
(iii) has the requisite power to execute and deliver and perform its obligations
under this Mortgage, the Note and each of the other Loan Documents. The
execution and delivery by Mortgagor of this Mortgage, the Note and each of the
other Loan Documents to be executed by Mortgagor, Mortgagor's performance of its
respective obligations thereunder and the creation of the security interest and
Liens provided for in this Mortgage have been duly authorized by all requisite
action on the part of Mortgagor, and will not violate in any material respect
any Legal Requirement, any order of any court or other Governmental Authority,
Mortgagor's certificate of limited partnership or partnership agreement or any
material indenture, agreement or other instrument to which Mortgagor is a party,
or by which Mortgagor is bound; and will not conflict with, result in a breach
of, or constitute (with due notice or lapse of time or both) a default under any
of the foregoing, or result in the creation or imposition of any Lien, of any
nature whatsoever, upon any of the property or assets of Mortgagor except the
Liens created hereunder. Mortgagor is not required to obtain any consent,
approval or authorization from or to file any declaration or statement with, any
Governmental Authority in connection with or as a condition to the execution,
delivery or performance of this Mortgage, the Note or the other Loan Documents
by Mortgagor other than those which have already been obtained or filed.
Mortgagor further represents and warrants that it is and, so long as any portion
of the Indebtedness shall remain outstanding, shall do all things necessary to
continue to be, a Single Purpose Entity.
18. Protection of Security; Costs and Expenses. Mortgagor shall
appear in and defend any action or proceeding of which it has notice purporting
to affect the security hereof or the rights or powers of Mortgagee or Mortgagee
hereunder and shall pay all costs and expenses, including, without limitation,
cost of evidence of title and reasonable attorneys' fees and disbursements, in
any such action or proceeding, and in any suit brought by Mortgagee to foreclose
this Mortgage or to enforce or establish any other rights or remedies of
Mortgagee hereunder upon the occurrence and during the continuance of an Event
of Default. If an Event of Default occurs under this Mortgage, or if any action
or proceeding is commenced in which it becomes necessary to defend or uphold the
Lien or priority of this Mortgage or which adversely affects Mortgagee or
Mortgagee's interest in the Mortgaged Property or any part thereof,
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including, but not limited to, eminent domain, enforcement of, or proceedings of
any nature whatsoever under any Legal Requirement affecting the Mortgaged
Property or involving Mortgagor's bankruptcy, insolvency, arrangement,
reorganization or other form of debtor relief, then Mortgagee, upon reasonable
notice to Mortgagor, may, but without obligation to do so and without releasing
Mortgagor from any obligation hereunder, make such appearances, disburse such
reasonable sums and take such action as Mortgagee reasonably deems necessary or
appropriate to protect Mortgagee's interest in the Mortgaged Property,
including, but not limited to, disbursement of reasonable attorneys' fees, entry
upon the Mortgaged Property to make repairs or take other action to protect the
security hereof, and payment, purchase, contest or compromise of any
encumbrance, charge or lien which in the reasonable judgment of Mortgagee
appears to be prior or superior hereto; provided, however, that the foregoing
shall be subject to Mortgagor's rights to contest under Section 7(c) hereof and
Mortgagee shall not pay or discharge any lien, encumbrance or charge being
contested by Mortgagor in accordance with Section 7(c) hereof. Mortgagor further
agrees to pay all reasonable costs and expenses of Mortgagee or Mortgagee
including reasonable attorneys' fees and disbursements incurred by Mortgagee or
Mortgagee in connection with (a) the negotiation, preparation, execution,
delivery and performance of this Mortgage, the Note and the other Loan
Documents, and (b) the performance of its obligations and exercise of its rights
under this Mortgage, the Note, and the other Loan Documents. All of the costs,
expenses and amounts set forth in this Section 18 shall be payable by Mortgagor,
on demand and, together with interest thereon at the Default Rate, if the same
are not paid within five (5) Business Days after demand therefor by Mortgagee
(or Mortgagee), until the date of repayment by Mortgagor, shall be deemed to be
Indebtedness hereunder and shall be a Lien on the Mortgaged Property prior to
any right, title, interest or claim upon the Mortgaged Property (subject to the
provisions of Section 11(d) hereof). Nothing contained in this Section 18 shall
be construed to require Mortgagee to incur any expense, make any appearance, or
take any other action.
19. Management of the Mortgaged Property.
(a) For purposes hereof, a "Qualifying Manager" shall mean any
property manager of national standing reasonably acceptable to Mortgagee, that,
as of the date of such designation, manages not less than ten (10) office
buildings in the region in which a Property is located. Notwithstanding the
foregoing, an Affiliates of Tower Realty Trust, Inc. shall be deemed an
acceptable manager to Mortgagee. Mortgagor shall notify Mortgagee and the Rating
Agencies in writing (and shall deliver a copy of the proposed management
agreement) of any entity proposed to be designated as a Qualifying Manager of
all or any of the Properties no less than thirty (30) days before such
Qualifying Manager begins to manage such Property or Properties and shall obtain
prior to any appointment of a Qualifying Manager a written confirmation from the
Rating Agencies that retention of such other Person as Manager shall not
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result in a downgrade, withdrawal or qualification of the then ratings of any
securities backed in part by this Mortgage.
(b) It is acknowledged and agreed that a Qualifying Manager may be
retained at Mortgagee's direction at any time following the occurrence and
during the continuance of an Event of Default.
(c) Upon the retention of a Qualifying Manager, Mortgagee shall have
the right to approve (which approval shall not be unreasonably withheld or
delayed) any new management agreement with such Qualifying Manager which is on
different terms. Mortgagor shall provide a copy of such new management agreement
to the Rating Agencies.
20. Remedies. Upon the occurrence and during the continuation of an
Event of Default, Mortgagee may take such actions against Mortgagor, subject to
Section 33 hereof, and/or against Mortgaged Property or any portion thereof as
Mortgagee determines is necessary to protect and enforce its rights hereunder,
without notice or demand except as set forth below or as required under
applicable law. Any such actions taken by Mortgagee shall be cumulative and
concurrent and may be pursued independently, singly, successively, together or
otherwise, at such time and in such order as Mortgagee may determine in its sole
discretion, to the fullest extent permitted by law, without impairing or
otherwise affecting the other rights and remedies of Mortgagee permitted by law,
equity or contract or as set forth herein or in the other Loan Documents.
Mortgagee's determination of appropriate action may be based on an appropriate
real estate or other consultant and/or counsel, and Mortgagee may rely
conclusively on such advice. Mortgagor shall pay such consultant's and
attorney's fees and expenses incurred by Mortgagee pursuant to this Section 20.
Such actions may include, without limitation, the following:
(a) Acceleration. Subject to any applicable provisions of the Note
and the other Loan Documents, Mortgagee may declare all or any portion of the
unpaid principal balance under the Note, together with all accrued and unpaid
interest thereon, and all other unpaid Indebtedness, to be immediately due and
payable.
(b) Entry. Subject to the provisions and restrictions of applicable
law, Mortgagee, personally, or by its agents or attorneys, at Mortgagee's
election, may enter into and upon all or any part of the Mortgaged Property
(including any Property and any part thereof), and may exclude Mortgagor, its
agents and servants therefrom (but such entry shall be subject to any
Nondisturbance Agreements then in effect); and Mortgagee, having and holding the
same, may use, operate, manage and control the Mortgaged Property or any part
thereof and conduct the business thereof, either personally or by its
superintendents, managers, agents, servants, attorneys
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or receiver. Upon every such entry, Mortgagee may, at the reasonable expense of
the Mortgaged Property and/or Mortgagor, from time to time, either by purchase,
repair or construction, maintain and restore the Mortgaged Property or any part
thereof, and may insure and reinsure the same in such amount and in such manner
as may seem to them to be advisable. Similarly, from time to time, Mortgagee
may, at the expense of Mortgagor (which amounts may be disbursed by Mortgagee
from the Mortgaged Property on behalf of Mortgagor), make all necessary or
proper repairs, renewals, replacements, alterations, additions, betterments and
improvements to and on the Mortgaged Property or any part thereof as it may seem
advisable. Mortgagee or its designee shall also have the right to manage and
operate the Mortgaged Property or any part thereof and to carry on the business
thereof and exercise all rights and powers of Mortgagor with respect thereto,
either in the name of Mortgagor or otherwise, as may seem to them to be
advisable. In confirmation of the grant made in Granting Clause (G) hereof, in
the case of the occurrence and continuation of an Event of Default, Mortgagee
shall be entitled to collect and receive all earnings, revenues, rents, issues,
profits and income of the Mortgaged Property or any part thereof (i.e., the
"Rents") to be applied in the order of priorities and amounts as shall be
provided for in Section 21 hereof. Mortgagee shall be liable to account only for
rents, issues and profits and other proceeds actually received by Mortgagee.
(c) Foreclosure. Prior to taking title to any Property (whether by
foreclosure, deed in lieu or otherwise), Mortgagee shall obtain, in each
instance, at Mortgagor's reasonable expense a new phase I environmental report
with respect to such Property, and such additional environmental studies as may
be recommended in such phase I report.
(i) Mortgagee, with or without entry, personally or by
its agents or attorneys, insofar as applicable, and in addition to any and
every other remedy, may (i) sell, to the extent permitted by law and
pursuant to the power of sale granted herein, all and singular the
Mortgaged Property, and all estate, right, title and interest, claim and
demand therein, and right of redemption thereof, at one or more sales, as
an entirety or in parcels, and at such times and places as required or
permitted by law and as are customary in any county or parish in which the
Property is located and upon such terms as Mortgagee may fix and specify
in the notice of sale to be given to Mortgagor (and on such other notice
published or otherwise given as provided by law), or as may be required by
law; (ii) institute proceedings for the complete or partial foreclosure of
this Mortgage under the provisions of the laws of the jurisdiction in
which the Mortgaged Property or any part thereof is located, or under any
other applicable provision of law; or (iii) take all steps to protect and
enforce the rights of Mortgagee, whether by action, suit or proceeding in
equity or at law (for the specific performance of any covenant, condition
or agreement contained in this Mortgage, or in aid of the execution of any
power herein granted, or for any foreclosure hereunder, or for the
enforcement of any other appropriate legal or
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equitable remedy), or otherwise, as Mortgagee, being advised by counsel
and its financial advisor, shall deem most advisable to protect and
enforce any of their rights or duties hereunder.
(ii) Mortgagee may conduct any number of sales from time
to time. The power of sale shall not be exhausted by any one or more such
sales as to any part of the Mortgaged Property remaining unsold, but shall
continue unimpaired until the entire Mortgaged Property shall have been
sold.
(iii) With respect to a Property, this Mortgage is made
upon any statutory conditions of the State in which such Property is
located, and, for any breach thereof or any breach of the terms of this
Mortgage, Mortgagee shall have the statutory power of sale, if any,
provided for by the laws of such State.
(d) Specific Performance. Mortgagee, in its sole and absolute
discretion, may institute an action, suit or proceeding at law or in equity for
the specific performance of any covenant, condition or agreement contained
herein or in the Notes or any other Loan Document, or in aid of the execution of
any power granted hereunder or for the enforcement of any other appropriate
legal or equitable remedy.
(e) Enforcement of Note. Subject to Section 33 hereof and to the
extent permitted under the provisions of applicable law, Mortgagee may recover
judgment on the Note (or any portion of the Indebtedness evidenced thereby),
either before, during or after any proceedings for the foreclosure (or partial
foreclosure) or enforcement of this Mortgage.
(f) Sale of Mortgaged Property; Application of Proceeds.
(i) Mortgagee may postpone any sale of all or any part
of the Mortgaged Property to be made under or by virtue of this Section 20
by public announcement at the time and place of such sale, or by
publication, if required by law, and, from time to time, thereafter, may
further postpone such sale by public announcement made at the time of sale
fixed by the preceding postponement.
(ii) Upon the completion of any sale made by Mortgagee
under or by virtue of this Section 20, Mortgagee shall execute and deliver
to the accepted purchaser or purchasers a good and sufficient deed or
deeds or other appropriate instruments, conveying, assigning and
transferring all its estate, right, title and interest in and to the
Property and rights so sold. Mortgagee is hereby appointed the true and
lawful irrevocable attorney-in-fact of Mortgagor in its name and stead or
in the name of Mortgagee to
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make all necessary conveyances, assignments, transfers and deliveries of
the Property and rights so sold, and, for that purpose, Mortgagee may
execute all necessary deeds and other instruments of assignment and
transfer, and may substitute one or more persons with like power,
Mortgagor hereby ratifying and confirming all that such attorney or
attorneys or such substitute or substitutes shall lawfully do by virtue
hereof. Mortgagor shall, nevertheless, if so requested in writing by
Mortgagee, ratify and confirm any such sale or sales by executing and
delivering to Mortgagee or to such purchaser or purchasers all such
instruments as may be advisable, in the judgment of Mortgagee, for such
purposes and as may be designated in such request. Any such sale or sales
made under or by virtue of this Section 20 shall operate to divest all the
estate, right, title, interest, claim and demand, whether at law or in
equity, of Mortgagor in and to the Property and rights so sold, and shall
be a perpetual bar, at law and in equity, against Mortgagor, its
successors and assigns and any Person claiming through or under Mortgagor
and its successors and assigns.
(iii) The receipt of Mortgagee for the purchase money
paid as a result of any such sale shall be a sufficient discharge therefor
to any purchaser of the Property or rights, or any part thereof, so sold.
No such purchaser, after paying such purchase money and receiving such
receipt, shall be bound to see to the application of such purchase money
upon or for any trust or purpose of this Mortgage, or shall be answerable,
in any manner, for any loss, misapplication or non-application of any such
purchase money or any part thereof, nor shall any such purchaser be bound
to inquire as to the authorization, necessity, expediency or regularity of
such sale.
(iv) Upon any sale made under or by virtue of this
Section 20, Mortgagee may bid for and acquire the Mortgaged Property or
any part thereof and, in lieu of paying cash therefor, may make settlement
for the purchase price by crediting upon the Note secured by this Mortgage
the net proceeds of sale, after deducting therefrom the expense of the
sale and the costs of the action and any other sums which Mortgagee is
authorized to deduct under this Mortgage. The person making such sale
shall accept such settlement without requiring the production of the Note
or this Mortgage, and without such production there shall be deemed
credited to the Indebtedness and Obligations under this Mortgage the net
proceeds of such sale. Mortgagee, upon acquiring the Mortgaged Property
or any part thereof, shall be entitled to own, hold, lease, rent, operate,
manage or sell the same in any manner permitted by applicable laws.
(g) Voluntary Appearance; Receivers. After the happening, and during
the continuance of, any Event of Default, and immediately upon commencement of
(i) any action,
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suit or other legal proceeding by Mortgagee to obtain judgment for the principal
and interest on the Notes and any other sums required to be paid pursuant to
this Mortgage, or (ii) any action, suit or other legal proceeding by Mortgagee
of any other nature in aid of the enforcement of the Loan Documents or any of
them, Mortgagor will (a) enter their voluntary appearance in such action, suit
or proceeding, and (b) if required by Mortgagee, consent to the appointment of
one or more receivers of the Mortgaged Property and of the earnings, revenues,
rents, issues, profits and income thereof. After the happening of any Event of
Default, or upon the filing of a bill in equity to foreclose this Mortgage or to
enforce the specific performance hereof or in aid thereof, or upon the
commencement of any other judicial proceeding to enforce any right of Mortgagee,
Mortgagee shall be entitled, as a matter of right, if it shall so elect, without
notice to any other party and without regard to the adequacy of the security of
the Mortgaged Property, forthwith, either before or after declaring the
principal and interest on the Notes to be due and payable, to the appointment of
such a receiver or receivers. Any receiver or receivers so appointed shall have
such powers as a court or courts shall confer, which may include, without
limitation, any or all of the powers which Mortgagee is authorized to exercise
by the provisions of this Section 20, and shall have the right to incur such
obligations and to issue such certificates therefor as the court shall
authorize. Notwithstanding the foregoing, Mortgagee as a matter of right may
appoint or secure the appointment of a receiver, trustee, liquidator or similar
official of the Mortgaged Property or any portion thereof, and Mortgagor hereby
irrevocably consents and agrees to such appointment, without notice to Mortgagor
and without regard to the value of the Mortgaged Property or adequacy of the
security for the Indebtedness and without regard to the solvency of the
Mortgagor or any other Person liable for the payment of the Indebtedness, and
such receiver or other official shall have all rights and powers permitted by
applicable law and such other rights and powers as the court making such
appointment may confer, but the appointment of such receiver or other official
shall not impair or in any manner prejudice the rights of Mortgagee to receive
the Rents with respect to any of the Mortgaged Property pursuant to this
Mortgage, the Assignment of Leases or the Cash Collateral Agreement.
(h) UCC Remedies. Mortgagee may exercise any or all of the remedies
granted to a secured party under the UCC, specifically including, without
limitation, the right to recover the attorneys' fees and other expenses incurred
by Mortgagee in the enforcement of this Mortgage or in connection with
Mortgagor's redemption of the Improvements or Building Equipment. Mortgagee may
exercise its rights under this Mortgage independently of any other collateral or
guaranty that Mortgagor may have granted or provided to Mortgagee in order to
secure payment and performance of the Obligations, and Mortgagee shall be under
no obligation or duty to foreclose or levy upon any other collateral given by
Mortgagor to secure any Obligation or to proceed against any guarantor before
enforcing its rights under this Mortgage.
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(i) Leases. Mortgagee may, at its option, before any proceeding for
the foreclosure (or partial foreclosure) or enforcement of this Mortgage, treat
any Lease which is subordinate by its terms to the Lien of this Mortgage, as
either subordinate or superior to the Lien of this Mortgage.
(j) Other Rights. Mortgagee may pursue against Mortgagor any other
rights and remedies of Mortgagee permitted by law, equity or contract or as set
forth herein or in the other Loan Documents.
(k) Retention of Possession. Notwithstanding the appointment of any
receiver, liquidator or trustee of Mortgagor, or any of its property, or of the
Mortgaged Property or any part thereof, Mortgagee to the extent permitted by
law, shall be entitled to retain possession and control of all property now or
hereafter granted to or held by Mortgagee under this Mortgage.
(l) Suits by Mortgagee. All rights of action under this Mortgage may
be enforced by Mortgagee without the possession of the Note and without the
production thereof or this Mortgage at any trial or other proceeding relative
thereto. Any such suit or proceeding instituted by Mortgagee shall be brought in
the name of Mortgagee and any recovery of judgment shall be subject to the
rights of Mortgagee.
(m) Remedies Cumulative. Subject to Section 33 hereof, no remedy
herein conferred upon or reserved to Mortgagee shall exclude any other remedy,
and each such remedy shall be cumulative and in addition to every other remedy
given hereunder or now or hereafter existing at law or in equity. No delay or
omission of Mortgagee to exercise any right or power accruing upon any Event of
Default shall impair any such right or power, or shall be construed to be a
waiver of any such Event of Default or an acquiescence therein. Every power and
remedy given to Mortgagee by this Mortgage to the Mortgagee may be exercised
from time to time and as often as the Mortgagee may deem expedient. Nothing in
this Mortgage shall affect Mortgagor's obligations to pay the principal of, and
interest on, the Note in the manner and at the time and place expressed in the
Note.
(n) Waiver of Rights. Mortgagor agrees that, to the fullest extent
permitted by law, it will not at any time, (1) insist upon, plead or claim or
take any benefit or advantage of any stay, extension or moratorium law, wherever
enacted, now or at any time hereafter in force, which may affect the covenants
and terms of performance of this Mortgage, (2) claim, take or insist upon any
benefit or advantage of any law, now or at any time hereafter in force,
providing for valuation or appraisal of the Mortgaged Property, or any part
thereof, prior to any sale or sales thereof which may be made pursuant to any
provision herein contained, or pursuant to the
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decree, judgment or order of any court of competent jurisdiction, or (3) after
any such sale or sales, claim or exercise any right, under any statute
heretofore or hereafter enacted by the United States of America, any State
thereof or otherwise, to redeem the Property and rights sold pursuant to such
sale or sales or any part hereof. Mortgagor hereby expressly waives all benefits
and advantages of such laws, and covenants, to the fullest extent permitted by
law, not to hinder, delay or impede the execution of any power herein granted or
delegated to Mortgagee or the Mortgagees, but will suffer and permit the
execution of every power as though no such laws had been made or enacted.
Mortgagor for itself and all who may claim through or under it, waives, to the
extent it lawfully may do so, any and all homestead rights and, any and all
rights to reinstatement, any and all right to have the property comprising the
Mortgaged Property marshaled upon any foreclosure of the Lien hereof.
21. Application of Proceeds.
(a) Sale Proceeds. The proceeds of any sale or foreclosure of the
Mortgaged Property or any portion thereof shall be applied to the following in
the following order of priority the payment of: (i) the costs and expenses of
the foreclosure proceedings with respect to the Property (including reasonable
counsel fees and disbursements actually incurred and advertising costs and
expenses), liabilities and advances made or incurred under this Mortgage, and
reasonable receivers' and trustees' fees and commissions and fees and expenses
incurred by Mortgagee, together with interest at the Default Rate to the extent
payable, (ii) any other sums advanced by Mortgagee (or any advancing agent on
its behalf) in accordance with the terms hereof and not repaid to it by
Mortgagor, together with interest at the Default Rate to the extent payable,
(iii) all sums due under the Note in the order of priority set forth therein,
and (iv) any surplus to Mortgagor or other party legally entitled thereto.
(b) Other Proceeds. All Proceeds or other amounts collected by
Mortgagee and applied to pay interest or principal of the Note or other amounts
due on this Mortgage following an Event of Default and acceleration of the Note
shall be applied (1) first, to reimburse any expenses related to such collection
and (2) thereafter, as provided in Section 21(a) hereof. If the Note has not
been accelerated, any amount available to make payments or applied in lieu of
such payments thereon shall be applied (1) first, to interest due or overdue on
the Note, (2) then, any amounts applied to pay or applied in lieu of paying
principal on the Note then due shall be applied to pay or applied in lieu of
paying each Note in order of priority, and (3) thereafter, to Mortgagor.
22. CERTAIN WAIVERS. TO INDUCE MORTGAGEE TO CONSUMMATE THE
TRANSACTIONS CONTEMPLATED BY THE NOTES AND THIS MORTGAGE, AND FOR OTHER GOOD AND
VALUABLE CONSIDERATION,
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THE RECEIPT AND SUFFICIENCY OF WHICH ARE HEREBY ACKNOWLEDGED, MORTGAGOR AND EACH
OF THE PARTNERS COMPRISING MORTGAGOR EXPRESSLY AND IRREVOCABLY HEREBY WAIVES THE
FOLLOWING RIGHTS, IN ADDITION TO AND NOT IN DEROGATION OF ALL OTHER WAIVERS
CONTAINED IN THE NOTE, THIS MORTGAGE AND THE OTHER LOAN DOCUMENTS:
(a) WAIVER OF RIGHT TO TRIAL BY JURY. MORTGAGOR HEREBY WAIVES AND
SHALL WAIVE TRIAL BY JURY IN ANY ACTION OR PROCEEDING BROUGHT BY, OR
COUNTERCLAIM ASSERTED BY MORTGAGEE WHICH ACTION, PROCEEDING OR COUNTERCLAIM
ARISES OUT OF OR IS CONNECTED WITH THIS MORTGAGE, THE NOTE OR ANY OTHER LOAN
DOCUMENTS.
23. Notice of Certain Occurrences. In addition to all other notices
required to be given by Mortgagor hereunder, Mortgagor shall give notice to
Mortgagee and the Rating Agencies promptly upon the occurrence of: (a) any
Default or Event of Default; (b) any litigation or proceeding affecting
Mortgagor or the Mortgaged Property or any part thereof in which the amount
involved is Two Hundred Fifty Thousand Dollars ($250,000) or more and not
covered by insurance or in which injunctive or similar relief is sought and
likely to be obtained; and (c) a material adverse change in the business,
operations, property or financial condition of Mortgagor or the Mortgaged
Property.
24. Trust Funds. To the extent required by applicable law, all
security deposits paid under the Leases shall be treated as trust funds and not
commingled with any other funds of Mortgagor. Within ten (10) days after request
by Mortgagee, Mortgagor shall furnish Mortgagee with satisfactory evidence of
compliance with this Section 24, together with a statement of all security
deposits by Tenants under the Leases, which statement shall be certified by
Mortgagor.
25. Taxation. In the event a law is passed after the date hereof of
the United States or of any state in which a Property is located either (a)
changing in any way the laws for the taxation of mortgages or debts secured
thereby for federal, state or local purposes, or the manner of collection of any
such taxes, or (b) imposing a tax, either directly or indirectly, on mortgages
or debts secured thereby, in each case other than income taxes, franchise taxes,
or withholding taxes, that materially adversely affects Mortgagee, Mortgagee
shall have the right to declare the Note due on a date to be specified by not
less than ninety (90) days' written notice to be given to Mortgagor unless
within such ninety (90) day period Mortgagor shall assume as an
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obligation hereunder the payment of any tax so imposed until full payment of the
Note provided such assumption shall be permitted by law.
26. Notices. Any notice, election, request or demand which by any
provision of this Mortgage is required or permitted to be given or served
hereunder shall be in writing and shall be given or served by hand delivery
against receipt, by any nationally recognized overnight courier service
providing evidence of the date of delivery or by certified mail return receipt
requested, postage prepaid, addressed to Mortgagor at: 120 West 45th Street,
24th Floor, New York, New York 10036-4003, Attention: Lawrence H. Feldman, with
a copy to Tower Realty Operating Partnership, L.P. 120 West 45th Street, 24th
Floor, New York, New York 10036-4003, Attention: Lawrence H. Feldman, with a
copy to Battle Fowler LLP, 75 East 55th Street, New York, New York 10022,
Attention: Bradley A. Kaufman, Esq.; if to Mortgagee, addressed to Mortgagee at:
World Financial Center, North Tower, New York, New York 10281-1326, Attention:
Frederick T. Kelly, with a copy to Skadden, Arps, Slate, Meagher & Flom LLP, 919
Third Avenue, New York, New York 10022, Attention: Martha Feltenstein, Esq., or
at such other address as shall be designated from time to time by Mortgagor,
Mortgagee or Mortgagee by notice given in accordance with the provisions of this
Section 26. Any such notice or demand given hereunder shall be effective upon
receipt. All notices, elections, requests and demands required or permitted
under this Mortgage shall be in the English language.
27. No Oral Modification. This Mortgage may not be waived, altered,
amended, modified, changed, discharged or terminated orally but only by a
written agreement signed by the party against which enforcement is sought.
28. Partial Invalidity. In the event any one or more of the
provisions contained in this Mortgage shall for any reason be held to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision hereof, but each shall be
construed as if such invalid, illegal or unenforceable provision had never been
included hereunder.
29. Successors and Assigns. All covenants of Mortgagor contained in
this Mortgage are imposed solely and exclusively for the benefit of Mortgagee
and its successors and assigns, and no other Person shall have standing to
require compliance with such covenants or be deemed, under any circumstances, to
be a beneficiary of such covenants, any or all of which may be freely waived in
whole or in part by Mortgagee at any time if in its sole discretion it deems it
advisable to do so. All such covenants of Mortgagor shall run with the land and
bind Mortgagor, the successors and assigns of Mortgagor (and each of them) and
all subsequent owners, encumbrancers and Tenants of the Mortgaged Property, and
shall inure to the benefit of Mortgagee, its successors and assigns.
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30. Governing Law. Subject to the provisions of Section 52 hereof,
this Mortgage, the obligations arising hereunder and the provisions for the
creation, perfection and enforcement of the Liens and security interest created
pursuant to this Mortgage and the Assignment of Leases shall be governed by and
construed in accordance with, the laws of the State of New York applicable to
contracts made and performed in the State of New York and any applicable laws of
the United States of America. Whenever possible, each provision of this Mortgage
shall be interpreted in such a manner as to be effective and valid under
applicable law, but if any provision of this Mortgage shall be prohibited by, or
invalid under, applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity without invalidating the remaining provisions
of this Mortgage. Nothing contained in this Mortgage or in any Loan Document
shall require either Mortgagor to pay or Mortgagee to accept any sum in any
amount which would, under applicable law, subject Mortgagee, or any Mortgagee to
penalty or adversely affect the enforceability of this Mortgage. In the event
that the payment of any sum due hereunder or under any Loan Document would have
such result under applicable law, then, ipso facto, the obligation of Mortgagor
to make such payments shall be reduced to the highest sum then permitted under
applicable law and appropriate adjustment shall be made by Mortgagor and
Mortgagee.
31. Certain Representations, Warranties and Covenants. (a) Recording
Fees, Taxes, Etc. Mortgagor hereby agrees to take all such further reasonable
actions, and to pay all taxes, recording fees, charges, costs and other expenses
including, without limitation, reasonable attorneys' and professional fees and
disbursements which are currently or in the future shall be imposed, and which
may be required or necessary to establish, preserve, protect or enforce the Lien
of this Mortgage.
(b) No Offsets. Mortgagor warrants, covenants and represents to
Mortgagee that there exists no cause of action at law or in equity that would
constitute any offset, counterclaim or deduction against the Indebtedness or
Obligations.
(c) Full and Accurate Disclosure. To the best of Mortgagor's
knowledge, no statement of fact made by or on behalf of Mortgagor in this
Mortgage or in any of the other Loan Documents contains any untrue statement of
a material fact or omits to state any material fact necessary to make statements
contained herein or therein not misleading as of the date made. There is no fact
presently known to Mortgagor which has not been disclosed which adversely
affects, nor as far as Mortgagor can foresee, might adversely affect, the
business, operations or condition (financial or otherwise) of Mortgagor.
(d) Tax Filings. Mortgagor has filed all federal, state and local
tax returns required to be filed prior to the date hereof and has paid or made
adequate provision for the
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payment of all federal, state and local taxes, charges and assessments shown to
be due from Mortgagor on such tax returns.
(e) No Litigation. No litigation is pending or, to Mortgagor's best
knowledge, threatened against Mortgagor which, if determined adversely to
Mortgagor, would have a material adverse effect on the Property or the security
created hereby and no Taking has been commenced or, to Mortgagor's best
knowledge, is contemplated with respect to all or any portion of the Mortgaged
Property or for the relocation of roadways providing access to the Mortgaged
Property. Mortgagor has delivered to Mortgagee and the Rating Agencies a
certificate setting forth all litigation affecting Mortgagor or the Properties.
(f) Solvency. The fair saleable value of Mortgagor's assets exceeds
and will, immediately following the issuance and sale of the Note and the
consummation of the other transactions contemplated to take place simultaneously
therewith, exceed Mortgagor's liabilities, including subordinated, unliquidated,
disputed and contingent liabilities. Mortgagor's assets do not and, immediately
following the issuance and sale of the Note and the consummation of the other
transactions contemplated to take place simultaneously therewith will not,
constitute unreasonably insufficient capital to carry out its business as
conducted or as proposed to be conducted. Mortgagor does not intend to, and does
not believe that it will, incur debts and liabilities (including, without
limitation, contingent liabilities) beyond its ability to pay such debts as they
mature.
(g) ERISA. Mortgagor is not an "employee benefit plan" (within the
meaning of Section 3(3) of ERISA) to which ERISA applies and Mortgagor's assets
do not constitute plan assets. No actions, suits or claims under any laws and
regulations promulgated pursuant to ERISA are pending or, to Mortgagor's
knowledge, threatened against Mortgagor. Mortgagor has no knowledge of any
material liability incurred by Mortgagor which remains unsatisfied for any taxes
or penalties with respect to any employee benefit plan or any Multiemployer
Plan, or of any lien which has been imposed on Mortgagor's assets pursuant to
Section 412 of the Code or Sections 302 or 4068 of ERISA.
(h) Claims. No claims, actions, suits, proceedings or investigations
whether judicial or otherwise are pending or, to the best knowledge of
Mortgagor, threatened against Mortgagor before any domestic or foreign court or
administrative, arbitral, governmental or regulatory authority or agency which,
if determined adversely to Mortgagor, would have a material adverse effect on
the security created hereby. Mortgagor has delivered to Mortgagee a certificate
setting forth all claims pending against Mortgagor.
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(i) Liens. No Lien, other than Permitted Encumbrances, which remains
outstanding as of the date hereof, including, without limitation, any tax lien,
has been levied against the Mortgaged Property.
(j) Outstanding Liabilities. No outstanding liabilities of Mortgagor
exist which, individually or in the aggregate, would have a material adverse
effect on the security created hereby or would materially adversely affect the
condition (financial or otherwise) of Mortgagor other than as disclosed for in
financial statements and other required reports delivered by Mortgagor to
Mortgagee, pursuant to the terms of this Mortgage. Mortgagor has delivered to
Mortgagee a certificate setting forth all liabilities of Mortgagor.
(k) Creditors' Claims. To Mortgagor's best knowledge, no claim of
any creditor of Mortgagor would have a material adverse effect on the security
created hereby or would materially adversely affect the condition (financial or
otherwise) of Mortgagor. Mortgagor has delivered to Mortgagee a certificate
setting forth all such claims of creditors of Mortgagor.
(l) Enforceability of Loan Documents. This Mortgage and the other
Loan Documents are the legal, valid and binding obligations of Mortgagor,
enforceable against Mortgagor in accordance with their terms, subject to
applicable bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and other laws affecting creditor's rights generally in effect from
time to time.
(m) Contingent Liabilities. Mortgagor does not have any known
material contingent liabilities.
(n) No Other Debt. Mortgagor has not borrowed or received debt
financing (other than financing evidenced by the Note) that has not been
heretofore repaid in full.
(o) Fraudulent Conveyance. Mortgagor represents and warrants as
follows: (i) it has not entered into this Mortgage or the other Loan Documents
or the transactions contemplated hereby or thereby with the actual intent to
hinder, delay, or defraud any creditor, and (ii) it has received reasonably
equivalent value in exchange for its obligations under this Mortgage and the
other Loan Documents. Giving effect to the transactions contemplated by this
Mortgage and the other Loan Documents, the fair saleable value of the assets of
Mortgagor exceeds and will, immediately following the execution and delivery of
this Mortgage and the other Loan Documents, exceed the total liabilities of
Mortgagor, including, without limitation, subordinated, unliquidated, disputed
or contingent liabilities. The fair saleable value of the assets of Mortgagor is
and will, immediately following the execution and delivery of this Mortgage and
the other
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Loan Documents, be greater than Mortgagor's probable liabilities, including the
maximum amount of the contingent liabilities of Mortgagor or their debts as such
debts become absolute and matured. The assets of Mortgagor do not and,
immediately following the execution and delivery of this Mortgage and the other
Loan Documents will not, constitute unreasonably small capital to carry out the
business of Mortgagor as conducted or as proposed to be conducted. Mortgagor
does not intend to, and does not believe that it will, incur debts and
liabilities (including, without limitation, contingent liabilities and other
commitments) beyond its ability to pay such debts as they mature (taking into
account the timing and amounts to be payable on or in respect of obligations of
Mortgagor).
(p) Access/Utilities. The Property has adequate rights of access to
public ways and is served by adequate water, sewer, sanitary sewer and storm
drain facilities. All public utilities necessary to the continued use and
enjoyment of a Property as presently used and enjoyed are located in the public
right-of-way abutting the Property, and all such utilities are connected so as
to serve the Property without passing over other property. All roads necessary
for the full utilization of the Property for its current purpose have been
completed and dedicated to public use and accepted by all governmental
authorities or are the subject of access easements for the benefit of the
Property.
(q) Special Assessments. Except to the extent set forth in Schedule
3, there are no pending or, to the knowledge of Mortgagor, proposed special or
other assessments for public improvements or otherwise affecting a Property,
nor, to the knowledge of Mortgagor, are there any contemplated improvements to
the Property that may result in such special or other assessments.
(r) Flood Zone. None of the Properties are located in a flood hazard
area as defined by the Federal Insurance Administration.
(s) Separate Business; Corporate Formalities.
(i) Mortgagor shall maintain its own deposit account or
accounts, separate from those of any Affiliate, with commercial banking
institutions. The funds of Mortgagor will not be diverted to any other
Person or for other than business uses of Mortgagor, nor will such funds
be commingled with the funds of any other Affiliate;
(ii) To the extent that Mortgagor shares the same officers or
other employees as any of its partners or Affiliates, the salaries of and
the expenses related to providing benefits to such officers and other
employees shall be fairly allocated among
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such entities, and each such entity shall bear its fair share of the
salary and benefit costs associated with all such common officers and
employees;
(iii) To the extent that Mortgagor jointly contracts with any
of its partners or Affiliates to do business with vendors or service
providers or to share overhead expenses, the costs incurred in so doing
shall be allocated fairly among such entities, and each such entity shall
bear its fair share of such costs. To the extent that Mortgagor contracts
or does business with vendors or service providers where the goods and
services provided are partially for the benefit of any other Person, the
costs incurred in so doing shall be fairly allocated to or among such
entities for whose benefit the goods and services are provided, and each
such entity shall bear its fair share of such costs. All material
transactions between Mortgagor and any of its Affiliates shall be only on
an arm's length basis.
(iv) To the extent that Mortgagor and any of its constituent
partners or Affiliates have offices in the same location, there shall be a
fair and appropriate allocation of overhead costs among them, and each
such entity shall bear its fair share of such expenses.
(v) Mortgagor shall conduct its affairs strictly in accordance
with its organizational documents, and observe all necessary, appropriate
and customary partnership formalities, as applicable, including, but not
limited to, obtaining any and all partners' consents necessary to
authorize actions taken or to be taken, and maintaining accurate and
separate books, records and accounts, including, but not limited to,
payroll and intercompany transaction accounts.
(vi) In addition, Mortgagor shall: (a) maintain books and
records separate from those of any other person; (b) maintain its assets in such
a manner that it is nor costly or difficult to segregate, identify or ascertain
such assets; (c) hold regular meetings of its board of directors, shareholders,
partners or members, as the case may be, and observe all other corporate,
partnership or limited liability company, as the case may be, formalities; (d)
hold itself out to creditors and the public as a legal entity separate and
distinct from any other entity; (e) prepare separate tax returns and financial
statements, or if part of a consolidated group, then it will be shown as a
separate member of such group; (f) transact all business with Affiliates on an
arm's-length basis and pursuant to enforceable agreements; (g) conduct business
in its name and use separate stationery, invoices and checks; (h) not commingle
its assets or funds with those of any other Person; and (i) not assume,
guarantee or pay the debts or obligations of any other Person.
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(t) Director Consents. The General Partner of Mortgagor shall obtain
the consent of all its directors, including the Independent Director, to (i)
file a bankruptcy or insolvency petition or otherwise institute insolvency
proceedings or to authorize Mortgagor to do so, (ii) dissolve, liquidate,
consolidate, merge or sell all or substantially all of Mortgagor's assets, (iii)
engage in any other business activity, or (iv) amend its organizational
documents.
(u) No Default. As of the date hereof, Mortgagor is not in material
default under the terms and provisions of any Operating Agreement or any
Material Lease.
(v) Collateral As Entirety of Property. Each Property and the
Personalty located thereon constitutes all of the real property, equipment and
fixtures currently owned by Mortgagor or currently used in the operation of the
business located on such Property.
(w) No Property Damage. As of the date hereof, to Mortgagor's
knowledge, no portion of the Improvements at a Property has been materially
damaged, destroyed or injured by fire or other casualty which is not now fully
restored or in the process of being restored.
(x) Separate Tax Parcels. Each Property constitutes one or more
separate tax lots, with a separate tax assessment, independent of any other land
or improvements.
(y) Title Insurance. Mortgagor shall cause to be delivered to
Mortgagee a mortgagee's title insurance policy, issued by the Title Company, for
the Orlando Property in an amount not less than 125% of the Allocated Loan
Amount and for Tower 45 in an amount not less than 115% of the Allocated Loan
Amount, which title insurance policy shall be dated as of the date hereof, and
shall insure that this Mortgage is a valid first priority lien on the Land and
Improvements, subject only to Permitted Encumbrances, standard exceptions
contained in the current ALTA printed form policy issued by the Title Company,
and any other matter consented to by Mortgagee.
32. No Waiver. No failure by Mortgagee to insist upon the strict
performance of any term hereof or to exercise any right, power or remedy
consequent upon a breach thereof shall constitute a waiver of any such term or
right, power or remedy or of any such breach. No waiver of any breach shall
affect or alter this Mortgage, which shall continue in full force and effect, or
shall affect or alter the rights of Mortgagee with respect to any other then
existing or subsequent breach.
33. Non-Recourse Obligations. Notwithstanding anything in this
Mortgage (other than as set forth in Section 41 hereof), the Note or the other
Loan Documents, no personal liability shall be asserted or enforceable against
(i) Mortgagor, (ii) any Affiliate of Mortgagor,
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(iii) any Person owning directly or indirectly, any legal or beneficial interest
in Mortgagor or any Affiliate of Mortgagor, or (iv) any partner, principal,
officer, controlling person, beneficiary, trustee, advisor, shareholder,
employee, agent, Affiliate or director of any Persons described in clauses (i)
through (iii) above (collectively, the "Exculpated Parties") by Mortgagee in
respect of the Obligations, this Mortgage, the Note or any other Loan Document,
or the making, issuance or transfer thereof, all such liability, if any, being
expressly waived by Mortgagee. Mortgagee, and each successive holder of any Note
and this Mortgage shall accept the Note and this Mortgage upon the express
condition of this provision and limitation that in the case of the occurrence
and continuance of an Event of Default, Mortgagee's remedies in its sole
discretion shall be any or all of:
(i) Foreclosure of the lien of this Mortgage in accordance
with the terms and provisions set forth in this Mortgage;
(ii) Action against any other security at any time given to
secure the payment of the Note and under the other Loan Documents; and
(iii) Exercise of any other remedy set forth in this Mortgage
or any other Loan Document.
The lien of any judgment against Mortgagor and any proceeding
instituted on, under or in connection with the Note or this Mortgage, or both,
shall not extend to any property now or hereafter owned by Mortgagor or any
Exculpated Party other than the Net Operating Income from and after an Event of
Default, provided that Mortgagor or any Exculpated Party shall not have
misappropriated the same, and the ownership interest of Mortgagor in, the
Mortgaged Property and the other security for the payment of the Note or this
Mortgage.
Notwithstanding anything to the contrary in this Mortgage or any of
the Loan Documents, Mortgagee shall not be deemed to have waived any right which
Mortgagee may have under Section 506(a), 506(b), 1111(b) or any other provisions
of the Bankruptcy Code to file a claim for the full amount of the Debt secured
by this Mortgage or to require that all collateral shall continue to secure all
of the Debt owing to Mortgagee in accordance with the Loan Documents.
Notwithstanding anything in this Mortgage to the contrary, there
shall at no time be any limitation on Mortgagor's liability for the payment to
Mortgagee of: (1) condemnation proceeds or insurance proceeds which Mortgagor
has received and to which Mortgagee is entitled pursuant to the terms of this
Mortgage or any of the Loan Documents to the extent the same have not been
applied toward payment of sums due under the Note or under this Mortgage,
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or used for the repair or replacement of the Mortgaged Property pursuant to this
Mortgage, or (2) all loss, damage and expense as incurred by Mortgagee and
arising from any fraud, or intentional misrepresentation of Mortgagor or (3) any
misappropriation of Rents or security deposits by Mortgagor or any Affiliate of
Mortgagor.
34. Further Assurances. Mortgagor, at its own expense, will execute,
acknowledge and deliver all such reasonable further acts, documents or
instruments including security agreements on any building equipment included or
to be included in the Mortgaged Property and a separate assignment of each Lease
and take all such actions as Mortgagee from time to time may reasonably request
to better assure, transfer and confirm unto Mortgagee the rights now or
hereafter intended to be granted to Mortgagee under this Mortgage or the other
Loan Documents. Mortgagor shall notify Mortgagee no less than thirty (30) days
prior to a change of address.
35. Estoppel Certificates. Mortgagor and Mortgagee each will, from
time to time, upon twenty (20) days' prior written request by the other party,
execute, acknowledge and deliver to the requesting party, in the case of a
request to Mortgagee, a certificate signed by an authorized officer or officers
and in the case of a request to Mortgagor, an Officer's Certificate, stating
that this Mortgage is unmodified and in full force and effect (or, if there have
been modifications, that this Mortgage is in full force and effect as modified
and setting forth such modifications) and stating the amount of accrued and
unpaid interest and the outstanding principal amount of the Note. The estoppel
certificate from Mortgagee shall also state either that, to Mortgagor's best
knowledge and based on no independent investigation, no Default exists hereunder
or, if any Event of Default shall exist hereunder, specify any Event of Default
of which Mortgagor has actual knowledge and the steps being taken to cure such
Event of Default.
36. Subleasehold Estate.
(a) Mortgagor hereby represents and warrants as follows: (i) the
Belasco Sublease is in full force and effect, unmodified by any writing or
otherwise except as specifically set forth herein; (ii) all rent, additional
rent and/or other charges reserved in or payable under the Belasco Sublease,
have been paid to the extent that they are payable to the date hereof; (iii) the
Mortgagor enjoys the quiet and peaceful possession of the Subleasehold Estate;
(iv) the Mortgagor is not in default under any of the material terms of the
Belasco Sublease and to the best of its knowledge, is not in default under any
other term of the Belasco Sublease; (v) the ground lessor is not in default
under any of the material terms or provisions of the Belasco Sublease, and, to
the best of the Mortgagor's knowledge, the ground lessor is not in default under
any other terms or provisions of the Belasco Sublease, on its part to be
observed or performed;
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and (vi) the Mortgagor has delivered to the Mortgagee a true, accurate and
complete copy of the Belasco Sublease.
(b) With respect to the Belasco Sublease, Mortgagor covenants and
agrees as follows: (i) to promptly and faithfully observe, perform and comply
with all the terms, covenants and provisions of the Belasco Sublease, on its
part to be observed, performed and complied with, within the applicable grace
periods, if any; (ii) to refrain from doing anything, as a result of which,
there could be a material default under or a breach of any of the terms of the
Belasco Sublease; (iii) not to do, permit or suffer any event or omission as a
result of which there is likely to occur a default or breach under the Belasco
Sublease after the passing of the applicable grace periods, if any; (iv) not to
cancel, terminate, surrender, modify, amend or in any way alter or permit the
alteration of any of the provisions of the Belasco Sublease or grant any
consents or waivers thereunder without the prior written consent of Mortgagee;
(v) to deliver to Mortgagee, within three (3) Business Days of receipt thereof,
a copy of each notice of default and all responses to default notices, similar
instruments received or delivered by Mortgagee, in connection with the Belasco
Sublease; (vi) to furnish within a reasonable period of time, except in
connection with a notice of default which is governed by the previous clause, to
Mortgagee copies of such information and evidence as Mortgagee may reasonably
request concerning the due observance, performance and compliance by Mortgagor
with the terms, covenants and provisions of the Belasco Sublease; and (vii)
that any failure by Mortgagor, as tenant under the Belasco Sublease, to perform
within any applicable grace period its obligations under the Belasco Sublease
shall constitute an Event of Default by Mortgagor under this Mortgage.
(c) In the event of the occurrence of any event which, with the
giving of notice, the passage of time or both, would constitute an Event of
Default (as defined in the Belasco Sublease) by Mortgagor in the performance of
its obligations under the Belasco Sublease, and which is not cured within any
applicable grace period, including, without limitation, any default in the
payment of any sums payable thereunder, then, in each and every case, Mortgagee
may, at its option cause the default or defaults to be remedied and otherwise
exercise any and all of the rights of Mortgagor thereunder in the name of and on
behalf of Mortgagor. Mortgagor shall, within five (5) Business Days after
written demand, reimburse Mortgagee for all advances made and expenses
reasonably incurred by Mortgagee in curing any such default (including, without
limitation, reasonable attorneys' fees), together with interest thereon from the
date that such advance is made, to and including the date the same is paid to
Mortgagee. The provisions of this subsection (c) are in addition to any other
remedy given to or allowed Mortgagee under the Belasco Sublease.
(d) If the Belasco Sublease is cancelled or terminated by reason of
an Event of Default (as defined in the Belasco Sublease) that Mortgagee was
unable to cure (following a
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good faith effort to so cure), then, if Mortgagee or its nominee shall acquire
an interest in any new lease of the Subleasehold Estate following such Event of
Default, Mortgagor shall have no right, title or interest in or to the new lease
or the leasehold estate created by such new lease.
(e) Mortgagor shall obtain and deliver to Mortgagee, within thirty
(30) days after written demand therefor by Mortgagee, an estoppel certificate
stating (1) that the Belasco Sublease is in full force and effect and has not
been modified or, if it has been modified, the date of each modification
(together with copies of each such modification), (2) the date to which the
fixed rent has been paid under the Belasco Sublease, (3) whether a notice of
default has been sent to Mortgagor, as tenant under the Belasco Sublease which
has not been cured, and if such notice has been sent, the date it was sent and
the nature of the default, (4) whether, to Mortgagor's knowledge, any parties
under the Belasco Sublease are in default in keeping, observing or performing
any material term covenant, agreement, provision, condition or limitation
contained in the Belasco Sublease, (5) if, under the Belasco Sublease,
Mortgagor, as tenant, shall be in default, the default, (6) the name of the
tenant entitled to possession of the Subleasehold Estate under the Belasco
Sublease, (7) whether to the best of Mortgagor's knowledge there has occurred
any event which, with the giving of notice or the passage of time or both would
constitute a default under the Belasco Sublease, and, if there has occurred any
such event, setting forth the nature thereof in reasonable detail.
(f) Notwithstanding anything to the contrary contained herein, this
Mortgage shall not constitute an assignment of the Belasco Sublease within the
meaning of any provision thereof prohibiting its assignment and Mortgagee shall
have no liability or obligation thereunder by reason of its acceptance of this
Mortgage. Mortgagee shall be liable for the obligations of the tenant arising
under the Belasco Sublease for only that period of time during which Mortgagee
is in possession of the Subleasehold Estate or has acquired, by foreclosure or
otherwise, and is holding, all of the right, title and interest of Mortgagor
therein.
37. Indemnification by Mortgagor.
Subject to the provisions of Section 33 hereof, Mortgagor will
protect, indemnify and save harmless Mortgagee, and all officers, directors,
stockholders, partners, employees, agents, successors and assigns thereof
(collectively, the "Indemnified Parties") from and against all liabilities,
obligations, claims, damages, penalties, causes of action, costs and expenses
(including all reasonable attorneys' fees and expenses actually incurred)
imposed upon or incurred by or asserted against the Indemnified Parties or the
Mortgaged Property or any part of its interest therein by a third party, by
reason of the occurrence or existence of any of the following (to the extent
Insurance Proceeds payable on account of the following shall be inadequate; it
being understood that in no event will the Indemnified
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Parties be required to actually pay or incur any costs or expenses as a
condition to the effectiveness of the foregoing indemnity) prior to (i) the
acceptance by Mortgagee or any third party of a deed-in-lieu of foreclosure with
respect to the applicable Property, or (ii) the Indemnified Parties taking
possession or control of the applicable Property, unless caused solely by the
actual willful misconduct or gross negligence of the Indemnified Parties (other
than such willful misconduct or gross negligence imputed to the Indemnified
Parties because of their interest in the Mortgaged Property): (1) ownership of
Mortgagor's interest in the Mortgaged Property, or any interest therein, or
receipt of any Rents or other sum therefrom, (2) any accident, injury to or
death of any persons or loss of or damage to property occurring on or about the
Mortgaged Property or any Appurtenances thereto, (3) any design, construction,
operation, repair, maintenance, use, non-use or condition of the Mortgaged
Property or Appurtenances thereto, including claims or penalties arising from
violation of any Legal Requirement or Insurance Requirement, as well as any
claim based on any patent or latent defect, whether or not discoverable by
Mortgagee, any claim the insurance as to which is inadequate, and any
Environmental Claim, (4) any Default under this Mortgage or any of the other
Loan Documents or any failure on the part of Mortgagor to perform or comply with
any of the material terms of any Lease or Operating Agreement within the
applicable notice or grace periods, (5) any performance of any labor or services
or the furnishing of any materials or other property in respect of the Mortgaged
Property or any part thereof, (6) any negligence or tortious act or omission on
the part of Mortgagor or any of its agents, contractors, servants, employees,
sublessees, licensees or invitees, (7) any contest referred to in Section 7(c)
hereof, (8) any obligation or undertaking relating to the performance or
discharge of any of the terms, covenants and conditions of the landlord
contained in the Leases or (9) the presence at, in or under the Property or the
Improvements thereon of any Hazardous Substance in violation of any Legal
Requirement. Any amounts the Indemnified Parties are legally entitled to receive
under this Section 37 which are not paid within ten (10) Business Days after
written demand therefor by the Indemnified Parties or Mortgagee, setting forth
in reasonable detail the amount of such demand and the basis therefor, shall
bear interest from the date of demand at the Default Rate, and shall, together
with such interest, be part of the Indebtedness and secured by this Mortgage. In
case any action, suit or proceeding is brought against the Indemnified Parties
by reason of any such occurrence, Mortgagor shall at Mortgagor's expense resist
and defend such action, suit or proceeding or will cause the same to be resisted
and defended by counsel at Mortgagor's reasonable expense for the insurer of the
liability or by counsel designated by Mortgagor (unless reasonably disapproved
by Mortgagee promptly after Mortgagee has been notified of such counsel);
provided, however, that nothing herein shall compromise the right of Mortgagee
(or any Indemnified Party) to appoint its own counsel at Mortgagor's expense for
its defense with respect to any action which in its reasonable opinion presents
a conflict or potential conflict between Mortgagee and Mortgagor that
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would make such separate representation advisable; provided further that if
Mortgagee shall have appointed separate counsel pursuant to the foregoing,
Mortgagor shall not be responsible for the expense of additional separate
counsel of any Indemnified Party unless in the reasonable opinion of Mortgagee a
conflict or potential conflict exists between such Indemnified Party and
Mortgagee. So long as Mortgagor is resisting and defending such action, suit or
proceeding as provided above in a prudent and commercially reasonable manner,
Mortgagee and the Indemnified Parties shall not be entitled to settle such
action, suit or proceeding and claim the benefit of this Section 37 with respect
to such action, suit or proceeding and Mortgagee agrees that it will not settle
any such action, suit or proceeding without the consent of Mortgagor; provided,
however, that if Mortgagee reasonably determines that Mortgagor is not
diligently defending such action, suit or proceeding in a prudent and
commercially reasonable manner as provided above, and has provided Mortgagor
with thirty (30) days' prior written notice, or shorter period if mandated by
the requirements of applicable law, and opportunity to correct such
determination, Mortgagee may settle such action, suit or proceeding subject only
to Mortgagor's consent which shall not be unreasonably withheld or delayed, and
claim the benefit of this Section 37 with respect to settlement of such action,
suit or proceeding. Any Indemnified Party will give Mortgagor prompt notice
after such Indemnified Party obtains actual knowledge of any potential claim by
such Indemnified Party for indemnification hereunder.
38. Release of Property. (a) If Mortgagor shall pay or cause to be
paid, the principal of and interest on the Note in full at maturity or as
permitted in accordance with the terms thereof or hereof and all other
Indebtedness payable to Mortgagee hereunder by Mortgagor or secured hereby or by
the other Loan Documents and all of the payment Obligations shall have been
performed, then this Mortgage and all the other Loan Documents shall be
discharged and satisfied or assigned (to Mortgagor or to any other Person at
Mortgagor's direction and without representation or warranty by, or recourse to,
Mortgagee), at Mortgagor's option, without warranty (except that Mortgagee shall
be deemed to have represented that such release and termination or reassignment
has been duly authorized and that it has not assigned or encumbered this
Mortgage or the other Loan Documents), at the expense of Mortgagor upon its
written request. Concurrently with such release and satisfaction or assignment
of this Mortgage and all the other Loan Documents, Mortgagee will return to
Mortgagor the Note and all insurance policies relating to the Mortgaged Property
which may be held by Mortgagee, any amounts held in escrow pursuant to this
Mortgage or the Cash Collateral Agreement, if applicable, or otherwise, and any
part of the Mortgaged Property or other Collateral that may be in its possession
and, on the written request and at the expense of Mortgagor, will execute and
deliver such instruments of conveyance, assignment and release (including
appropriate UCC-3 termination statements) prepared by Mortgagor and as may
reasonably be requested by
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Mortgagor to evidence such release and satisfaction, or assignment, and any such
instrument, when duly executed by Mortgagee and, if appropriate, duly recorded
by Mortgagor in the places where this Mortgage and each other Loan Document is
recorded, shall conclusively evidence the release and satisfaction or assignment
of this Mortgage and the other Loan Documents.
(b) Notwithstanding anything to the contrary contained herein,
Mortgagee shall execute and deliver such documents as may be required to release
the Madison Properties from the Lien of this Mortgage, from and after the
earlier to occur of (1) two (2) days prior to the date of the Securitization and
(2) December 15, 1997, provided that all of the conditions set forth below have
been satisfied:
(i) No Event of Default shall have occurred and be continuing as
of the date of such notice and the Release Date;
(ii) After giving effect to such proposed release, the Debt Service
Coverage Ratio would be not less than 1.2:1; and
(iii) Mortgagee and shall have received from Mortgagor with respect
to the matters referred to in clause (ii), (x) statements of
the Net Operating Income and Debt Service (both on a
consolidated basis and separately for the applicable
Property(ies) to be released) for the immediately preceding
calendar quarter, and (y) based on the foregoing statements of
Net Operating Income and Debt Service, calculations of the
Debt Service Coverage Ratio both with and without giving
effect to the proposed release, and (z) calculations of the
ratios referred to in such clause (ii), accompanied by an
Officers' Certificate stating that such statements,
calculations and information are true, correct, and complete
in all material respects.
(c) Notwithstanding anything contained in Section 38(b)
hereof, Mortgagor shall be entitled to have one (1) Property released from the
Lien of this Mortgage, from and after the earlier to occur of (1) the second
(2nd) anniversary of the date of the Securitization and (2) October 16, 2000 in
connection with a delivery of Defeasance Collateral, provided that all of the
conditions set forth below have been satisfied:
(i) Mortgagee shall have received from Mortgagor at least 30 days'
prior written notice of the date proposed for such release
(the "Re-
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lease Date"), which Release Date shall be a Payment Date (as
defined in the Note);
(ii) No Event of Default shall have occurred and be continuing as
of the date of such notice and the Release Date;
(iii) Mortgagor shall deliver to Mortgagee (pursuant to and in
accordance with the provisions of Sections 46 and 47 hereof)
on the Release Date Defeasance Collateral in such amount as
shall satisfy the Minimum Defeasance Collateral Requirement
with respect to such Property;
(iv) Mortgagor shall have delivered to Mortgagee an Officer's
Certificate, dated the Release Date, confirming the matters
referred to in clause (ii) above, certifying that the
provisions of clause (iii) above have been complied with and
certifying that all conditions precedent for such release
contained in this Mortgage have been complied with;
(v) Mortgagor, at its sole cost and expense, shall have delivered
to Mortgagee, one or more endorsements to the mortgagee policy
of title insurance delivered to Mortgagee on the date hereof
in connection with this Mortgage insuring that, after giving
effect to such release, (x) the Liens created hereby and
insured thereunder are first priority Liens on the respective
remaining Properties subject only to the Permitted
Encumbrances applicable to the remaining Properties and (y)
that such policy is in full force and effect and unaffected by
such release;
(vi) The Debt Service Coverage Ratio with respect to the remaining
Property would be not less than 1.5:1;
(vii) Mortgagor shall deliver written confirmation from the Rating
Agencies that such release will not result in a downgrade,
withdrawal or qualification of the then current ratings of any
securities backed in part by this Mortgage;
(viii) (as evidenced by appraisals prepared by Independent
Appraisers selected by Mortgagee performed at Mortgagor's
expense) the fair
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market value of the Properties that will remain subject to the
lien of this Mortgage as of the date of the proposed release
shall not be less than the fair market value of such
Properties as of the date of this Mortgage as evidenced by
appraisals performed by Cushman & Wakefield, Inc. delivered as
of September 23, 1997;
(ix) Mortgagee shall have received from Mortgagor with respect to
the matters referred to in clause (vi), (x) statements of the
Net Operating Income and Debt Service (both on a consolidated
basis and separately for the applicable Property(ies) to be
released) for the applicable measuring period, and (y) based
on the foregoing statements of Net Operating Income and Debt
Service, calculations of the Debt Service Coverage Ratio both
with and without giving effect to the proposed release, and
(z) calculations of the ratios referred to in such clause
(vi), accompanied by an Officers' Certificate stating that
such statements, calculations and information are true,
correct, and complete in all material respects.
(d) Upon or after the delivery of Defeasance Collateral in
accordance with Section 38(c) (iii) and Section 46(b)(iii) hereof and the
satisfaction of all other conditions provided for herein in Sections 46 and 47,
Mortgagee shall effectuate the following (hereinafter referred to as a "Property
Release"): the security interest of Mortgagee in this Mortgage and the other
Loan Documents relating to the released Property shall be released from the Lien
of this Mortgage and Mortgagee will execute and deliver any agreements
reasonably requested by Mortgagor to release and terminate or reassign, at
Mortgagor's option, this Mortgage as to the released Property; provided, that
such release and termination or reassignment shall be without recourse to
Mortgagee (except as contemplated hereby) and without any representation or
warranty except that Mortgagee shall be deemed to have represented that such
release and termination or reassignment has been duly authorized and that it has
not assigned or encumbered this Mortgage or the other Loan Documents relating to
the released Property (except as contemplated hereby) and Mortgagee shall return
the originals of any Loan Documents that relate solely to the released Property
to Mortgagor; provided, further, that upon the release and termination or
reassignment of Mortgagee's security interest in this Mortgage relating to the
released Property all references herein to this Mortgage relating to the
released Property shall be deemed deleted, except as otherwise provided herein
with respect to indemnities.
39. Rating Agency Monitoring. Until the Obligations are paid in
full, Mortgagor shall provide the Rating Agencies with all financial reports
required hereunder and such other information as it shall reasonably request,
including copies of any notices delivered to
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and received from Mortgagee hereunder, to enable it to continuously monitor the
creditworthiness of Mortgagor and to permit an annual surveillance of the
implied credit rating of certain securities secured by a pledge of the Note;
provided, however, such information shall be provided to the Rating Agencies to
the extent such information is readily available to Mortgagor in the ordinary
course of business and would not result in additional expense to Mortgagor.
40. Environmental Matters.
(a) Representations. Mortgagor hereby represents and warrants that
except as set forth in the reports listed on Exhibit B hereto (the
"Environmental Reports"), (i) Mortgagor has not engaged in or knowingly
permitted any operations or activities upon, or any use or occupancy of the
Property, or any portion thereof, for the purpose of or in any way involving the
handling, manufacture, treatment, storage, use, generation, release, discharge,
refining, dumping or disposal of any Hazardous Substances on, under, in or about
the Property, or transported any Hazardous Substances to, from or across the
Property, except in all cases in material compliance with Environmental
Requirements and only in the course of legitimate business operations by
Mortgagor and use and occupancy by Tenants at the Property; (ii) to Mortgagor's
knowledge, no tenant, occupant or user of any Property, nor any other person,
has during Mortgagor's ownership of such Property, engaged in or permitted any
operations or activities upon, or any use or occupancy of the Property, or any
portion thereof, for the purpose of or in any material way involving the
handling, manufacture, treatment, storage, use, generation, release, discharge,
refining, dumping or disposal of any Hazardous Substances on, in or about the
Property, or transported any Hazardous Substances to, from or across the
Property, except in all cases in material compliance with Environmental
Requirements and only in the course of legitimate business operations at the
Property; (iii) to Mortgagor's knowledge, no Hazardous Substances are presently
constructed, deposited, stored, or otherwise located on, under, in or about any
Property except in material compliance with Environmental Requirements; (iv) to
Mortgagor's knowledge, no Hazardous Substances have migrated from the Property
upon or beneath other properties which would reasonably be expected to result in
material liability for Mortgagor; and (v) to Mortgagor's knowledge, no Hazardous
Substances have migrated or threaten to migrate from other properties upon,
about or beneath any Property which would reasonably be expected to result in
material liability for Mortgagor.
(b) Covenants. Subject to Mortgagor's right to contest under Section
7(c) hereof, Mortgagor covenants and agrees with Mortgagee that it shall comply
with all Environmental Laws in all material respects. If at any time during the
continuance of the Lien of this Mortgage, a Governmental Authority having
jurisdiction over the Mortgaged Property requires remedial action to correct the
presence of Hazardous Materials in, around, or under any Property (an
"Environmental Event"), Mortgagor shall deliver prompt notice of the occurrence
of
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such Environmental Event to Mortgagee. Within (30) thirty days after Mortgagor
has knowledge of the occurrence of an Environmental Event, Mortgagor shall
deliver to Mortgagee an Officer's Certificate (an "Environmental Certificate")
explaining the Environmental Event in reasonable detail and setting forth the
proposed remedial action, if any.
(c) Environmental Indemnification. Subject to Section 33 of this
Mortgage, Mortgagor shall protect, indemnify, save, defend, and hold harmless
Mortgagee, its subsidiaries, Affiliates and all officers, directors,
stockholders, partners, employees, agents, successors and assigns thereof
(collectively, the "Indemnified Environmental Parties") from and against any and
all liability, loss, damage, actions, causes of action, costs or expenses
whatsoever (including reasonable attorneys' fees and expenses) and any and all
claims, suits and judgments which any Indemnified Environmental Party may
suffer, as a result of or with respect to: (a) any Environmental Claim relating
to or arising from such Property; (b) the violation of any Environmental Law in
connection with such Property; (c) any release, spill, or the presence of any
Hazardous Substances affecting such Property; and (d) the presence at, in, on or
under, or the release, escape, seepage, leakage, discharge or migration at or
from, such Property of any Hazardous Substances, whether or not such condition
was known or unknown to Mortgagor provided that, in each case, Mortgagor may be
relieved of its obligation under this subsection if any of the matters referred
to in clauses (a) through (d) above did not occur (but need not have been
discovered) prior to the earliest of (1) the foreclosure of this Mortgage with
respect to such Property, (2) the delivery by Mortgagor to Mortgagee or a third
party of a deed-in-lieu of foreclosure with respect to such Property, or (3)
Mortgagee's taking possession and control of such Property after the occurrence
of an Event of Default hereunder and such obligation is a result of the acts or
omissions of any Indemnified Party. If any such action or other proceeding shall
be brought against Mortgagee, upon written notice from Mortgagor to Mortgagee
(given reasonably promptly following Mortgagee's notice to Mortgagor of such
action or proceeding), Mortgagor shall be entitled to assume the defense
thereof, at Mortgagor's expense, with counsel reasonably acceptable to
Mortgagee; provided, however, Mortgagee may, at its own expense, retain separate
counsel to participate in such defense, but such participation shall not be
deemed to give Mortgagee a right to control such defense, which right Mortgagor
expressly retains. Notwithstanding the foregoing, each Indemnified Environmental
Party shall have the right to employ separate counsel at Mortgagor's expense if,
in the reasonable opinion of legal counsel, a conflict or potential conflict
exists between the Indemnified Environmental Party and Mortgagor that would make
such separate representation advisable.
41. Recourse Nature of Certain Indemnifications. Notwithstanding
anything to the contrary provided in this Mortgage or in any other Loan
Document, the indemnification
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provided in Section 40(c) hereof shall be fully recourse to Mortgagor (but not
to (i) any Affiliate of Mortgagor, (ii) any Person owning directly or
indirectly, any legal or beneficial interest in Mortgagor or any Affiliate of
Mortgagor, and (iii) any partner, principal, officer, controlling person,
beneficiary, trustee, advisor, shareholder, employee, agent, Affiliate or
director of Mortgagor or of any Persons described in clauses (i) through (ii)
above) and shall be independent of, and shall survive, the discharge of the
Indebtedness, the release of the Lien created under this Mortgage, and/or the
conveyance of title to any Property to Mortgagee or any purchaser or designee in
connection with a foreclosure of this Mortgage or conveyance in lieu of
foreclosure.
42. Counterparts. This Mortgage may be executed in one or more
counterparts, each of which shall be deemed to be an original, and all of which
together shall constitute one and the same instrument.
43. Merger, Conversion, Consolidation or Succession to Business of
Mortgagee. Any corporation into which Mortgagee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which Mortgagee shall be a party, or any
corporation succeeding to all or substantially all the corporate trust business
of Mortgagee, shall be the successor of Mortgagee hereunder, without the
execution or filing of any paper or any further act on the part of any of the
parties hereto. Mortgagee shall provide the Rating Agencies with written notice
of any merger or conversion to be undertaken pursuant to this Section 43 no less
than thirty (30) days' prior to such merger or conversion.
44. No Endorsement. Mortgagee shall not become or be considered to
be an endorser, co-maker or co-obligor on any Note or on any obligation of
Mortgagor secured by this Mortgage or otherwise.
45. Intentionally Omitted.
46. Defeasance.
(a) With respect to a release of the Lien of this Mortgage
pursuant to Section 38(c) hereof other than in connection with a total repayment
on the Maturity Date (each, a "Defeasance"), the Mortgagor shall deposit
Defeasance Collateral in accordance with subsection (B) below to the Defeasance
Collateral Account. In no event shall the deliverance of Defeasance Collateral
cause the Mortgagor to be released from its obligations to make payments of
principal and interest on the Note.
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(b) The Defeasance shall be permitted at such time as all of
the following events shall have occurred:
(i) the Defeasance shall occur after the earlier to
occur of (1) the second (2nd) anniversary of the date of the
Securitization and (2) the October 16, 2000;
(ii) the Defeasance Collateral Account shall have been
established pursuant to Section 47 hereof;
(iii) Mortgagor shall have delivered or caused to have
been delivered to Mortgagee the Defeasance Collateral for deposit into the
Defeasance Collateral Account such that it will satisfy the Total
Defeasance Collateral Requirement with respect to a release of the
Properties at the time of delivery and all such Defeasance Collateral, if
in registered form, shall be registered in the name of Mortgagee or its
nominee (and, if registered in nominee name endorsed to Mortgagee or in
blank) and, if issued in book-entry form, the name of Mortgagee or its
nominee shall appear as the owner of such securities on the books of the
Federal Reserve Bank or other party maintaining such book-entry system;
(iv) Mortgagor shall have granted or caused to have been
granted to Mortgagee a valid perfected first priority security interest in
the Defeasance Collateral and all proceeds thereof;
(v) Mortgagor shall have delivered or caused to be
delivered to Mortgagee an Officers' Certificate, dated as of the date of
such delivery (x) that sets forth the aggregate face amount or unpaid
principal amount, interest rate and maturity of all such Defeasance
Collateral, a copy of the transaction journal, if any, or such other
notification, if any, published by or on behalf of the Federal Reserve
Bank or other party maintaining a book-entry system advising that
Mortgagee or its nominee is the owner of such securities issued in
book-entry form, and (y) to the following effect that states that:
(A) Mortgagor owns the Defeasance Collateral being
delivered to Mortgagee free and clear of any and all Liens,
security interests or other encumbrances, and has not assigned
any interest or participation therein (or, if any such
interest or participation has been assigned, it has
been released), and Mortgagor has full power and authority to
pledge such Defeasance Collateral to Mortgagee;
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(B) such Defeasance Collateral consists solely of
Defeasance Eligible Investments;
(C) such Defeasance Collateral satisfies the Total
Defeasance Collateral Requirement, or the Minimum Defeasance
Collateral Requirement (for a Partial Release), as the case
may be, determined as of the date of delivery;
(D) the Defeasance contemplated hereby will not give
rise to an Event of Default; and
(E) the information set forth in the schedule attached
to such Officers' Certificate is correct and complete as of
the date of delivery (such schedule, which shall be attached
to and form a part of such Officers' Certificate, shall
demonstrate satisfaction of the requirement set forth in
clause (C) above, in a form reasonably acceptable to
Mortgagee);
(vi) Mortgagor shall have delivered or caused to be
delivered to Mortgagee (A) the Required Opinion with respect to
Mortgagee's interest in such Defeasance Collateral, (B) a Tax Opinion, (C)
if the Mortgage Loan at such time is included in a REMIC, a
Nondisqualification Opinion, and (D) an additional Opinion of Counsel, to
the effect that Mortgagee will not be required to be registered under the
Investment Company Act as a result of such Defeasance, and (E) an Opinion
of Counsel that Mortgagee has been granted a first priority perfected
security interest in the Defeasance Collateral;
(vii) Mortgagor shall have delivered or caused to be
delivered to Mortgagee a certificate, acceptable to Mortgagee, from an
independent certified public accountant confirming that Mortgagor has
satisfied the provisions of this Section 46(b);
(viii) Mortgagee shall have received from each of the
Rating Agencies written affirmation that the current credit ratings of the
securities secured by a pledge of the Note immediately prior to such
defeasance will not be qualified, downgraded or withdrawn as a result of
such defeasance, which affirmation may be granted or withheld in the
Rating Agencies' sole and absolute discretion; and
(ix) Mortgagor shall have delivered or caused to be
delivered to Mortgagee such other documents and certificates as Mortgagee
may reasonably request in
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connection with demonstrating that Mortgagor has satisfied the provisions
of this Section 46(b).
(c) For purposes of determining whether sufficient amounts are
on deposit in the Defeasance Collateral Account, there shall be included only
payments of principal and predetermined and certain income thereon (determined
without regard to any reinvestment of such amounts) that will occur on a stated
date for a stated payment on or before the dates when such amounts may be
required to be applied to pay the principal and interest when due on the Note
through and including the Reset Date (as defined in the Note) together with the
outstanding principal balance of the Note as of the Reset Date.
47. Defeasance Collateral Account.
(a) On or before the date on which Mortgagor delivers
Defeasance Collateral to Mortgagee pursuant to Section 6 or 46 hereof, Mortgagor
shall open at any Approved Bank or Banks at the time and acting as custodian for
Mortgagee, a defeasance collateral account (the "Defeasance Collateral
Account") which shall at all times be an Eligible Account (as defined in the
Cash Collateral Agreement), in which Mortgagor shall grant to Mortgagee or
reconfirm the grant to Mortgagee of a security interest as part of the Mortgaged
Property hereunder. Should Mortgagor open the Defeasance Collateral Account at a
bank or banks other than an Approved Bank, such Defeasance Collateral Account
must be maintained as a segregated trust account. The Defeasance Collateral
Account shall contain (i) all Defeasance Collateral delivered by Mortgagor
pursuant to Sections 38, 46 and 47 hereof, (ii) all payments received on
Defeasance Collateral held in the Defeasance Collateral Account and (iii) all
income or other gains from investment of moneys or other property deposited in
the Defeasance Collateral Account, provided, however, that (x) any sums earned
on any Defeasance Collateral, which sums were not included in the determination
of the Total Defeasance Collateral, shall be paid monthly by Mortgagee to
Mortgagor and (y) any sums earned on any Defeasance Collateral representing the
difference between the assumed interest on the Note at the Default Rate and the
lesser, if applicable, of the actual interest on the Note for the quarter prior
to the preceding Due Date shall be paid quarterly to the Mortgagor. All such
amounts, including all income from the investment or reinvestment thereof, shall
be held by Mortgagee as part of the Mortgaged Property, subject to withdrawal by
Mortgagee for the purposes set forth in this Section 47. Mortgagor shall be the
owner of the Defeasance Collateral Account and shall report all income accrued
on Defeasance Collateral for federal, state and local income tax purposes in its
income tax return.
(b) Mortgagee shall withdraw, draw on or collect and apply the
amounts that are on deposit in the Defeasance Collateral Account to pay when due
the principal and all
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installments of interest and principal on the Note and other amounts due under
the Loan Documents.
(c) Funds and other property in the Defeasance Collateral
Account shall not be commingled with any other monies or property of Mortgagor
or any Affiliate of Mortgagor.
(d) Mortgagee shall not in any way be held liable by reason of
any insufficiency in the Defeasance Collateral Account.
48. Reserves.
(a) Capital Expenditure Reserves.
(i) On the Closing Date, a portion of the Loan in the amount
of Four Hundred Fifty Two Thousand One Hundred Twenty Seven Dollars
($452,127), representing budgeted and non-budgeted capital
expenditures in the amount of One Hundred Ninety Four Thousand One
Hundred Twenty Seven ($194,127) with respect to the Orlando Property
and Two Hundred Fifty Eight Thousand Dollars ($258,000) with respect
to Tower 45, will be deposited into the Capital Expenditure Reserve
Account (as defined in the Cash Collateral Agreement) held by Agent
(as defined in the Cash Collateral Agreement) for Mortgagee. Such
funds are referred to herein as the "Capital Expenditure Reserve
Amounts". In lieu of delivering the Capital Expenditure Reserve
Amounts, Mortgagor may deliver a Letter of Credit in the amount of
the Capital Expenditure Reserve Amounts. Within five (5) Business
Days after receipt of an Officer's Certificate stating that certain
capital expenditures set forth on Schedule 4 hereto have been
substantially completed, and, upon an inspection of the capital
expenditures (performed at the discretion of the Mortgagee),
provided that no Event of Default shall have occurred and be
continuing, Mortgagee shall instruct Agent to disburse Capital
Expenditure Reserve Amounts in the amount specified in Schedule 4 to
pay specified contractors or to reimburse Mortgagor for funds
disbursed by Mortgagor for the payment of capital expenditures. Upon
full disbursement to Borrowers of all Capital Expenditures Reserve
Amounts, Mortgagee shall close the Capital Expenditure Reserve
Account.
(ii) On the first day of December, 1997 and on the first day
of every month thereafter, Mortgagee shall instruct Agent to
withdraw from the Operating Account and deposit into the Capital
Expenditure Reserve Account, an annual
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amount, payable in monthly installments, equal to $0.15 per square
foot for the Orlando Property and Tower 45, or Ten Thousand Eighty
Five Dollars ($10,085) per month (the "Monthly Capital Expenditure
Reserve Amounts"), representing $4,585 per month for the Orlando
Property and $5,500 for Tower 45. The Monthly Capital Expenditure
Amounts shall be disbursed by Agent to Mortgagor, not more
frequently than once per month, pursuant to instructions from
Mortgagee, upon delivery to Mortgagee of an Officer's Certificate
(with invoices attached) stating that Mortgagor has incurred costs
associated with capital expenditures at the Orlando Property
pursuant to invoices attached thereto. Within five (5) Business Days
of receipt of such certification, Mortgagee shall instruct Agent to
disburse Monthly Capital Expenditure Reserve Amounts to Mortgagor in
an amount equal to the amount requested by Mortgagor.
(b) TI and Leasing Reserves.
(i) On the first day of December, 1997 and on the first
day of every month thereafter, Mortgagee shall instruct Agent to
withdraw from the Operating Account and deposit into the TI and
Leasing Reserve Account, an annual amount, payable in monthly
installments, equal to (A) $1.50 per square foot, or $45,000 per
month, for the Orlando Property, and (B) $2.00 per square foot, or
$73,333 per month, for Tower 45 (such funds as deposited, together
with all investment income earned thereon, are referred to herein as
the "TI and Leasing Reserve Amounts"). Agent shall withdraw such
funds until an amount equal to One Million Eighty Thousand Dollars
($1,080,000) for the Orlando Property and One Million Seven Hundred
Sixty Thousand Dollars ($1,760,000) for Tower 45 shall have been
deposited in the TI and Leasing Reserve Account, and, upon
disbursement, shall replenish such TI and Leasing Reserve Amounts by
withdrawal from the Operating Account on the first day of the month
as set forth above. TI and Leasing Reserve Amounts shall be
disbursed by Agent to Mortgagor, not more frequently than once per
month, pursuant to instructions from Mortgagee, upon delivery to
Mortgagee of an Officer's Certificate (with invoices attached)
stating that Mortgagor has incurred costs associated with tenant
improvements, leasing commissions and other customary leasing costs
pursuant to invoices attached thereto. Within five (5) Business Days
of receipt of such certification, Mortgagee shall instruct Agent to
disburse TI and Leasing Amounts to Mortgagor in an amount equal to
the requested by Mortgagor.
(ii) Mortgagor shall be required to deposit into the TI
and Leasing Reserve Account reserves with respect to Material Leases
at the Orlando Property
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and at Tower 45 which by their terms are scheduled to expire within
one year from the date in question (without regard to any extension
or renewal options). Commencing on the first Business Day of the
month which is twelve (12) months prior to the expiration date of
any Material Lease, and on the first Business Day of each of the
succeeding eleven (11) months, Mortgagor shall deposit in the TI and
Leasing Reserve Account, in accordance with (but only to the extent
required under) Paragraph 3(g) of the Cash Collateral Agreement, an
amount equal to one twelfth of the product of (x) either (i) $25 per
square foot for the Orlando Property or (ii) $35 per square foot for
Tower 45 and (y) the square footage of the applicable Material
Lease which amount shall be subject to adjustment based upon
increases in the Consumer Price Index published by the United States
Department of Labor, Bureau of Labor Statistics (the "Consumer Price
Index") over the Consumer Price Index in effect as of the Closing
Date (the "Lease Expiration Reserve Amounts"); provided, however,
Mortgagor shall be permitted to fund the Lease Expiration Reserve
Amounts from the TI and Leasing Reserve Amounts to the extent the TI
and Leasing Reserve Amounts exceed Five Hundred Forty Thousand
Dollars ($540,000) for the Orlando Property and Eight Hundred Eighty
Thousand Dollars ($880,000) for Tower 45. Mortgagee shall direct
Agent to re lease the Lease Expiration Reserve Amounts for each
Material Lease as to which amounts are held in the TI and Leasing
Reserve Account upon the satisfaction of the following conditions:
(i) upon the delivery by Mortgagor to Mortgagee of a fully executed
Renewal Lease complying in all respects with the provisions of
Section 15(b) hereof, the Lease Expiration Reserve Amounts
attributable to said Material Lease shall be released to Mortgagor
less any expenses incurred by Mortgagor in connection with the
renewal of the Material Lease; or (ii) upon the delivery by
Mortgagor to Mortgagee of a fully executed Lease complying in all
respects with the provisions of Section 15(b) hereof, the Lease
Expiration Reserve Amounts attributable to the applicable space
shall be released to Mortgagor which Mortgagor shall use for payment
of tenant improvements and leasing commissions for the applicable
space. Mortgagor shall deliver invoices to Mortgagee evidencing
payment of tenant improvement expenses and leasing commissions with
the Lease Expiration Reserve Amounts funded to Mortgagor. The
balance of the Lease Expiration Reserve Amounts attributable to the
applicable space shall be released to Mortgagor after payment of all
leasing commissions and tenant improvement costs.
49. Intentionally Omitted.
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50. Liability of Mortgagee. Mortgagee shall not be liable for any
error of judgment or act done by Mortgagee in good faith, or be otherwise
responsible or accountable under any circumstances whatsoever, except for
Mortgagee's gross negligence or willful misconduct. Mortgagee shall have the
right to rely on any instrument, document or signature authorizing or supporting
any action taken or proposed to be taken by him hereunder, believed by him in
good faith to be genuine. All monies received by Mortgagee shall, until used or
applied as herein provided, be held in trust for the purposes for which they
were received, and shall be segregated from all other monies, and Mortgagee
shall be under no liability for interest on any monies received by him
hereunder. Mortgagor will reimburse Mortgagee for, and indemnify and save him
harmless against, any and all liability and expenses which may be incurred by
him in the performance of his duties hereunder.
51. Intentionally Omitted.
52. As to Property in Florida. Notwithstanding anything to the
contrary elsewhere in this Mortgage, as to the Mortgaged Property:
(a) This Mortgage secures a portion of the Note made, executed
and delivered in the State of New York, which Note consolidates, amends and
restates in its entirety, the Original Note and the Additional Notes in the
original principal amount of $107,000,000.
(b) Consolidation, Amendment and Restatement of Original
Mortgage. The Original Note was secured by the Original Mortgage described on
Exhibit "D". The obligations contained in the Original Note and the Original
Mortgage have been consolidated, amended and restated in this Mortgage with the
Additional Notes and the Additional Mortgages so that together they shall
constitute in law, but one mortgage, a single, first mortgage upon the Property
described in Exhibit "A" securing to Mortgagee the repayment of the obligations
as limited herein. Other than for the lien, conveyance and grant of the Original
Mortgages and the Additional Mortgages as consolidated, amended and restated
herein, the terms, representations and covenants and conditions of the Original
Mortgage and the Additional Mortgages shall be and hereby are superseded and
replaced by the terms, representations, covenants and conditions contained
herein and the parties certify that this instrument secures the same
indebtedness evidenced and secured by the Original Mortgage and the Additional
Mortgages as consolidated, amended and restated by this Mortgage and secures no
further or other indebtedness.
The obligations of Mortgagor pursuant to this Mortgage are
individually limited to $54,000,000.
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The Original Mortgage evidences the payment of Documentary Stamp Tax
based upon the maximum indebtedness secured thereby of $70,000,000 and the
payment of Intangible Tax based on a value of $61,000,000 allocated to the
Orlando Property.
(c) The reference in Section D of the Granting Clauses to the
Uniform Commercial Code shall be deemed to refer to Florida Statutes Section
679.313 and Section 679.402, as amended, respectively. This Mortgage is intended
to be a Financing Statement within the purview of Florida Statute Section
679.402 with respect to the personal property described herein. The addresses of
the Mortgagor (Debtor) and the Mortgagee (Secured Party) are herein set forth.
This Mortgage is to be filed of record with the Clerk of the Circuit Court of
the County or Counties where the Mortgaged Property is located.
(d) This Mortgage shall constitute a Security Agreement within
the meaning of the Florida Uniform Commercial Code with respect to (i) any and
all sums at any time on deposit for the benefit of the Mortgagee or held by the
Mortgagee (whether deposited by or on behalf of the Mortgagor or anyone else)
pursuant to any of the provisions of the Mortgage and (ii) with respect to any
personal property included in the Granting Clauses of this Mortgage, and all
replacements of such personal property, and the proceeds thereof. Upon default,
without limitation of any other remedies, the Mortgagee shall have the remedies
of a Secured Party under the Florida Uniform Commercial Code. The
Debtor/Mortgagor hereby authorizes the Secured Party/Mortgagee to execute,
deliver, file or refile as Secured Party without joinder of the Borrower, any
Financing Statement, Continuation Statement or other instruments the Mortgagee
may reasonably require from time to time to perfect or renew such security
interest under the Uniform Commercial Code.
(e) This Mortgage shall be deemed to be and shall be construed
as a Mortgage as well as a Security Agreement and Collateral Assignment of
Leases, Rents and Revenues. Each of the remedies set forth herein, including
without limitation the remedies involving a power of sale or power of attorney
with respect to the Orlando Property and the right of Mortgagee to exercise
self-help in connection with the enforcement of the terms of this Mortgage shall
be exercisable if and to the extent permitted by the laws of the State of
Florida in force at the time of the exercise of such remedies without regard to
the enforceability of such remedies at the time of the execution and delivery of
this Mortgage.
(f) In any suit to foreclose the lien of this Mortgage there
shall be allowed and included as additional indebtedness hereby secured in the
final judgment decree all expenditures and expenses which may be paid or
incurred by or on behalf of the Mortgagee for attorneys' and paralegals' fees,
appraisers' fees, outlays for documentary and expert evidence, stenographer
charges, publication costs, costs (which may be estimated as to items to be
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expended after entry of the decree) of procuring all title searches and
examinations and policies, and similar date and assurance with respect to title
as Mortgagee may deem reasonably necessary either to prosecute such suit or to
evidence to bidders at sales which may be had pursuant to such decree the true
condition of the title to or the value of the mortgaged property.
(g) The definition of Environmental Laws in this Mortgage
shall, with respect to the Orlando Property, be deemed to include the Florida
Pollutant Spill Prevention and Control Act, Chapter 376. Florida Statutes, and
the Florida Air and Water Pollution Control Act, Chapter 403, part I of the
Florida Statutes, together with any and all other environmental laws in effect
from time to time in the State of Florida, as the same may be hereafter amended
or modified.
53. As to Property in New York
(a) Consolidation, Amendment and Restatement of Original Mortgage.
This Mortgage secures the Note which Note was made, executed and delivered in
the State of New York, and which Note is a consolidation, amendment and
restatement in its entirety of the Original Note and Additional Notes which were
made, executed and delivered in the State of New York.
The Original Note was secured by that certain Original Mortgage. The
Additional Notes were secured by the Additional Mortgages. The obligations
contained in the Original Note, the Original Mortgage, the Additional Notes and
the Additional Mortgages have been merged into the Obligations contained in the
Note of even date herewith given by Mortgagor to Mortgagee, and Mortgagor and
Mortgagee agree that the Original Mortgage and the Additional Mortgages are
hereby restated in this Mortgage so that together they shall constitute in law,
but one mortgage, a single, first mortgage upon the Property described in
Exhibit "A" securing to Mortgagee the repayment of the obligations as limited
herein. Other than for the lien, conveyance and grant of the Original Mortgage
and Additional Mortgages as consolidated, amended and restated , the terms,
representations and covenants and conditions of the Original Mortgages and the
Additional Mortgages shall be and hereby are superseded and replaced by the
terms, representations, covenants and conditions contained herein and the
parties certify that this instrument secures the same indebtedness evidenced and
secured by the Original Mortgage and the Additional Mortgages and secures no
further or other indebtedness.
(c) Lien Law. (i) This Mortgage is made subject to Section 13 of the
New York Lien Law and, in compliance with Section 13 of the New York Lien Law,
Mortgagor will receive the loan secured by this Mortgage and the right to
receive such advances as a trust fund to be applied first for the purpose of
paying any unpaid costs of the Improvements; and
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Mortgagor has applied and will apply the same first to the payment of any unpaid
costs of the Improvements before using any part of the total of the same for any
other purpose.
(ii) Mortgagor will indemnify and hold Mortgagee harmless
against any loss, liability, cost or expense, including any judgments,
attorneys' fees, costs of appeal bonds or printing costs, arising out of or
relating to any proceedings instituted by any claimant alleging a violation by
Mortgagor of Article 3-A of the New York Lien Law.
(d) Real Property Law. (i) Sections 5 and 6 hereof shall be
construed according to subdivision 4 of Section 254 of the New York Real
Property Law as amended by Chapter 886 of the Laws of 1945 but not as amended by
Chapter 830 of the Laws of 1965 or as otherwise thereafter amended.
(ii) For purposes of Section 291-f of the New York Real
Property Law, Tenant and every tenant or subtenant who after the recording of
this Mortgage, enters into a Lease upon the Mortgaged Property or who acquires
by instrument of assignment or by operation of law a leasehold estate upon the
Mortgaged Property in existence on the date of recording of this Mortgage is
hereby notified that Mortgagor shall not, without obtaining Mortgagee's prior
consent in each instance, cancel, abridge or otherwise modify any Leases upon
the Mortgaged Property or accept prepayments for more than thirty (30) days of
installments of rent to become due with respect to any Lease thereof having an
unexpired term on the date of this Mortgage of five (5) years or more, except as
expressly permitted under this Mortgage or the Assignment of Leases, and that
any such cancellation, abridgement, modification or prepayment made by any such
tenant or subtenant without either being expressly permitted under this Mortgage
or receiving Mortgagee's prior consent shall be voidable by Mortgagee at its
option.
(e) RPAPL. If an Event of Default shall occur and being continuing,
Mortgagee may elect to sell (and, in the case of any default of any purchaser,
resell) the Property or any part of the Property by exercise of the power of
foreclosure or of sale granted to Mortgagee by Articles 13 and 14 of the New
York Real Property Actions and Proceedings Las (the "RPAPL"). In such case,
Mortgagee may commence a civil action to foreclose this Mortgage pursuant to
Article 13 of the RPAPL, or it may proceed and sell the Property pursuant to
Article 14 of the RPAPL to satisfy the Note and all amounts secured hereby.
(f) No Residential Units. This Mortgage does not encumber real
property principally improved or to be improved by one or more structures
containing in the aggregate six or fewer residential dwelling units having their
own separate cooking facilities.
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(g) Maximum Amount Secured. Notwithstanding anything contained
herein to the contrary the maximum amount of principal indebtedness secured by
this Mortgage at the time of execution hereof or which under any contingency may
become secured by this Mortgage at any time hereinafter is Seventy Seven Million
Dollars ($77,000,000), plus (a) Impositions which may be imposed by law on the
Mortgaged Property, (b) premiums on insurance policies covering the Mortgaged
Property, (c) expenses incurred in upholding the lien of this Mortgage,
including, but not limited to (i) the expenses of any litigation to prosecute or
defend the rights and lien created by this Mortgage, (ii) any amount, cost or
charges to which the Mortgagee becomes subrogated, upon payment, whether under
recognized principles of law or equity, or under express statutory authority and
(iii) interest at the Default Rate.
54. Intentionally Omitted.
55. Liability of Assignees of Mortgagee. No assignee of Mortgagee
(an "Assignee") shall have any personal liability, directly or indirectly, under
or in connection with this Mortgage or any amendment or amendments hereto made
at any time or times, heretofore or hereafter, any liability being limited to
the assets pledged as security pursuant to this Mortgage and Mortgagor hereby
forever and irrevocably waives and releases any and all such personal liability.
In addition, no Assignee shall have at any time or times hereafter any personal
liability, directly or indirectly, under or in connection with or secured by any
agreement, lease, instrument, encumbrance, claim or right affecting or relating
to the Properties or to which the Properties are now or hereafter will be
subject. The limitation of liability provided in this Section 54 is (i) in
addition to, and not in limitation of, any limitation of liability applicable to
the assignee provided by law or by any other contract, agreement or instrument,
and (ii) shall not apply to any Assignee's negligence or willful misconduct.
56. Securitization.
(A) Sale of Note and Securitization. At the request of the holder of
the Note and, to the extent not already required to be provided by Mortgagor
under this Mortgage, Mortgagor shall use reasonable efforts to satisfy the
market standards to which the holder of the Note customarily adheres or which
may be reasonably required in the marketplace or by the Rating Agencies in
connection with the sale of the Note or participation therein or the first
successful securitization (such sale and/or securitization, the
"Securitization") of rated single or multi-class securities (the "Securities")
secured by or evidencing ownership interests in the Note and the Mortgage,
including:
(a) (i) at Mortgagee's expense, provide such financial and other
information with respect to the Properties, Mortgagor and its Affiliates, the
Manager and any Tenants of the
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Properties, (ii) provide business plans and budgets relating to the Properties
and (iii) to perform or permit or cause to be performed or permitted such site
inspection, appraisals, market studies, environmental reviews and reports (phase
I's and, if appropriate, phase II's), engineering reports and other due
diligence investigations of the Properties, as may be reasonably requested by
the holder of the Note or the Rating Agencies or as may be necessary or
appropriate in connection with the Securitization (the "Provided Information"),
together, if customary, with appropriate verification and/or consents of the
Provided Information through letters of auditors or opinions of counsel of
independent attorneys acceptable to Mortgagee and the Rating Agencies;
(b) cause counsel to render opinions as to fraudulent conveyance,
and true sale or any other opinion customary in securitization transactions with
respect to the Properties and Mortgagor and its Affiliates, including, without
limitation, a Bankruptcy Opinion, to be provided at Mortgagee's expense, and a
10b-5 Opinion, to be provided at the request of Mortgagee, which counsel and
opinions shall be reasonably satisfactory to the holder of the Note and the
Rating Agencies; for the purposes hereof, (i) "Bankruptcy Opinion" shall mean an
opinion to the effect that if the Mortgagor or the general partner of the
Mortgagor were a debtor under the U.S. Bankruptcy Code, a court would not have
valid legal grounds to cause the Mortgagor to be substantively consolidated with
any other Person and (ii) the "10b-5 Opinion" shall mean an opinion or other
written assurance of counsel acceptable to Mortgagee and its counsel regarding
the absence of any misstatement of a material fact, or the omission to state a
material fact in any materials, other than financial information with respect to
the Properties or the Loan, provided by the Mortgagor to the Mortgagee in
connection with the origination of the Loan, including without limitation
information with respect to the Mortgage, the Mortgaged Property, the Manager,
the Mortgagor and other legal aspects of the Mortgage Loan. The 10b-5 Opinion
shall be delivered at Mortgagee's expense, provided, however, that Mortgagor
shall pay all expenses in connection with the 10b-5 Opinion exceeding $20,000.
Mortgagor's failure to deliver the opinions required hereby within ten (10)
Business Days shall constitute an "Event of Default" hereunder;
(c) make such representations and warranties as of the closing date
of the Securitization with respect to the Properties, Mortgagor, and the Loan
Documents as are customarily provided in securitization transactions and as may
be reasonably requested by the holder of the Note or the Rating Agencies and, to
the extent still true, consistent with the facts covered by such representations
and warranties as they exist on the date thereof, including the representations
and warranties made in the Loan Documents; and
(d) at Mortgagor's expense, execute such amendments to the Loan
Documents and Mortgagor's organizational documents, as may be reasonably
requested by the holder of the Note or the Rating Agencies or otherwise to
effect the Securitization, provided, that nothing
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contained in this subsection (D) shall result in any economic change in the
transaction, or increase the liability or obligations, or reduce the rights and
benefits, of the Mortgagor hereunder.
(B) Cooperation with Rating Agencies. In the event this Loan becomes
an asset of a securitization underwritten by Mortgagee or any of its Affiliates,
Mortgagor, prior to such securitization, shall implement any and all operations
and maintenance plans recommended for asbestos or other environmental matters
recommended in any environmental report and complete all surveys in connection
therewith; provided, however, that nothing contained in this paragraph (b) shall
limit the obligations of Mortgagor contained in this Mortgage or the other Loan
Documents. In addition, Mortgagor shall (i) gather any environmental information
required by the Rating Agencies in connection with such a securitization, (ii)
at Mortgagee's request, meet with representatives of such Rating Agencies to
discuss the business and operations of the Mortgaged Property, and (iii)
cooperate with the requests of the Rating Agencies in connection with all of the
foregoing as well as in connection with all other matters, including, without
limitation, entering into any amendments or modifications to this Mortgage or to
any other Loan Document as may be required by the Rating Agencies; provided,
however, that such amendments or modifications shall not increase Mortgagor's
obligations or materially decrease Mortgagor's rights and benefits under the
Loan Documents; further provided that Mortgagor shall not be obligated under
this paragraph (B) to expend any of its funds or incur any expense to comply
herewith.
(C) Securitization Financial Statements. Mortgagor covenants and
agrees that, upon Mortgagee's written request therefor in connection with a
securitization in which this Mortgage is to be included as an asset, Mortgagor
shall, at Mortgagor's sole cost and expense, promptly deliver the most recent
audited financial statements and related documentation prepared by an
independent certified public accountant that satisfy applicable federal
securities law requirements for use in a Public Registration Statement (which
may include up to three (3) years of historical audited financial statements or
for so long as Mortgagor has owned a Property). A "Public Registration
Statement" shall mean a registration statement meeting the requirements of
Section 5 of the Securities Act of 1933, as amended.
(D) Securitization Indemnification. (i) Mortgagor understands that
certain of the Provided Information and the information required to be delivered
by Mortgagor hereunder (the "Required Records") may be included in disclosure
documents in connection with the Securitization, including a prospectus or
private placement memorandum (each, a "Disclosure Document") and may also be
included in filings with the Securities and Exchange Commission pursuant to the
Securities Act of 1933, as amended (the "Securities Act"), or the Securities and
Exchange Act of 1934, as amended (the "Exchange Act"), or provided or made
available to
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investors or prospective investors in the Securities, the Rating Agencies, and
service providers relating to the Securitization. In the event that the
Disclosure Document is required to be revised prior to the sale of all
Securities, Mortgagor will cooperate with the holder of the Note in updating the
Provided Information or Required Reports for inclusion or summary in the
Disclosure Document by providing all current information pertaining to Mortgagor
and the Properties necessary to keep the Disclosure Document accurate and
complete in all material respects with respect to such matters.
(ii) In connection with each of (x) a preliminary and a private
placement memorandum or (y) a preliminary and final prospectus, as applicable,
and provided that Mortgagee, at Mortgagee's cost and expense has provided
Mortgagor with drafts of such preliminary and final documents, and such
additional information as Mortgagor shall reasonably require, Mortgagor agrees
to provide an indemnification certificate:
(A) certifying that Mortgagor has carefully examined those portions of
such memorandum or prospectus, as applicable, pertaining to
Mortgagor, the Properties and the Loan including applicable portions
of the sections entitled "Special Considerations", "Description of
the Mortgages", "Description of the Mortgage Loans and Mortgaged
Property", "The Manager", "The Mortgagor" and "Certain Legal Aspects
of the Mortgage Loan", and such sections (and any other sections
reasonably requested and pertaining to Mortgagor, the Properties or
the Loan) do not contain any untrue statement of a material fact or
omit to state a material fact necessary in order to make the
statements made, in the light of the circumstances under which they
were made, not misleading;
(B) indemnifying Mortgagee and the affiliates of Merrill Lynch & Co.
("ML"), that has filed the registration statement relating to the
securitization (the "Registration Statement"), each of its
directors, each of its officers who have signed the Registration
Statement and each person or entity who controls ML within the
meaning of Section 15 of the Securities Act or Section 30 of the
Exchange Act of 1933, as amended (the "Securities Act")
(collectively, the "ML Group"), and ML, each of its directors and
each person who controls ML, within the meaning of Section 15 of the
Securities Act and Section 20 of the Exchange Act (collectively, the
"Underwriter Group") for any losses, claims, damages or liabilities
(the "Liabilities") to which Mortgagee, the ML Group or the
Underwriter Group may become subject insofar as the Liabilities
arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the applicable
portions of such sections applicable to Mortgagor, the Properties or
the Loan, or arise out of or are based upon the omission or alleged
omission to state
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<PAGE> 108
therein a material fact required to be stated in the applicable
portions of such sections or necessary in order to make the
statements in the applicable portions of such sections or in light
of the circumstances under which they were made, not misleading; and
(C) agreeing to reimburse Mortgagee and ML for any legal or other
expenses reasonably incurred by Mortgagee and ML in connection with
investigating or defending the Liabilities for which Mortgagor has
liability to Mortgagee, the ML Group or the Underwriter Group.
Mortgagor's Liability under clauses (A) or (B) above shall be
limited to Liabilities arising out of or based upon any such untrue
statement or omission made therein in reliance upon and in
conformity with information furnished to Mortgagee by Mortgagor in
connection with the preparation of those portions of the memorandum
or prospectus pertaining to Mortgagor, the Properties or the Loan or
in connection with the underwriting of the debt, including financial
statements of Mortgagor, operating statements, and rent rolls with
respect to the Properties. This indemnity agreement will be in
addition to any liability which Mortgagor may otherwise have.
(iii) In connection with filings under the Exchange Act, Mortgagor
agrees to (i) indemnify Mortgagee, ML Group and the Underwriter Group for any
Liabilities to which Mortgagee, the ML Group or the Underwriter Group may become
subject insofar as the Liabilities arise out of or are based upon the omission
or alleged omission to state in the Provided Information or Required Records a
material fact required to be stated in the Provided Information or Required
Records in order to make the statements in the Provided Information or Required
Records, in light of the circumstances under which they were made not misleading
and (ii) reimburse Mortgagee or ML for any legal or other expenses reasonably
incurred by Mortgagee and ML in connection with defending or investigating the
Liabilities.
(iv) Promptly after receipt by an indemnified party under this
Section 56 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section 56, notify the indemnifying party in writing of the
commencement thereof, but the omission to so notify the indemnifying party will
not relieve the indemnifying party from any liability which the indemnifying
party may have to any indemnified party hereunder except to the extent that
failure to notify causes prejudice to the indemnifying party. In the event that
any action is brought against any indemnified party, and it notifies the
indemnifying party of the commencement thereof, the indemnifying party will be
entitled, jointly with any other indemnifying party, to participate therein and,
to the extent that it (or they) may elect by written notice delivered to the
indemnified party promptly after receiving the aforesaid notice from such
indemnified party, to
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<PAGE> 109
assume the defense thereof with counsel satisfactory to such indemnified party.
After notice from the indemnifying party to such indemnified party under this
Section 56 for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation; provided, however, if the defendants in any such action
include both the indemnified party and the indemnifying party shall have
reasonably concluded that there are any legal defenses available to it and/or
other indemnified parties that are different from or additional to those
available to the indemnifying party, the indemnified party or parties shall have
the right to select separate counsel to assert such legal defenses and to
otherwise participate in the defense of such action on behalf of such
indemnified party or parties. The indemnifying party shall not be liable for the
expenses of more than one separate counsel unless an indemnified party shall
have reasonably concluded that there may be legal defenses available to it that
are different from or additional to those available to another indemnified
party.
(v) In order to provide for just and equitable contribution in
circumstances in which the indemnity agreement provided for in Section 56 is for
any reason held to be unenforceable by an indemnified party in respect of any
losses, claims, damages or liabilities (or action in respect thereof) referred
to therein which would otherwise be indemnifiable under Section 56, the
indemnifying party shall contribute to the amount paid or payable by the
indemnified party as a result of such losses, claims, damages or liabilities (or
action in respect thereof); provided, however, that no person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. In determining the amount of
contribution to which the respective parties are entitled, the following factors
shall be considered: (i) the ML Group's and Mortgagor's relative knowledge and
access to information concerning the matter with respect to which claim was
asserted; (ii) the opportunity to correct and prevent any statement or omission;
and (iii) any other equitable considerations appropriate in the circumstances.
Mortgagee and Mortgagor hereby agree that it may not be equitable if the amount
of such contribution were determined by pro rata or per capita allocation.
(E) Depositor and Registrant. Notwithstanding anything to the
contrary contained herein, Mortgagor shall have no obligation to act as a
depositor with respect to the Loan or an issuer or registrant with respect to
the securities issued in any Securitization (or be deemed by the Securities and
Exchange Commission to be an issuer, registrant or the functional equivalent
thereof for purposes of the Securities Act).
(F) Retention of Servicer. Mortgagee reserves the right to retain a
servicer to act as its agent hereunder with such powers as are specifically
delegated to the servicer by Mortgagee, whether pursuant to the terms of this
Mortgage, the Cash Collateral Agreement or otherwise, together with such other
powers as are reasonably incidental thereto.
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<PAGE> 110
(G) Exculpated Parties. Notwithstanding anything to the contrary
contained in this Section 57, no personal liability shall be asserted or
enforceable against the Exculpated Parties for the Liabilities.
57. Air Rights Lease.
(a) Mortgagor hereby represents and warrants as follows: (i) the Air
Rights Lease is in full force and effect, unmodified by any writing or otherwise
except as specifically set forth herein; (ii) all rent, additional rent and/or
other charges reserved in or payable under the Air Rights Lease, have been paid
to the extent that they are payable to the date hereof; (iii) the Mortgagor
enjoys the holding of the air development rights; (iv) the Mortgagor is not in
default under any of the material terms of the Air Rights Lease and to the best
of its knowledge, is not in default under any other term of the Air Rights
Lease; (v) the ground lessor is not in default under any of the material terms
or provisions of the Air Rights Lease, and, to the best of the Mortgagor's
knowledge, the ground lessor is not in default under any other terms or
provisions of the Air Rights Lease, on its part to be observed or performed; and
(vi) the Mortgagor has delivered to the Mortgagee a true, accurate and complete
copy of the Air Rights Lease.
(b) With respect to the Air Rights Lease, Mortgagor covenants and
agrees as follows: (i) to promptly and faithfully observe, perform and comply
with all the terms, covenants and provisions of the Air Rights Lease, on its
part to be observed, performed and complied with, within the applicable grace
periods, if any; (ii) to refrain from doing anything, as a result of which,
there could be a material default under or a breach of any of the terms of the
Air Rights Lease; (iii) not to do, permit or suffer any event or omission as a
result of which there is likely to occur a default or breach under the Air
Rights Lease after the passing of the applicable grace periods, if any; (iv) not
to cancel, terminate, surrender, modify, amend or in any way alter or permit the
alteration of any of the provisions of the Air Rights Lease or grant any
consents or waivers thereunder without the prior written consent of Mortgagee;
(v) to deliver to Mortgagee, within three (3) Business Days of receipt thereof,
a copy of each notice of default and all responses to default notices, similar
instruments received or delivered by Mortgagee, in connection with the Air
Rights Lease; (vi) to furnish within a reasonable period of time, except in
connection with a notice of default which is governed by the previous clause, to
Mortgagee copies of such information and evidence as Mortgagee may reasonably
request concerning the due observance, performance and compliance by Mortgagor
with the terms, covenants and provisions of the Air Rights Lease; and (vii)
that any failure by Mortgagor, as tenant under the Air Rights Lease, to perform
within any applicable grace period its obligations under the Air Rights Lease
shall constitute an Event of Default by Mortgagor under this Mortgage.
(c) In the event of the occurrence of any event which, with the
giving of notice, the passage of time or both, would constitute an Event of
Default (as defined in the Air Rights Lease) by Mortgagor in the performance of
its obligations under the Air Rights Lease, and which is not cured within any
applicable grace period, including, without limitation, any default
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<PAGE> 111
in the payment of any sums payable thereunder, then, in each and every case,
Mortgagee may, at its option cause the default or defaults to be remedied and
otherwise exercise any and all of the rights of Mortgagor thereunder in the name
of and on behalf of Mortgagor. Mortgagor shall, within five (5) Business Days
after written demand, reimburse Mortgagee for all advances made and expenses
reasonably incurred by Mortgagee in curing any such default (including, without
limitation, reasonable attorneys' fees), together with interest thereon from the
date that such advance is made, to and including the date the same is paid to
Mortgagee. The provisions of this subsection (c) are in addition to any other
remedy given to or allowed Mortgagee under the Air Rights Lease.
(d) If the Air Rights Lease is cancelled or terminated by reason of
an Event of Default (as defined in the Air Rights Lease) that Mortgagee was
unable to cure (following a good faith effort to so cure), then, if Mortgagee or
its nominee shall acquire an interest in any new lease of the air rights
following such Event of Default, Mortgagor shall have no right, title or
interest in or to the new lease or the leasehold estate created by such new
lease.
(e) Mortgagor shall obtain and deliver to Mortgagee, within thirty
(30) days after written demand therefor by Mortgagee, an estoppel certificate
stating (1) that the Air Rights Lease is in full force and effect and has not
been modified or, if it has been modified, the date of each modification
(together with copies of each such modification), (2) the date to which the
fixed rent has been paid under the Air Rights Lease, (3) whether a notice of
default has been sent to Mortgagor, as tenant under the Air Rights Lease which
has not been cured, and if such notice has been sent, the date it was sent and
the nature of the default, (4) whether, to Mortgagor's knowledge, any parties
under the Air Rights Lease are in default in keeping, observing or performing
any material term covenant, agreement, provision, condition or limitation
contained in the Air Rights Lease, (5) if, under the Air Rights Lease,
Mortgagor, as tenant, shall be in default, the default, (6) the name of the
tenant entitled to possession of the air rights under the Air Rights Lease, (7)
whether to the best of Mortgagor's knowledge there has occurred any event which,
with the giving of notice or the passage of time or both would constitute a
default under the Air Rights Lease, and, if there has occurred any such event,
setting forth the nature thereof in reasonable detail.
(f) Notwithstanding anything to the contrary contained herein, this
Mortgage shall not constitute an assignment of the Air Rights Lease within the
meaning of any provision thereof prohibiting its assignment and Mortgagee shall
have no liability or obligation thereunder by reason of its acceptance of this
Mortgage. Mortgagee shall be liable for the obligations of the tenant arising
under the Air Rights Lease for only that period of time during which Mortgagee
is in possession of the air rights or has acquired, by foreclosure or otherwise,
and is holding, all of the right, title and interest of Mortgagor therein.
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<PAGE> 112
IN WITNESS WHEREOF, this Mortgage has been duly executed by
Mortgagor and Mortgagee on the date first hereinabove written.
MORTGAGOR:
MAGNOLIA ASSOCIATES, LTD.,
a Florida limited partnership
By: Tower Orlando GP LLC,
a Delaware limited liability company,
its general partner
By: Tower QRS No. 3 Corp.,
a Delaware corporation,
its managing member
By: /s/ Lawrence H. Feldman
---------------------------------------
Name: Lawrence H. Feldman
Title: President
286 MADISON, L.P.,
a New York limited partnership
By: Tower Madison GP LLC,
a Delaware limited liability company,
its general partner
By: Tower QRS No. 4 Corp.,
a Delaware corporation,
its managing member
By: /s/ Lawrence H. Feldman
---------------------------------------
Name: Lawrence H. Feldman
Title: President
<PAGE> 113
290 MADISON, L.P.,
a New York limited partnership
By: Tower Madison GP LLC,
a Delaware limited liability company,
its general partner
By: Tower QRS No. 4 Corp.,
a Delaware corporation,
its managing member
By: /s/ Lawrence H. Feldman
---------------------------------------
Name: Lawrence H. Feldman
Title: President
292 MADISON, L.P.,
a New York limited partnership
By: Tower Madison GP LLC,
a Delaware limited liability company,
its general partner
By: Tower QRS No. 4 Corp.,
a Delaware corporation,
its managing member
By: /s/ Lawrence H. Feldman
---------------------------------------
Name: Lawrence H. Feldman
Title: President
<PAGE> 114
MORTGAGEE:
MERRILL LYNCH MORTGAGE CAPITAL INC.,
a Delaware corporation
By: /s/ Lawrence Miller
-------------------------------------------
Lawrence Miller
Director
<PAGE> 115
SCHEDULE 1
Allocated Loan Amounts
One Orlando Center $40,000,000
286/290/292 Madison Avenue $32,000,000
Tower 45 $67,000,000
<PAGE> 116
SCHEDULE 2
Operating Agreements
Orlando Property
Olympia & York Southeast Equity Corp. Development Order - Project Olympia Place
Substantial Deviation, the City of Orlando, Florida ECFRPC DRI #688-13 by the
City of Orlando, Florida, dated October 17, 1988, and recorded on December 7,
1988, in Official Records Book 4037, page 2641, of the Public Records of Orange
County, Florida, as amended by that certain First Amendment to the Olympia &
York Southeast Equity Corp. Development Order by the City of Orlando, Florida,
dated December 14, 1992, and recorded on January 8, 1993, in Official Records
Book 4510, page 3480, of the Public Records of Orange County, Florida, and as
further amended by that certain Second Amendment to the One Orlando Centre
Development Order by the City of Orlando, Florida, dated June 24, 1996, and
recorded on July 10, 1996, in Official Records Book 5086, page 3263, of the
Public Records of Orange County, Florida.
City of Orlando Downtown Development of Regional Impact Development Order - The
city of Orlando, Florida, ECFRPC DRI #690-05 by the City of Orlando, Florida,
dated June 18, 1990, and recorded on January 8, 1992, in Official Records Book
4362, page 3368, of the Public Records of Orange County, Florida, as amended by
that certain Notice of Recordation of Omitted Exhibit from City of Orlando
Downtown Development of Regional Impact Development Order The City of Orlando
ECFRPC DRI #690-05, dated November 15, 1996, and recorded on November 19, 1996,
in Official Records Book 5157, page 1002, of the Public Records of Orange
County, Florida.
Reciprocal Parking Easement Agreement by and between Magnolia Associates, LTD.,
a Florida limited partnership, and Orlando Option Holding, L.L.C., a Delaware
limited liability company, to be recorded in the Public Records of Orange
County, Florida.
<PAGE> 117
SCHEDULE 3
Special Assessments
286 Madison, New York BID Tax
97/98 tax year: $15,632.16
290 Madison, New York BID Tax
97/98 tax year: $5,617.24
292 Madison, New York BID Tax
97/98 tax year: $26,068.68
120 West 45th Street, New York BID Tax
97/98 tax year: $123,319.20
<PAGE> 118
SCHEDULE 4
Capital Expenditures
For the Orlando Property, capital expenditure reserves of $100,000
for improved maintenance of mechanical systems.
For Tower 45, capital expenditure reserves of $157,000 for repair of
the roof and $101,000 for improved maintenance of the heat pumps.
<PAGE> 1
Exhibit 10.76
AMENDED AND RESTATED
ASSIGNMENT OF LEASES,
RENTS AND SECURITY DEPOSITS
from
MAGNOLIA ASSOCIATES, LTD.,
286 MADISON, L.P., 290 MADISON, L.P. AND 292 MADISON, L.P.,
collectively, as Assignor
to
MERRILL LYNCH MORTGAGE CAPITAL INC.
as Assignee
Dated as of November 26, 1997
- --------------------------------------------------------------------------------
Prepared and drafted by and after recording, return to:
Martha Feltenstein, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
<PAGE> 2
AMENDED AND RESTATED
ASSIGNMENT OF LEASES, RENTS AND SECURITY DEPOSITS
THIS AMENDED AND RESTATED ASSIGNMENT OF LEASES, RENTS AND SECURITY
DEPOSITS (herein, together with all amendments and supplements thereto, this
"Assignment"), dated as of this 26th day of November, 1997, by and among
MAGNOLIA ASSOCIATES, LTD., a Florida limited partner ship, 286 MADISON, L.P.,
290 MADISON, L.P. and 292 MADISON, L.P., each a New York limited partnership,
each having an address c/o Tower Realty Operating Partnership, L.P., 120 West
45th Street, 24th floor, New York, New York 10036, as assignor ("Assignor") and
MERRILL LYNCH MORTGAGE CAPITAL INC., a Delaware, having an address at World
Financial Center, North Tower, New York, New York 10281-1326, as assignee
(together with its successors and assigns, "As signee").
W I T N E S S E T H :
WHEREAS, simultaneously herewith, Assignor and Assignee have spread
the lien of the Original Mortgage to Tower 45 and have consolidated, amended and
restated the Original Mortgage and the Additional Mortgages in their entirety to
secure indebtedness in the principal amount of One Hundred Seven Million Dollars
($107,000,000) (the "Loan"), which Loan is evidenced by a consolidated, amended
and restated mortgage note in the amount of One Hundred Seven Million Dollars
($107,000,000), of even date herewith (together with all amendments,
modifications, supplements, restatements, substitutions and replacements thereof
or thereto, the "Note"), executed by Assignor in favor of Assignee, secured by
the Consolidated, Amended and Restated Mortgage, Security Agreement, Financing
Statement, Fixture Filing and Assignment of Leases, Rents and Security Deposits,
dated as of even date herewith, from Assignor to Assignee (the "Mortgage");
and
WHEREAS, as a condition to making the Loan, Assignee has required
that Assignor amend and restate the Assignment of Leases, Rents and Security
Deposits dated as of October 16, 1997, made by Assignor to Midland Loan
Services, L.P., as assignee (the "Original Assignment"), which Original
Assignment has been assigned to Assignee by assignment dated as of October 16,
1997 and as such Original Assignment and assignment thereof is more particularly
described on Exhibit B attached hereto.
1
<PAGE> 3
NOW, THEREFORE, Assignor, in consideration of TEN DOLLARS ($10.00),
and other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, does hereby assign, transfer and set over unto Assignee,
subject to the terms hereof, all of the right, title and interest of Assignor in
and to all of those certain leases now or hereafter affecting all or a portion
of the real property more particularly described on Exhibit A hereto (the
"Property"), together with all rents, security deposits, income and profits
arising from said leases, all modifications, renewals and extensions thereof and
any guarantees of the lessee's obligations under said leases (each of said
leases and all such guarantees, modifications, renewals and extensions relating
thereto being individually referred to as a "Lease" and collectively referred to
as the "Leases").
THIS ASSIGNMENT is an absolute, present and irrevocable assignment
and is made for the purpose of securing:
A. The payment of all sums and indebtedness now or hereafter due and
payable under the Note.
B. Payment of all sums with interest thereon becoming due and
payable to Assignee under this Assignment, the Mortgage or the other Loan
Documents.
C. The performance and discharge of each and every obligation,
covenant, representation, warranty and agreement of Assignor under this
Assignment, the Note, the Mortgage, the Cash Collateral Agreement and any other
Loan Document.
ASSIGNOR hereby covenants and warrants to Assignee that Assignor has
not executed any prior assignment of the Leases or the Rents outstanding as of
the date hereof except for the Mortgage, nor has Assignor performed any act or
executed any other instrument which might prevent Assignee from exercising its
rights under any of the terms and conditions of this Assignment or which would
limit Assignee in such exercise; and Assignor further covenants and warrants to
Assignee that Assignor has not executed or granted any modification whatsoever
of any Lease which individually or in the aggregate is likely to result in a
material adverse effect on the value of the Property other than any amendment
heretofore delivered to Assignee, and that the Leases are in full force and
effect and Assignor has neither given to nor received any written notice of
default from any Tenant which remains uncured (which individually or in the
aggregate might have a material adverse effect
2
<PAGE> 4
on the value of the Property) and to the Assignor's knowledge, no events or
circumstances exist which with or without the giving of notice, the passage of
time or both may constitute a default under any of the Leases which individually
or in the aggregate is likely to result in a material adverse effect on the
value of the Property.
ASSIGNOR further covenants with Assignee: (i) to observe and perform
all material obligations imposed upon the lessor under the Leases and, except as
permitted under the Mortgage, not to do or permit to be done anything which
individually or in the aggregate is likely to result in a material adverse
effect on the value of the Property; (ii) not to collect any of the Rents
(exclusive of security deposits) more than thirty (30) days in advance of the
time when the same shall become due, not to execute any other assignment of
lessor's interest in the Leases or assignment of Rents arising or accruing from
the Leases or otherwise with respect to the Properties except for the Mortgage;
none of the foregoing shall be done or suffered to be done without in each
instance obtaining the prior written consent of Assignee (except to the extent
such consent is not required pursuant to the terms of the Mortgage), and any of
such acts done without the prior written consent of Assignee shall be null and
void; and (iii) to execute and deliver, at the request of Assignee, all such
further assurances and assignments with respect to the Leases and Rents assigned
herein as Assignee shall from time to time reasonably require to implement the
terms of this Assignment; provided, however, that no such further assurances and
assignments shall increase Assignor's obligations or liability under this
Assignment.
THIS ASSIGNMENT is made on the following terms, covenants and
conditions:
1. All capitalized terms not otherwise defined herein shall have the
meanings set forth in the Mortgage.
2. Subject to the provisions of the Cash Collateral Agreement,
Assignee has granted Assignor a license to cause the Rents to be collected and
deposited by Tenants in the Property Account (as defined in the Cash Collateral
Agreement) in accordance with the terms of the Cash Collateral Agreement.
3. At any time after the occurrence and during the continuance of an
Event of Default, Assignee, without in any way waiving such Event of Default, at
its option, upon notice and without regard to the adequacy of the security for
the said principal sum, interest and indebtedness secured hereby and by the
Mortgage, either
3
<PAGE> 5
in person or by agent, upon bringing any action or proceeding, or by a receiver
appointed by a court, may enter upon and take possession of the premises
described in the Leases and/or the Mortgage and have, hold, manage, lease and
operate the same on such terms and for such period of time as Assignee may deem
proper. At any time after and during the continuance of an Event of Default,
Assignee, either with or without taking possession of said premises in its own
name, may demand, sue for or otherwise collect and receive all Rents, including
any Rents past due and unpaid, and to apply such Rents to the payment of: (a)
all reasonable expenses of managing the Trust Estate, including, without
limitation, the reasonable salaries, fees and wages of any managing agent and
such other employees as Assignee may reasonably deem necessary and all
reasonable expenses of operating and maintaining the Trust Estate, including,
without limitation, all taxes, charges, claims, assessments, water rents, sewer
rents and any other liens, and premiums for all insurance which are due and
payable and the cost of all alterations, renovations, repairs or replacements,
and all reasonable expenses incident to taking and retaining possession of the
Trust Estate; and (b) the principal sum, interest and indebtedness secured
hereby and by the Mortgage, together with all reasonable costs and reasonable
attorneys' fees, actually incurred in such order of priority as Assignee may
elect in its sole discretion. The exercise by Assignee of the option granted it
in this Section 3 and the collection of the Rents and the application thereof as
herein provided shall not be considered a waiver of any Event of Default under
the Note, the Mortgage or under the Leases or this Assignment. Assignor agrees
that the exercise by Assignee of one or more of its rights and remedies
hereunder shall in no way be deemed or construed to make Assignee a mortgagee in
possession unless and until such time as Assignee takes actual possession of any
Property.
4. Assignee shall not be liable for any loss sustained by Assignor
resulting from Assignee's failure to let the premises or any portion thereof or
any other act or omission of Assignee either in collecting the Rents or, if
Assignee shall have taken possession of the premises described in the Leases
and/or the Mortgage, in managing such premises after any such Event of Default
unless such loss is caused by the gross negligence, willful misconduct or bad
faith of Assignee. Assignee shall not be obligated to perform or discharge, nor
does Assignee hereby undertake to perform or discharge, any obligation, duty or
liability under any Lease or under or by reason of this Assignment, and Assignor
shall, and does hereby agree to, indemnify Assignee for, and to hold Assignee
harmless prior to the time that Assignee or any Affiliate, nominee or designee
of Assignee becomes a mortgagee in possession or fee owner of any Property or
otherwise takes possession of the Property following an Event of Default from,
any and all liability, loss or damage which Assignee may
4
<PAGE> 6
incur as a result of or related to said Leases or under or by reason of this
Assignment and the exercise of its remedies hereunder and under the other Loan
Documents and from any and all claims and demands whatsoever which may be
asserted against Assignee by reason of any alleged obligations or undertakings
on its part to perform or discharge any of the terms, covenants or agreements
contained in said Leases, except liability resulting from gross negligence,
willful misconduct or bad faith of Assignee. Should Assignee incur any such
liability under said Leases or under or by reason of this Assignment or in
defense of any such claims or demands, the amount thereof, including reasonable
costs and expenses and reasonable attorneys' fees actually incurred, shall be
secured hereby, and Assignor shall reimburse Assignee therefor immediately upon
demand, and upon the failure of Assignor to do so Assignee may, at its option,
exercise Assignee's remedies under the Mortgage as the same relates to the Trust
Estate. It is further understood that unless and until Assignee or its
Affiliate, nominee or designee shall become a mortgagee in possession or the
fee owner of the Property or otherwise takes possession or control of the
Property following an Event of Default, this Assignment shall not operate to
place responsibility for the control, care, management or repair of said
premises upon Assignee, nor for the carrying out of any of the terms and
conditions of any Lease; nor shall it operate to make Assignee responsible or
liable for any waste committed on the Property by the tenants or any other
parties, or for any dangerous or defective condition of the premises, or for any
negligence in the management, upkeep, repair or control of said premises
resulting in loss or injury or death to any tenant, licensee, employee or
stranger other than any of the foregoing arising from the gross negligence,
willful misconduct or bad faith of Assignee, its employees, officers, agents or
representatives.
5. Upon payment in full of the principal sum, interest and
indebtedness secured hereby and by the Mortgage, this Assignment shall become
and be void and of no effect, but the affidavit, certificate, letter or
statement of any officer, agent or attorney of Assignee showing any part of said
principal, interest or indebtedness to remain unpaid shall be and constitute
conclusive evidence of the validity, effectiveness and continuing force of this
Assignment, and any person may, and is hereby authorized to, rely thereon.
Assignor hereby authorizes and directs the lessees named in the Leases or any
other or future lessee or occupant of the premises described therein or in the
Mortgage, upon receipt from Assignee of written notice to the effect that
Assignee is then the holder of the Mortgage and that an Event of Default exists
thereunder or under any other Loan Document to pay over to Assignee all Rents
and to continue so to do until otherwise notified by Assignee. Notwithstanding
anything to the contrary contained herein, to the extent all or a portion of
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<PAGE> 7
any Property is released from the lien of the Mortgage pursuant to Sections 6,
11, 38, 46 or 57 thereof, Leases covering such portion of the Property shall be
released from this Assignment and Assignee shall execute and deliver to the
owner of the Property a written release hereof in recordable form.
6. Assignee may take or release other security for the payment of
said principal sum, interest and indebtedness, may release any party primarily
or secondarily liable therefor and may apply any other security held by it to
the satisfaction of such principal sum, interest or indebtedness without
prejudice to any of its rights under this Assignment.
7. Each Assignor agrees that it will, after an Event of Default and
the acceleration of indebtedness evidenced by the Note, at the request therefor
by As signee, deliver to Assignee certified copies of each and every Lease then
affecting all or any part of the Property, together with assignments thereof.
Such assignments shall be on forms reasonably approved by Assignee or its
designee, and each Assignor agrees to pay all reasonable costs reasonably
incurred in connection with the execution and recording of such assignments or
any other related documents, including, without limitation, reasonable fees of
Assignee's local counsel.
8. Wherever used herein, the singular (including, without
limitation, the term "Lease") shall include the plural, and the use of any
gender shall apply to all genders.
9. Nothing contained in this Assignment and no act done or omitted
by Assignee pursuant to the powers rights granted it hereunder and shall be
deemed to be a waiver by Assignee of any of Assignee's rights and remedies under
the Note, the Mortgage, the Cash Collateral Agreement or any other Loan
Document. This Assignment is made and accepted without prejudice to any of such
rights and remedies possessed by Assignee to collect the principal sum, interest
and indebtedness secured hereby and to enforce any other security therefor held
by it, and said rights and remedies may be exercised by Assignee either prior
to, simultaneously with, or subsequent to any action taken by it hereunder.
10. All notices, consents, approvals and requests required or
permitted hereunder shall be given in accordance with the terms of Section 26 of
the Mortgage.
6
<PAGE> 8
11. No consent by Assignor shall be required for any assignment or
reassignment of the rights of Assignee under this Assignment to any purchaser of
the Loan or any interest in or portion of the Loan.
12. This Assignment was negotiated in New York, and made by Assignor
and accepted by Assignee in the State of New York, and the proceeds of the Note
delivered pursuant thereto were disbursed from New York, which State the parties
agree has a substantial relationship to the parties and to the underlying trans
action embodied hereby, and in all respects, including, without limiting the
generality of the foregoing, matters of construction, validity and performance.
This Assignment and the obligations arising hereunder and the provisions for the
creation, perfection and enforcement of the Liens and security interest created
herein and pursuant to the Mortgage with respect to the Property shall be
governed by and construed in accordance with, the laws of the State of New York
applicable to contracts made and performed in the State of New York and any
applicable laws of the United States of America. Whenever possible, each
provision of this Assignment shall be interpreted in such a manner as to be
effective and valid under applicable law, but if any provision of this
Assignment shall be prohibited by, or invalid under, applicable law, such
provision shall be ineffective to the extent of such prohibition or invalidity
without invalidating the remaining provisions of this Assignment. Nothing
contained in this Assignment or in any Loan Document shall require either
Assignor to pay or Assignee to accept any sum in any amount which would, under
applicable law, subject Assignee, any trustee or any holder to penalty or
adversely affect the enforceability of this Assignment. In the event that the
payment of any sum due hereunder or under any Loan Document would have such
result under applicable law, then, ipso facto, the obligation of Assignor to
make such payments shall be reduced to the highest sum then permitted under
applicable law and appropriate adjustment shall be made by Assignor and
Assignee.
13. Recourse with respect to any claim arising under or in
connection with this Assignment by Assignee shall be limited to the same extent
as is provided in Section 33 of the Mortgage with respect to claims against
Assignor and the other parties named therein by Assignee and the terms,
covenants and conditions of Section 33 of the Mortgage are hereby incorporated
by reference as if fully set forth herein.
14. In the event that any provisions of this Assignment and the
Mortgage conflict, the provisions of the Mortgage shall control.
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<PAGE> 9
15. Assignor hereby waives and shall waive trial by jury, to the
extent permitted by law, in any action or proceeding brought by, or counterclaim
asserted by Assignee which action proceeding or counterclaim arises out of or is
connected with this Assignment, the Note or any other Loan Document.
16. This Assignment may be executed in any number of counter parts.
8
<PAGE> 10
IN WITNESS WHEREOF, each Assignor has duly executed this amended
and restated Assignment on the date first hereinabove written.
ASSIGNOR:
MAGNOLIA ASSOCIATES, LTD.,
a Florida limited partnership
By: Tower Orlando GP LLC,
a Delaware limited liability company
Its General Partner
By: Tower QRS No. 3 Corp.,
a Delaware corporation,
Its managing member
By: /s/ Lawrence H. Feldman
-------------------------------------
Name: Lawrence H. Feldman
Title President
286 MADISON, L.P.,
a New York limited partnership
By: Tower Madison GP LLC,
a Delaware limited liability company
Its General Partner
By: Tower QRS No. 4 Corp.,
a Delaware corporation,
Its managing member
By: /s/ Lawrence H. Feldman
-------------------------------------
Name: Lawrence H. Feldman
Title President
<PAGE> 11
290 MADISON, L.P.,
a New York limited partnership
By: Tower Madison GP LLC,
a Delaware limited liability company
Its General Partner
By: Tower QRS No. 3 Corp.,
a Delaware corporation,
Its managing member
By: /s/ Lawrence H. Feldman
---------------------------------------
Name: Lawrence H. Feldman
Title President
292 MADISON, L.P.,
a New York limited partnership
By: Tower Madison GP LLC,
a Delaware limited liability company
Its General Partner
By: Tower QRS No. 4 Corp.,
a Delaware corporation,
Its managing member
By: /s/ Lawrence H. Feldman
---------------------------------------
Name: Lawrence H. Feldman
Title President
<PAGE> 12
ASSIGNEE:
MERRILL LYNCH MORTGAGE CAPITAL INC.,
a Delaware corporation
By: /s/ Lawrence Miller
---------------------------------------
Lawrence Miller
Director
<PAGE> 1
Exhibit 10.77
AMENDED AND RESTATED
CASH COLLATERAL ACCOUNT
SECURITY, PLEDGE AND ASSIGNMENT AGREEMENT
among
MAGNOLIA ASSOCIATES, LTD.,
as Borrower
and
THE CHASE MANHATTAN BANK,
as Agent
and
MERRILL LYNCH MORTGAGE CAPITAL INC.,
as Lender
DATED: as of November 26, 1997
<PAGE> 2
AMENDED AND RESTATED CASH COLLATERAL ACCOUNT
SECURITY, PLEDGE AND ASSIGNMENT AGREEMENT
AMENDED AND RESTATED CASH COLLATERAL ACCOUNT SECURITY, PLEDGE AND
ASSIGNMENT AGREEMENT (this "Agreement"), dated as of November 26, 1997, among
MAGNOLIA ASSOCIATES, LTD. ("Borrower"), THE CHASE MANHATTAN BANK ("Agent"), and
MERRILL LYNCH MORTGAGE CAPITAL INC. ("Lender").
W I T N E S S E T H:
WHEREAS, Borrower is the holder of certain real property described
in Exhibit A attached hereto (collectively, the "Premises", and the portion of
the Premises described in Exhibit A-1 attached hereto, the "Orlando Premises",
and the portion of the Premises described in Exhibit A-2 attached hereto, the
"Tower 45 Premises");
WHEREAS, Lender and 286 Madison, L.P., 290 Madison, L.P. and 292
Madison, L.P., collectively as mortgagor ("Mortgagor") have spread the lien of
the Original Mortgage to the Tower 45 Premises and have consolidated, amended
and restated the Original Mortgages and those mortgages encumbering the Tower 45
Premises (the "Additional Mortgages") in their entirety to secure indebtedness
in the maximum principal amount of One Hundred Seven Million Dollars
($107,000,000) (the "Loan") which Loan is evidenced by a consolidated, amended
and restated mortgage note dated as of the date hereof (as the same may be
amended, modified, increased or restated, the "Note"), made by Borrower, as
maker, in favor of Lender, as payee, and secured by (i) a Consolidated, Amended
and Restated Mortgage, Security Agreement, Financing Statement, Fixture Filing
and Assignment of Leases, Rents and Security Deposits, dated as of the date
hereof (as the same may be amended, modified, consolidated or restated, the
"Mortgage"), between Mortgagor, and Lender, as mortgagee, (ii) an Amended and
Restated Assignment of Rents and Leases made by Mortgagor, as assignor, to
Lender, as assignee, dated as of the date hereof (as the same may be amended,
modified or restated, the "Assignment"), and (iii) the other Loan Documents;
WHEREAS, pursuant to Section 38(b) of the Mortgage, the properties
owned by 286 Madison, L.P., 290 Madison, L.P. and 292 Madison, L.P.
(collectively, the "Madison Borrowers") shall be released from the lien of the
Mortgage by
<PAGE> 3
December 15, 1997 upon the satisfaction of certain conditions set forth therein,
and as a result of such contemplated release, the Madison Borrowers are not a
party to this Agreement;
WHEREAS, pursuant to the Mortgage and the Assignment, Borrower has
granted to Lender a security interest in the rents and other revenues derived
from or otherwise attributable or allocable to the Premises, and has absolutely
assigned and conveyed to Lender all of the rents, income, revenue, issues and
profits due and to become due or to which Borrower is now or may hereafter
become entitled, arising out of the leases or the Premises or any part or parts
thereof; and
WHEREAS, in order to further effectuate the assignment of rents and
profits by Borrower to Lender, Borrower has established, pursuant to the Cash
Collateral Account Security, Pledge and Assignment Agreement, dated as of
October 15, 1997, by and among Mortgagor, as borrower, Agent and Midland Loan
Services, L.P. ("Midland"), as assigned by Midland to Lender (the "Original
Agreement"), the Operating Account, the P&I Escrow Account, the Mortgage Escrow
Account, the Capital Expenditure Reserve Account, the TI and Leasing Reserve
Account, the Security Deposit Account/Orlando, the Security Deposit
Account/Tower 45 and the D.E.Shaw Security Deposit Account (as such terms are
defined in Section 3(a) hereof) (the Operating Account, the P&I Escrow Account,
the Mortgage Escrow Account, the Capital Expenditure Reserve Account, the TI
and Leasing Reserve Account and the Security Deposit Account are hereinafter
collectively referred to as the "Accounts") and has granted to Agent, as agent
for Lender, a perfected first priority security interests therein upon the terms
and subject to the conditions thereof.
WHEREAS, as a condition to making the Loan, Lender has required that
Borrower amend and restate this Agreement for the benefit of the Lender;
NOW, THEREFORE, in consideration of the agreements and covenants
hereinafter contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree to amend
and restate this Agreement as follows:
1. Defined Terms. Capitalized terms not otherwise defined herein shall be as
defined in the Mortgage.
2
<PAGE> 4
(i) "Air Rights Reserve Amounts" means those amounts required to be
deposited on a monthly basis by Borrower with Agent in connection with basic
rental due under the Air Rights Lease, for so long as the Air Rights Lease may
be in existence.
(ii) "Approved Annual Budget" means the annual budget to be prepared
by Borrower from and after the Reset Date and approved by Lender in accordance
with Section 18 of the Note.
(iii) "Approved Bank" means banks or other financial institutions
which have a minimum long-term unsecured debt rating of at least "AA" by each of
the Rating Agencies, or if any such bank or other financial institution is not
rated by all the Rating Agencies, then a minimum long-term rating of at least
"AA" or its equivalent by the Rating Agencies involved in any securitization of
which the Loan forms a part.
(iv) "Cash Expenses" means, for any period, the operating expenses
for the operation and maintenance of the Premises to the extent that such
expenses are actually incurred by Borrower after the Reset Date and as the same
are set forth on the Approved Annual Budget, less Mortgage Escrow Amounts.
(v) "Extraordinary Expense" means an extraordinary operating expense
or capital expense not set forth in the Approved Annual Budget.
(vi) "Lease Expiration Reserve Amounts" means those amounts required
pursuant to Section 48(b)(ii) of the Mortgage to be deposited by Borrower with
Agent in connection with any Material Lease scheduled to expire within one year
from the date in question.
(vii) "Loan Documents" means the Note, the Mortgage, the Assignment,
this Agreement, and any and all other agreements, instruments or documents
executed by Borrower evidencing, securing or delivered in connection with the
Loan and the transactions contemplated thereby.
(viii) "Material Lease" means a lease demising not less than (i)
20,000 rentable square feet at the Orlando Premises and (ii) 25,000 rentable
square feet at the Tower 45 Premises.
(ix) "Mortgage Escrow Amounts" means amounts required pursuant to
Section 8 of the Mortgage to be deposited by Borrower with Agent for the
3
<PAGE> 5
payment of real estate taxes and insurance premiums, and which, for the purposes
of this Agreement shall include Air Rights Reserve Amounts.
(x) "Mortgage Escrow Security" means a letter of credit or cash or
cash equivalents that satisfy the requirements of the Mortgage and that may be
delivered by Borrower to Lender in lieu of depositing Mortgage Escrow Amounts
with Agent.
(xi) "Payment Date" means the first business day of each month
commencing on January 1, 1998, through November 1, 2027.
(xii) "Person" means any individual, corporation, partnership, joint
venture, estate, trust, unincorporated association, and any federal, state,
county or municipal government or any political subdivision thereof.
(xiii) "Rating Agencies" means Standard & Poor's Ratings Services,
Duff & Phelps Credit Rating Co., Moody's Investors Services, Inc. and Fitch
Investor Services, L.P. or, if such corporation shall for any reason no longer
perform the functions of a securities rating agency, any other nationally
recognized statistical rating agency designated by Lender, provided, however,
that at any time during which the Loan is an asset of a securitization, "Rating
Agencies" shall mean the rating agencies that from time to time rate the
securities issued in connection with such securitization.
(xiv) "Reset Date" means November 1, 2004.
2. Security for Obligations. To secure the full and punctual payment
and performance of all obligations of Borrower now or hereafter existing with
respect to the Loan, whether for principal, interest, fees, expenses or
otherwise, and all obligations of Borrower now or hereafter existing under the
Note, the Mortgage, this Agreement and all other Loan Documents (all such
obligations, collectively, the "Obligations"), Borrower hereby sells, assigns,
conveys, pledges and transfers to Agent, as agent for Lender, a first priority
continuing security interest in and to the following property of Borrower to the
extent of Borrower's ownership interest therein, whether now owned or existing
or hereafter acquired or arising and regard less of where located (all of the
same, collectively, the "Collateral"):
(a) the Accounts and all cash, checks, drafts, certificates
and instruments, if any, from time to time deposited or held in the Accounts
from time to
4
<PAGE> 6
time including, without limitation, all deposits or wire transfers made to the
Accounts pursuant to Paragraph 3(a) hereof;
(b) any and all amounts invested in Permitted Investments (as
hereinafter defined);
(c) all interest, dividends, cash, instruments and other
property from time to time received, receivable or otherwise payable in respect
of, or in exchange for, any or all of the foregoing; and
(d) to the extent not covered by clauses (a), (b) or (c)
above, all proceeds (as defined under the Uniform Commercial Code as in effect
in the State in which the Accounts are located (the "UCC") of any or all of the
foregoing.
Agent, as agent for Lender, shall have with respect to the
Collateral, in addition to the rights and remedies herein set forth, all of the
rights and remedies available to a secured party under the UCC, as if such
rights and remedies were fully set forth herein.
3. Operating Accounts.
(a) Borrower has established in the name of Agent, as agent for
Lender, as secured party, two cash collateral accounts (individually, an
"Operating Account", and collectively, the "Operating Accounts") with Agent.
Borrower represents, warrants and covenants that (w) all tenants of the Premises
will have been instructed as of the date hereof, pursuant to letters of
instruction delivered to tenants, evidence of which has been delivered to
Lender, to either mail all checks or wire all funds with respect to rental due
under the leases of the Premises to the applicable Operating Account (any such
checks to be delivered to the lock boxes maintained with Agent, as described on
Exhibit B attached hereto), (x) all operating revenue from the Premises will be
deposited by Borrower into the applicable Operating Account, (y) there are no
other accounts other than the Operating Accounts maintained by Borrower or any
other Person for the collection of rents with respect to the Premises, and (z)
so long as the Note shall be outstanding, neither it nor any other Person shall
open any other operating accounts with respect to the Premises. Borrower has
established in the name of Agent, as agent for Lender, as secured party, a
segregated cash collateral account (the "P&I Escrow Account") with Agent.
Borrower has established in the name of Agent, as agent for Lender, as secured
party, a segregated cash collateral account (the "Mortgage Escrow Account") with
Agent. Borrower has established in the name of Agent, as agent for Lender, as
secured party,
5
<PAGE> 7
a segregated cash collateral account (the "Capital Expenditure Reserve Account")
with Agent. Borrower has established in the name of Agent, as agent for Lender,
as secured party, a segregated cash collateral account (the "TI and Leasing
Reserve Account") with Agent. Borrower has established in the name of Agent, as
agent for Lender, as secured party, a segregated cash collateral account (the
"Security Deposit Account/Orlando") with Agent. Borrower has established in the
name of Agent, as agent for Lender, as secured party, a segregated cash
collateral account (the "Security Deposit Account/Tower 45") with Agent.
Borrower has established in the name of Agent, as agent for Lender, as secured
party, a segregated cash collateral account (the "D.E. Shaw Security Deposit
Account") with Agent. Borrower has established in the name of Agent, as agent
for Lender, as secured party, a segregated custodial account (the "D.E. Shaw
Bond Account"). The Accounts are more particularly described on Exhibit B
hereto. The Accounts shall be subject to such applicable laws, and such
applicable regulations of the Board of Governors of the Federal Reserve System
and of any other banking or governmental authority, as may now or hereafter be
in effect. Interest accruing on the Permitted Investments shall be periodically
added to the principal amount of the Operating Accounts, the Security Deposit
Account/Orlando, the Security Deposit Account/Tower 45 and the D.E. Shaw
Security Deposit Account and shall be held, disbursed and applied in accordance
with the provisions of this Agreement. All statements relating to the Accounts
shall be issued by Agent to Lender (or such other Person as Lender may designate
as Lender's representative) and Borrower. Borrower shall be the beneficial owner
of the Accounts for federal income tax purposes and shall report all income on
the Accounts. Returned items in the Operating Accounts will be charged against
the Borrower in the succeeding month. The Accounts (other than the Operating
Accounts, the Security Deposit Account/Orlando, the Security Deposit
Account/Tower 45 and the D.E. Shaw Security Deposit Account) shall be
subaccounts of the Operating Accounts. Any thing in this Agreement to the
contrary notwithstanding, Agent shall never be obligated to release funds from
the Accounts in excess of the collected and available amount therein.
(b) Borrower hereby agrees that all amounts required to be
deposited in the Operating Accounts and received by Borrower or any of its
Affiliates shall be deposited immediately into the applicable Operating
Account. Until so deposited, any such amounts held by Borrower shall be deemed
to be Collateral and shall be held in trust by it for the benefit, and as the
property, of Agent, as agent for Lender and shall not be commingled with any
other funds or property of Borrower.
6
<PAGE> 8
(c) Borrower shall deliver to Agent for deposit in the P&I
Escrow Account on the date hereof the amount of One Million Nine Hundred Fifty
One Thousand Three Hundred Fifty Five and 86/100 ($1,951,355.86).
(d) Borrower shall have delivered to Agent, as of the date of
the Original Agreement, for deposit in the Mortgage Escrow Account on the date
hereof the amount of Nine Hundred Forty One Thousand Four Hundred Sixty Seven
and 74/100 Dollars ($941,467.74), unless Lender shall notify Agent that,
pursuant to Section 8(b) of the Mortgage, Borrower has elected to replace any
Mortgage Escrow Amounts with Mortgage Escrow Security.
(e) Borrower shall deliver to Agent for deposit in the Capital
Expenditure Reserve Account on the date hereof the amount of Four Hundred Fifty
Two Thousand One Hundred Twenty Seven Dollars ($452,127).
(f) Borrower shall deliver to Agent for deposit in the
Security Deposit Account/Orlando on the date hereof the amount of Seventy Six
Thousand Eighty Nine and 55/100 Dollars ($76,089.55). Borrower shall deliver to
Agent for deposit in the Security Deposit Account/Tower 45 on the date hereof
the amount of Five Hundred Sixty Three Thousand Six Hundred Fifty Seven and
12/100 Dollars ($563,657.12). Borrower shall deliver to Agent for deposit in the
D.E. Shaw Security Deposit Account on the date hereof the amount of One Million
One Hundred Eighty Seven Thousand Seventy Three and 42/100 Dollars
($1,187,073.42). Borrower shall transfer or cause to be transferred into the
name of Agent, the Bonds (as defined herein) which shall be held by Agent in the
D.E. Shaw Bond Account.
(g) At such time as Borrower shall be required to fund Lease
Expiration Reserve Amounts into the TI and Leasing Reserve Account in accordance
with Section 48(b) of the Mortgage, Lender shall deliver to Agent and Borrower a
statement setting forth the monthly Lease Expiration Reserve Amounts to be
transferred by Agent from the applicable Operating Account into the TI and
Leasing Reserve Account with respect to the expiring Material Lease. In
addition, from and after such time as Borrower shall be required to fund Lease
Expiration Reserve Amounts, Borrower shall deliver no later than the fifteenth
(15th) day of each month, or, if the fifteenth day shall not be a business day,
on the business day following the fifteenth day of the month, to Agent and
Lender a certificate of an officer of Bor rower certifying, as of the date
thereof, the anticipated Cash Expenses for the Premises for the applicable
month, provided, however, that the monthly Lease Expiration Reserve Amounts
shall only be funded to the extent of available cash in
7
<PAGE> 9
the applicable Operating Account after payment of the Monthly Amount, the
Monthly Mortgage Escrow Amount, Reserve Amounts, the Monthly Capex Amount, the
Monthly TI and Leasing Amount and the funding of Cash Expenses. At such time as
Borrower shall be required to fund Lease Expiration Reserve Amounts and if in
any month, pursuant to the provisions of the clause (g), Borrower shall have
funded less than the full amount of the required monthly Lease Expiration
Reserve Amounts and such amounts shall not have been previously furnished
pursuant to this clause or other wise, Borrower shall deliver to Agent and
Lender, on the fifteenth day of each month, or, if the fifteenth day shall not
be a Business Day, on the Business Day following the fifteenth day of the month,
a certificate of an officer of Borrower certifying as of the date thereof, (y)
the anticipated Cash Expenses of the Premises for the next month, and (z) the
actual Cash Expenses of the Premises for the preceding month. The difference
between actual and budgeted Cash Expenses for the previous month shall be
adjusted by Borrower out of or to available cash to be paid by Borrower to
Agent.
(h) Borrower hereby instructs Agent to withdraw from each
Operating Account by 12:00 p.m. New York time on the first Business Day of each
month, or as soon thereafter as there shall be sufficient collected funds on
deposit in the Operating Accounts, the following amounts and in the following
order of priority:
(i) funds in an amount equal to the monthly principal and
interest payment (each, a "P&I Payment" and collectively the
"Monthly Amount") as more particularly set forth on Schedule 1
hereto, and deposit the same into the P&I Escrow Account;
(ii) funds in an amount equal to the monthly Mortgage
Escrow Amounts (including the Air Rights Reserve Amounts) (the
"Monthly Mortgage Escrow Amount") as more particularly set forth on
Schedule 2 hereto, and deposit the same into the Mortgage Escrow
Account;
(iii) funds in an amount equal to the Reserve Amounts,
if any, as certified by Borrower pursuant to clause (j) hereof, and
deposit the same into the Mortgage Escrow Account;
(iv) funds in an amount equal to Four Thousand Five
Hundred Eighty Five Dollars ($4,585) from the Orlando Operating
Account and Five Thousand Five Hundred Dollars ($5,500)
8
<PAGE> 10
from the Tower 45 Operating Account (collectively, the "Monthly
Capex Amount") and deposit the same into the Capital Expenditure
Reserve Account;
(v) funds in an amount equal to Forty Five Thou sand
Dollars ($45,000) from the Orlando Operating Account and Seventy
Three Thousand Three Hundred Thirty Three Dollars ($73,333)
(collectively, the "Monthly TI and Leasing Amount") and deposit the
same into the TI and Leasing Reserve Account.
(vi) from time to time in accordance with Paragraph 3(g)
hereof, funds in an amount equal to the Lease Expiration Reserve
Amounts and deposit the same into the TI and Leasing Reserve
Account.
(i) Provided that (i) no Event of Default shall have occurred
and be continuing hereunder or under any of the other Loan Documents, (ii)
Borrower shall have delivered to Agent and Lender a certificate of an officer of
Borrower's general partner certifying that (x) the signatory knows of no Event
of Default that has occurred and is then outstanding hereunder or under any of
the other Loan Documents, (y) there are no payables of Borrower outstanding that
are more than sixty (60) days past due, unless the same are being contested by
Borrower in good faith, and no other obligations of Borrower that are past due
that are not being contested in accordance with the Mortgage, and (z) Borrower
has delivered to Agent for deposit into the Mortgage Escrow Account (or shall
deliver simultaneously there with) or has instructed (or shall instruct
simultaneously therewith) Agent to transfer from the applicable Operating
Account to the Mortgage Escrow Account, an amount equal to one hundred
twenty-five percent (125%) of any amounts being contested in connection with any
payables which exceed Two Hundred-Fifty Thousand Dollars ($250,000) in the
aggregate (such amounts in excess of Two Hundred-Fifty Thou sand Dollars
($250,000) delivered in connection with any such contest in excess of Two
Hundred Fifty Thousand Dollars ($250,000) being hereinafter referred to as the
"Reserve Amount"), and (iii) Borrower shall have deposited into the Accounts all
funds then required to have been so deposited, then, Borrower may, at any time
during a month, instruct Agent in writing (which instructions Agent agrees to
follow) to transfer all amounts (less any accrued and unpaid fees and expenses
of Agent) remaining on deposit from time to time in the Operating Accounts for
the balance of the applicable month, from the Operating Accounts after all
withdrawals for such month have been made pursuant to Paragraph 3(h) above, to
such account or accounts of Borrower as Borrower may direct (the "Borrower
Accounts"), to transfer
9
<PAGE> 11
such excess funds to Borrower Accounts in order for Borrower to pay operating
expenses of the Premises, to make distributions to the partners of Borrower, or
other wise. Lender hereby disclaims any security interest in the amounts
deposited into the Borrower Accounts and such accounts shall not be deemed
"Accounts" as such term is defined herein or in the Mortgage. Notwithstanding
the foregoing, Lender, in connection with any securitization of which the Loan
forms a part, shall request that the Rating Agencies waive the requirement that
Borrower deliver the certificate referred to in clause (ii) as a condition to
the release of amounts remaining in the Operating Accounts and if all the Rating
Agencies shall agree to such request, such requirement shall be deemed waived.
(j) In the event the Borrower has not paid or caused to be
paid, the principal of and interest on the Note in full on or before the Reset
Date, Borrower hereby instructs Agent to withdraw from each Operating Account by
12:00 p.m. New York time on the first Business Day of each month or as soon
thereafter as there shall be collected funds on deposit in the Operating
Accounts, the following amounts and in the following order of priority, based on
the information set forth in a statement delivered to Agent by Borrower at least
two (2) business days prior to the date of withdrawal (or if no statement is
received by Agent then, based on the information set forth in the most recent
statement delivered to Agent by Borrower) and upon which Agent may conclusively
rely:
(i) funds in an amount equal to the related P&I Payment as set
forth in Schedule 1 hereto and deposit the same into the P&I Escrow
Account;
(ii) funds in an amount equal to the related Monthly Mortgage
Escrow Amounts (including the Air Rights Reserve Amounts) as set forth on
Schedule 2 hereto and deposit the same into the Mortgage Escrow Account;
(iii) funds in an amount equal to the Reserve Amounts, if any,
and deposit the same into the Mortgage Escrow Account;
(iv) funds in an amount equal to the monthly allocation of
Cash Expenses in the Approved Annual Budget ("Approved Operating
Expenses") and approved Extraordinary Expenses ("Approved Extraordinary
Expenses"), if any, and pay the same to Lender;
(v) funds in an amount equal to the Monthly Capex Amount and
deposit the same into the Capital Expenditure Reserve Account;
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<PAGE> 12
(vi) funds in an amount equal to the Monthly TI and Leasing
Amounts and deposit the same into the TI and Leasing Reserve Account;
(vii) funds in an amount equal to the Lease Expiration Re
serve Amounts and deposit the same into the TI and Leasing Reserve
Account;
(viii) funds in an amount equal to the lesser of the
outstanding principal due under the Note and the balance of funds in the
Operating Accounts until such time as Lender shall notify Agent in writing
that the principal amount is paid in full, and pay the same to Lender; and
(ix) funds in an amount (as Lender shall certify in writing to
Agent) equal to the Accrued Interest (which shall not be duplicative of
amounts paid in clause (viii) above), including, if applicable, interest
at the Default Rate applicable from and after the Reset Date and pay the
same to Lender.
(k) Borrower hereby instructs the Agent to withdraw from the
P&I Escrow Account by 12:00 p.m. New York time on each Payment Date and pay to
Lender the Monthly Amount due to Lender on such Payment Date, and, from and
after the Reset Date, to pay to Lender any additional interest amounts required
under the Note from the funds deposited into the P&I Escrow Account pursuant to
Section 3(j) hereof.
(l) The Capital Expenditure Reserve Amounts shall be disbursed
by Agent at the written instructions of Lender in accordance with Section 48(a)
of the Mortgage. If Agent shall reasonably determine that there will be
insufficient amounts in the Capital Expenditures Reserve Account to disburse
such amounts, Agent shall provide written notice of same to Borrower and
disburse such available amounts in accordance with the written instructions of
Lender as shall be available in accordance with such instructions.
(m) The TI and Leasing Reserve Amounts shall be disbursed by
Agent at the written instructions of the Lender in accordance with Section 48(b)
of the Mortgage. If Agent shall reasonably determine that there will be
insufficient amounts in the TI and Leasing Reserve Account to disburse such
amounts, Agent shall provide written notice of same to Borrower and disburse
such available amounts in accordance with the written instructions of Lender as
shall be available in accordance with such instructions.
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<PAGE> 13
(n) On or before the first day of each calendar year during
the term of the Note, Borrower shall deliver to the Agent a statement setting
forth the Monthly Mortgage Escrow Amounts (including Air Rights Reserve Amounts)
and the Monthly Amounts which will be required to be paid pursuant to the
provisions of the Mortgage for the succeeding calendar year. In the event
Borrower subsequently determines that any such statement delivered to the Agent
hereunder contains incorrect or incomplete information, Borrower shall promptly
deliver an amended statement of Mortgage Escrow Amounts to the Agent, clearly
identifying the revised or additional information contained therein. Lender
shall instruct Agent in writing to withdraw funds from the Mortgage Escrow
Account from time to time, in accordance with Section 8(d) of the Mortgage, to
pay all real estate taxes and insurance premiums allocable to the Mortgaged
Property in accordance with Section 8 of the Mortgage.
(o) The Security Deposit Account/Orlando and the Security
Deposit Account/Tower 45 shall be disbursed by Agent at the written instruction
of Lender in accordance with Section 15(e) of the Mortgage.
(p) Upon the occurrence of an Event of Default and the
acceleration of the Note, Lender shall promptly notify Agent in writing of such
Event of Default and acceleration and, without notice from Agent or Lender, (x)
Borrower shall have no further right in respect of (including, without
limitation, the right to instruct Lender or Agent to transfer from) the
Accounts, and (y) Lender may direct Agent to liquidate and transfer any amounts
then invested in Permitted Investments to the Accounts or reinvest such amounts
in other Permitted Investments as Lender may reasonably determine is necessary
to perfect or protect any security interest granted or purported to be granted
hereby or to enable Agent, as agent for Lender, or Lender to exercise and
enforce Lender's rights and remedies hereunder with respect to any Collateral.
In the absence of such written notice, Agent may assume that no Event of Default
shall have occurred.
(q) Any amounts held in any of the Accounts shall be in
vested, liquidated and reinvested at Borrower's written direction (provided no
Event of Default shall have occurred and be continuing), or if an Event of
Default shall have occurred and be continuing, at Lender's written direction, in
the name of Agent, as agent for Lender, as secured party under this Agreement,
in either case, in permitted investments, as set forth on Exhibit C hereto (the
"Permitted Investments") (or, if Borrower so directs and no Event of Default
shall have occurred and be continuing, shall be retained in the applicable
Account) and disbursed in accordance with this Agreement. Amounts held in the
Accounts, may be commingled for
12
<PAGE> 14
purposes of purchasing Permitted Investments. In no event shall Agent have any
responsibility or liability for the types of investments that Borrower may
direct it to make, nor shall it have any duty or responsibility to confirm that
the same are in fact Permitted Investments. In addition, the Agent shall not be
liable for any investment losses resulting from any investment of funds on
deposit in the Accounts.
(r) All of the Accounts shall be established and maintained at
Borrower's election either as segregated "trust" accounts or as segregated
accounts with an Approved Bank. All of the Accounts which are not held at an
Approved Bank shall be Eligible Accounts. An Eligible Account is a segregated
trust account or accounts maintained with the corporate trust department of a
federal depository institution or state-chartered depository institution subject
to regulations regarding fiduciary funds on deposit similar to Title 12 of the
Code of Federal Regulations Section 9.10(b) which, in either case, has corporate
trust powers.
(s) Reference is hereby made to that certain lease dated July
8, 1991 made by Tower 45 Associates Limited Partnership, predecessor in interest
to Borrower, as landlord, and D.E.Shaw & Co., L.P. ("D.E.Shaw"), as tenant (the
"Shaw Lease"). Pursuant to Article 33 of the Shaw Lease, D.E.Shaw is required to
fund a lump sum security deposit in the amount of One Hundred Twenty One
Thousand Seven Hundred Sixty Two Dollars ($121,762) (the "Cash Security"), which
funds have been deposited in the D.E.Shaw Security Deposit Account on the date
hereof. In addition, D.E. Shaw is required to deliver United States Treasury
bills, notes and/or bonds as more particularly set forth on Schedule 3 attached
hereto (the "Bonds") to Borrower, as security for the payment of the
Cancellation Penalty (as defined in the Shaw Lease) as well as other amounts due
thereunder. Borrower has transferred or caused to be transferred to Agent on the
date hereof such Bonds and all amounts received with respect thereto shall be
deposited in the D.E. Shaw Bond Account. Lender shall instruct Agent in writing
to disburse the Cash Security, or a portion thereof, and the D.E. Shaw Bond
Account, or a portion thereof, at the end of the Shaw Lease or as may otherwise
be provided in Articles 33 and 37 thereof, provided that Borrower shall deliver
an Officer's Certificate to Lender stating that, pursuant to the terms of the
Shaw Lease, or upon termination of the Shaw Lease as provided therein, the
security deposit shall be released to D.E. Shaw.
4. Financing Statement; Further Assurances. Simultaneously herewith,
Borrower shall execute and deliver to Agent for filing a financing statement or
statements in connection with the Collateral in the form required to properly
perfect Agent's security interest therein as agent for Lender. Borrower agrees
that at any time and from time to time, at the expense of Borrower, Borrower
13
<PAGE> 15
will promptly execute and deliver all further instruments and documents, and
take all further action, that may be reasonably necessary or desirable, or that
Agent or Lender may reason ably request, in order to perfect and protect any
security interest granted or purported to be granted hereby (including, without
limitation, any security interest in and to any Permitted Investments) or to
enable Agent or Lender to exercise and enforce its rights and remedies hereunder
with respect to any Collateral. The Agent shall be under no obligation
whatsoever to file any financing statement or continuation statement to any such
financing statement, or to make any other filing or other registration under the
UCC, other relevant legislation or similar statute in connection with this
Agreement.
5. Transfers and Other Liens. Except as permitted under the Mortgage
and hereunder, Borrower agrees that it will not (i) sell or otherwise dispose of
any of the Collateral or (ii) create or permit to exist any Lien upon or with
respect to all or any of the Collateral, except for the Lien granted to Agent,
as agent for Lender, under this Agreement.
6. Lender's Right to Perform Borrower's Obligations; No Liability of
Lender. If Borrower fails to perform any of the covenants or obligations
contained herein, and such failure shall continue for a period five (5) Business
Days after Borrower's receipt of written notice thereof from Lender, Lender may
itself perform, or cause performance of, such covenants or obligations, and the
reasonable expenses of Lender incurred in connection therewith shall be payable
by Borrower to Lender in accordance with Section 10 hereof. Notwithstanding the
Lender's right to perform certain obligations of Borrower, it is acknowledged
and agreed that Borrower retains control of the Premises and operation thereof
and notwithstanding anything contained herein or Agent's or Lender's exercise
of any of its rights or remedies hereunder, under the Loan Documents or
otherwise at law or in equity, neither Agent nor Lender shall be deemed to be a
mortgagee-in-possession nor shall Lender be subject to any liability with
respect to the Premises or otherwise based upon any claim of lender liability.
7. Reasonable Care. (a) Beyond the exercise of reasonable care in
the custody thereof, neither Agent nor Lender shall have any duty as to any
Collateral in its possession or control as agent therefor or bailee thereof or
any income thereon or the preservation of rights against any person or otherwise
with respect thereto. Agent and Lender each shall be deemed to have exercised
reasonable care in the custody and preservation of the Collateral in its
possession if the Collateral is accorded treatment substantially equal to that
which Agent or Lender accords its own property, it being understood that Lender
shall not be liable or responsible for any
14
<PAGE> 16
loss or damage to any of the Collateral, or for any diminution in value thereof,
by reason of the act or omission of Agent or Lender, its Affiliates, agents,
employees or bailees, except to the extent that such loss or damage results from
Agent's or Lender's gross negligence or willful misconduct.
(b) In the event that Agent shall be uncertain as to its duties or
rights hereunder or shall receive instructions, claims or demands from any party
hereto which, in its opinion, conflict with any provisions of this Agreement, it
shall be entitled to refrain from taking any action and its sole obligation
shall be to keep safely all property held in the Accounts until it shall be
directed otherwise in writing by all of the parties hereto or by a final order
or judgment of a court of competent jurisdiction.
8. Remedies.
Upon the occurrence and during the continuance of an Event of
Default, Agent, as agent for Lender, may:
(a) without notice to Borrower, except as required by law, and
at any time or from time to time, charge, set-off and other wise apply all
or any part of the Collateral against the Obligations or any part thereof;
(b) in its sole discretion, at any time and from time to time,
exercise any and all rights and remedies available to it under this
Agreement, and/or as a secured party under the UCC; and
(c) demand, collect, take possession of, receipt for, settle,
compromise, adjust, sue for, foreclose or realize upon the Collateral (or
any portion thereof) as Lender may determine in its sole discretion.
Borrower hereby expressly waives, to the fullest extent permitted by law,
presentment, demand, protest or any notice of any kind in connection with this
Agreement or the Collateral. Borrower acknowledges and agrees that ten (10)
days' prior written notice of the time and place of any public sale of the
Collateral or any other intended disposition thereof shall be reasonable and
sufficient notice to Borrower within the meaning of the UCC.
15
<PAGE> 17
9. No Waiver. The rights and remedies provided in this Agreement and
the other Loan Documents are cumulative and may be exercised independently or
concurrently, and are not exclusive of any other right or remedy provided at law
or in equity. No failure to exercise or delay by Agent or Lender in exercising
any right or remedy hereunder or under the Loan Documents shall impair or
prohibit the exercise of any such rights or remedies in the future or be deemed
to constitute a waiver or limitation of any such right or remedy or acquiescence
therein. Every right and remedy granted to Agent and/or Lender under Section 8
or by law may be exercised by Agent and/or Lender at any time and from time to
time, and as often as Agent and/or Lender may deem it expedient. Any and all of
Agent's and/or Lender's rights with respect to the lien and security interest
granted hereunder shall continue unimpaired, and Borrower shall be and remain
obligated in accordance with the terms hereof, notwithstanding (a) any
proceeding of Borrower under the Federal Bankruptcy Code or any bankruptcy,
insolvency or reorganization laws or statutes or any state, (b) the release or
substitution of Collateral at any time, or of any rights or interests therein or
(c) any delay, extension of time, renewal, compromise or other indulgence
granted by the Agent and/or Lender in the event of any default, with respect to
the Collateral or otherwise hereunder. No delay or extension of time by Agent
and/or Lender in exercising any power of sale, option or other right or remedy
hereunder, and no notice or demand which may be given to or made upon Borrower
by Agent and/or Lender, shall constitute a waiver thereof, or limit, impair or
prejudice Agent's and/or Lender's right, without notice or demand, to take any
action against Borrower or to exercise any other power of sale, option or any
other right or remedy.
10. Fees and Expenses. The Collateral shall secure, and Borrower
shall pay to Agent and Lender and/or Agent's and Lender's counsel on demand,
from time to time, all costs and expenses (including, but not limited to,
reasonable attorneys' fees and disbursements, and transfer, recording and filing
fees, taxes and other charges) of, or incidental to, the creation or perfection
of any lien or security interest granted or intended to be granted hereby, the
custody, care, sale, transfer, administration, collection of or realization on
the Collateral, or in any way relating to the enforcement, protection or
preservation of the rights or remedies of Agent and/or Lender under this
Agreement, the Note, the Mortgage, or the other Loan Documents. Agent shall be
paid certain fees in connection with the performance of its services hereunder
pursuant to a separate agreement among Borrower, Agent and Tower Realty
Operating Partnership, L.P., which fees, together with reimbursable expenses, if
not paid in accordance with such agreement, may be set off against any amounts
from time to time in the Operating Accounts.
16
<PAGE> 18
11. Agent Appointed Attorney-In-Fact. Borrower hereby irrevocably
constitutes and appoints Agent as Borrower's true and lawful attorney-in-fact,
with full power of substitution, to execute, acknowledge and deliver any
instruments and to exercise and enforce every right, power, remedy, option and
privilege of Borrower with respect to the Collateral upon the occurrence and
during the continuance of an Event of Default, and is empowered hereunder to do
in the name, place and stead of Borrower, all such acts, things and deeds for
and on behalf of and in the name of Borrower, which Borrower could or might do
or which Agent or Lender may deem necessary or desirable to more fully vest in
Agent as agent for Lender the rights and remedies provided for herein and to
accomplish the purposes of this Agreement. The foregoing powers of attorney are
irrevocable and coupled with an interest. If Borrower fails to perform any
agreement herein contained, Agent as agent for Lender may itself perform or
cause performance of any such agreement, and any reasonable expenses of Agent
and Lender incurred in connection therewith shall be paid by Borrower as
provided in Section 10 hereof.
12. No Liability.
(a) Except as set forth herein, Agent shall not incur any liability for
following the instructions herein contained or expressly provided for, or
written instructions given by the parties hereto.
(b) Agent undertakes to perform only such duties as are expressly set
forth herein. The duties and responsibilities of Agent hereunder shall be
determined solely by the express provisions of this Agreement, and no other or
further duties or responsibilities shall be implied. Agent shall not have any
liability under, nor duty to inquire into the terms and provisions of any
agreement or instructions, other than as outlined in this Agreement. Agent shall
use the same degree of care and skill as is reasonably expected of financial
institutions acting in comparable capacities.
(c) Agent may rely and shall be protected in acting or refraining from
acting upon any written notice, instruction or request furnished to it hereunder
and believed by it to be genuine and to have been signed or presented by the
proper party or parties. Agent shall be under no duty to inquire into or
investigate the validity, accuracy or content of any such document. Agent shall
have no duty to solicit any payments which may be due it hereunder. Agent shall
not in any way be held liable by reason of any insufficiency in any Account
unless it is determined by a court of competent jurisdiction that Agent's gross
negligence or willful misconduct was the primary cause of such insufficiency.
17
<PAGE> 19
(d) Agent shall not be liable for any action taken or omitted by it in
good faith unless a court of competent jurisdiction determines that Agent's
gross negligence or willful misconduct was the primary cause of any loss to
Borrower or Lender. Agent may consult with independent counsel of its own choice
and shall have full and complete authorization and protection for any action
taken or omitted by it hereunder in good faith and in accordance with the
opinion of such counsel, except in those cases where Agent has been guilty of
gross negligence or willful misconduct. Agent assumes no liability for any
matter or merchandise received through the Post Office Box which are not
depositable items, except in those cases where Agent has been guilty of gross
negligence or willful misconduct.
(e) It is understood that Agent may rely solely upon any account numbers
or similar identifying number provided by either of the parties hereto to
identify (i) the beneficiary, (ii) the beneficiary's bank, or (iii) an
intermediary bank. Agent may apply any of the deposited funds for any payment
order it executes using any such identifying number, even where its use may
result in a person other than the beneficiary being paid, or the transfer of
funds to a bank other than the beneficiary's bank, or an intermediary bank
designated by such beneficiary.
(f) Borrower shall indemnify Agent for, and hold it harmless against, any
loss, liability or expense arising out of or in connection with this Agreement
and carrying out its duties hereunder, including the costs and expenses of
defending itself against any claim of liability, except in those cases where
Agent has been guilty of gross negligence or willful misconduct. Anything in
this Agreement to the contrary notwithstanding, in no event shall Agent be
liable for special, indirect or consequential loss or damage of any kind
whatsoever (including but not limited to lost profits), even if Agent has been
advised of the likelihood of such loss or damage and regard less of the form of
action. The foregoing indemnifications shall survive any termination of this
Agreement and the resignation or removal of Agent.
13. Continuing Security Interest. This Agreement shall create a
continuing security interest in the Collateral and shall remain in full force
and effect until payment in full of the Indebtedness. Upon payment in full of
the Indebtedness, this Agreement shall terminate and Borrower shall be entitled
to the return, upon its request and at its expense, of such of the Collateral as
shall not have been sold or otherwise applied pursuant to the terms hereof and
Agent and/or Lender shall execute such instruments and documents as may be
reasonably requested by Borrower to evidence such termination and the release of
the lien hereof.
18
<PAGE> 20
14. Resignation of Agent. (a) Agent shall have the right to resign
as Agent hereunder upon thirty (30) days' prior written notice to Borrower and
the Rating Agencies, and in the event of such resignation, Borrower shall
appoint a successor Agent which may be any banking institution which has a
rating by the Rating Agencies not lower than BBB or its equivalent. No such
resignation by Agent shall become effective until a successor Agent shall have
accepted such appointment and executed an instrument by which it shall have
assumed all of the rights and obligations of Agent hereunder. If no such
successor Agent is appointed within sixty (60) days after receipt of the
resigning Agent's notice of resignation, the resigning Agent may petition a
court for the appointment of a successor Agent.
(b) In connection with any resignation by Agent, (i) the
resigning Agent shall, at the sole cost of Borrower, (A) duly assign, transfer
and deliver to the successor Agent this Agreement and the Operating Account
Agreement and all cash and Permitted Investments held by it hereunder, (B)
execute such financing statements and other instruments as may be necessary to
assign to the successor Agent the security interest in the Collateral existing
in favor of the retiring Agent hereunder and to otherwise give effect to such
succession and (C) take such other actions as may be reasonably required by the
Borrower or the successor Agent in connection with the foregoing and (ii) the
successor Agent shall establish in its name, as secured party, cash collateral
accounts, which shall become the Accounts for purposes of this Agreement upon
the succession of such Agent.
15. Miscellaneous.
(a) This Agreement constitutes the entire and final agreement
between the parties with respect to the subject matter hereof and may not be
changed, terminated or otherwise varied, except by a writing duly executed by
the parties.
(b) No waiver of any term or condition of this Agreement,
whether by delay, omission or otherwise, shall be effective unless in writing
and signed by the party sought to be charged, and then such waiver shall be
effective only in the specific instance and for the purpose for which given.
(c) This Agreement shall be binding upon and inure to the
benefit of the parties hereto, their respective successors and permitted
assigns.
(d) All notices, demands, requests, consents, approvals and
other communications (any of the foregoing, a "Notice") required, permitted, or
desired, to be given hereunder shall be in writing sent by telefax or by
registered or
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<PAGE> 21
certified mail, postage prepaid, return receipt requested or delivered by hand
or reputable overnight courier addressed to the party to be so notified at its
address hereinafter set forth, or to such other address as such party may
hereafter specify in accordance with the provisions of this Section 15(d). Any
such Notice shall be deemed to have been received three (3) days after the date
such Notice is mailed or on the date of sending by telefax or delivery by hand
or courier addressed to the parties as follows:
If to Lender: Merrill Lynch Mortgage Capital Inc.
World Financial Center
North Tower
New York, New York 10281
Attn: Frederick T. Kelly
With a copy to: Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Attn: Martha Feltenstein, Esq.
If to Borrower: Magnolia Associates, LTD.
c/o Tower Realty Operating Partnership, L.P.
120 West 45th Street, 24th Floor
New York, New York 10036
Attn: Lawrence H. Feldman
With a copy to: Tower Realty Operating Partnership, L.P.
120 West 45th Street, 24th Floor
New York, New York 10036-4003
Attn: Lawrence H. Feldman
and Joseph Kasman
With a copy to: Battle Fowler LLP
75 East 55th Street
New York, New York 10022
Attn: Bradley A. Kaufman, Esq.
If to Agent: The Chase Manhattan Bank
450 West 33rd Street
15th Floor
20
<PAGE> 22
New York, New York 10001
Attn: Collateral Management Administration
With a copy to: Thacher Proffitt & Wood
2 World Trade Center
New York, New York 10048
Attn.: Charles Dietzgen
(e) All captions in this Agreement are included herein for
convenience of reference only and shall not constitute part of this Agreement
for any other purpose.
(f) This Agreement shall be governed by and construed and
enforced in all respects in accordance with the laws of the State of New York.
(g) Recourse with respect to any claim arising under or in
connection with this Agreement shall be limited to the same extent as is
provided in Section 33 of the Mortgage with respect to claims against Borrower
and the terms, covenants and conditions of Section 33 of the Mortgage are hereby
incorporated by reference as if fully set forth herein.
(h) This Agreement may be executed in any number of
counterparts.
21
<PAGE> 23
IN WITNESS WHEREOF, the parties hereto have duly executed this
amended and restated Agreement as of the day and year first above written.
BORROWER:
MAGNOLIA ASSOCIATES, LTD.,
a Florida limited partnership
By: Tower Orlando GP LLC,
a Delaware limited liability company,
its general partner
By: Tower QRS No. 3 Corp.,
a Delaware corporation,
its managing member
By: /s/ Lawrence H. Feldman
-------------------------------------
Name: Lawrence H. Feldman
Title: President
LENDER:
MERRILL LYNCH MORTGAGE CAPITAL INC.,
a Delaware corporation
By: /s/ Lawrence Miller
-------------------------------------
Name: Lawrence Miller
Title: Director
22
<PAGE> 24
AGENT:
THE CHASE MANHATTAN BANK
By: /s/ Gene Riccolo
-------------------------------------
Name: Gene Riccolo
Title: Assistant Vice President
<PAGE> 25
Schedule 1
Monthly Amount
After Nov. 1, 1999
Until Nov. 1, 1999 Until Reset Date
Orlando Premises $227,348.93 $267,170.88
Tower 45 Premises $380,535.90 $447,189.76
<PAGE> 26
Schedule 2
Monthly Mortgage Escrow Amounts
Tax Insurance Air Rights
Escrow Escrow Reserve Amounts Total
------ ------ --------------- -----
Orlando Premises $ 74,370.86 $2,568.13 $ 76,938.99
Tower 45 Premises $310,643.11 $6,309.55 $47,916.67 $364,869.33
----------- --------- ---------- -----------
TOTAL $415,013.97 $8,877.68 $47,916.67 $393,891.65
<PAGE> 27
Schedule 3
D.E. Shaw Bond Deposits
<PAGE> 1
Exhibit 10.78
================================================================================
FIRST AMENDMENT TO MORTGAGE
MAGNOLIA ASSOCIATES, LTD.,
a Florida limited partnership,
as Mortgagor
AND
MERRILL LYNCH MORTGAGE CAPITAL INC.,
a Delaware corporation,
as Mortgagee
================================================================================
Prepared and drafted by and after recording, return to:
Martha Feltenstein, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
<PAGE> 2
FIRST AMENDMENT TO MORTGAGE
FIRST AMENDMENT TO MORTGAGE (this "Amendment") dated as of December
__, 1997, among Magnolia Associates, Ltd., a Florida limited partnership having
an address c/o Tower Realty Operating Partnership, L.P., 292 Madison Avenue, New
York, New York 10017, as mortgagor ("Mortgagor"), and Merrill Lynch Mortgage
Capital Inc., a Delaware corporation, having an address at World Financial
Center, North Tower, 250 Vesey Street, New York, New York 10281, as mortgagee
("Mortgagee").
W I T N E S S E T H :
WHEREAS, Mortgagee has made a loan to Mortgagor, 286 Madison, L.P.,
290 Madison, L.P. and 292 Madison, L.P. (collectively, the "Original Mortgagor")
in the amount of Fifty Four Million Dollars ($54,000,000) (the "Original Loan"),
which Loan is evidenced by an Amended and Restated Mortgage Note, dated as of
October 16, 1997 (the "Original Note "), made by the Original Mortgagor, as
maker, in favor of Midland, as payee, and endorsed to Mortgagee by note
endorsement attached thereto;
WHEREAS, the Original Loan was secured by, among other things, an
Amended and Restated Mortgage, Security Agreement, Financing Statement, Fixture
Filing and Assignment of Leases, Rents and Security Deposits dated as of October
16, 1997, among Original Mortgagor, as mortgagor, and Midland, as mortgagee, and
recorded on ______________ __, 199_ in the Office of the Register of the City of
New York on ___________ in Reel ___ at page __, and recorded in the Public
Records of Orange County, Florida on ______ in Official Records Book ___, page
___ (the "Original Mortgage") encumbering property referred to therein as the
Orlando Property and the Madison Properties (collectively, the "Original Land")
and pursuant to which the recovery in the State of New York was limited to
Thirty Two Million Dollars ($32,000,000) and the recovery in the State of
Florida was limited to Fifty Four Million Dollars ($54,000,000);
WHEREAS, pursuant to an Assignment of Mortgage dated as of October
16, 1997 by and between Midland, as assignor and Mortgagee, as assignee, and
recorded on ______________ __, 199_ in the Office of the Register of the City of
New York on ___________ in Reel ___ at page ___, and pursuant to an Assignment
of Mortgage Collateral Security Documents dated as of October 16, 1997 by and
between Midland, as assignor and Mortgagee, as assignee, and recorded on
<PAGE> 3
______________ __, 199_ in the Public Records of Orange County, Florida on
________ in Official Records Book ___, page ___, Mortgagee is the assignee of
Midland's interest under the Mortgage;
WHEREAS, Magnolia Associates, Ltd. ("Mortgagor") is the record and
beneficial owner of a fee simple interest (the "Tower Fee Estate") and ground
subleasehold interest in the property (the "Subleasehold Estate") comprising and
located on the land described in Exhibit A-1 attached hereto (the "Additional
Land") and Mortgagor is the owner of a leasehold interest in certain development
rights (the "Air Rights") appurtenant to the land described in Exhibit A-2
attached hereto (the "Air Rights Parcel");
WHEREAS, by Option Agreement dated as of November 13, 1986 made by
Belasco Theatre Corporation, a New York corporation, as owner ("Belasco"), to
Tower 45 Associates Limited Partnership, successor in interest to Mortgagor, as
optionee, a memorandum of which was recorded on February 9, 1987 in Reel 1187
Page 1295 in the Office of the Register of the City of New York (the "Option
Agreement"), Belasco granted, bargained and sold to Mortgagor the exclusive
option to purchase the Air Rights Parcel including the Air Rights (the
"Option"), which Option must be exercised by Mortgagor on or before October 31,
2001 in accordance with the conditions set forth in the Option Agreement;
WHEREAS, by Mortgage Modification and Spreader Agreement dated as of
November 26, 1997, and recorded on ______________ __, 199_ in the Office of the
Register of the City of New York on ___________ in Reel ____ at page ____, the
Original Mortgage was spread over the whole of the Additional Property and
Mortgagor's interest in the Air Rights;
WHEREAS, the Itochu Corporation ("Itochu") assigned to Mortgagee its
right, title and interest in and to a certain promissory note by Allonge to Note
and, as additional security therefor, Itochu assigned to Mortgagee its right,
title and interest in and to that certain mortgage by Assignment of Mortgage
dated as of November 26, 1997 and recorded on ______________ __, 199_ in the
Office of the Register of the City of New York on ___________ in Reel ____ at
page ____ and two collateral assignment of option agreements dated as of
November 26, 1997 and recorded on ______________ __, 199_ in the Office of the
Register of the City of New York on ___________ in Reel ____ at page ____;
2
<PAGE> 4
WHEREAS, the Original Note and certain additional notes (the
"Additional Notes") secured by those mortgages more particularly described on
Exhibit B attached hereto (the "Additional Mortgages"), were consolidated,
amended and restated by Original Mortgagor and Mortgagee pursuant to the
Consolidated, Amended and Restated Mortgage Note, which note evidences
indebtedness in the amount of One Hundred Seven Million Dollars ($107,000,000)
(the "Consolidated Note");
WHEREAS, in connection with the delivery of the Consolidated Note,
Mortgagor and Mortgagee have consolidated, amended and restated the Original
Mortgage and the Additional Mortgages pursuant to that certain Consolidated,
Amended and Restated Fee and Subleasehold Mortgage, Security Agreement,
Financing Statement, Fixture Filing and Assignment of Leases, Rents and Security
Deposits dated as of November 26, 1997 and recorded on ______________ __, 199_
in the Office of the Register of the City of New York on ___________ in Reel ___
at page __, and recorded in the Public Records of Orange County, Florida on
______ in Official Records Book ___, page ___(the "Consolidated Mortgage")
pursuant to which the recovery in the State of New York was limited to Seventy
Seven Million Dollars ($77,000,000) and the recovery in the State of Florida was
limited to Fifty Four Million Dollars ($54,000,000);
WHEREAS, Mortgagee has released the Madison Properties from the lien
of the Consolidated Mortgage by Release dated as of December __, 1997 and
recorded on ______________ __, 199_ in the Office of the Register of the City of
New York on ___________ in Reel ___ at page ___; and
WHEREAS, Mortgagor and Mortgagee desire to amend and modify the
Consolidated Mortgage by this Amendment as hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Mortgagor and the Mortgagee that the Consolidated Mortgage is
hereby amended as follows:
1. Definitions. Wherever used in this Amendment, the following terms, and
the singular and plural thereof, shall have the following meanings. All
capitalized terms used but not otherwise defined herein have the meanings given
thereto in the Consolidated Mortgage:
3
<PAGE> 5
Air Rights Lease: Shall mean that certain Indenture of Air Rights
Lease dated as of November 13, 1986, by and between Belasco Theatre Corporation,
a New York corporation, as landlord, and Tower 45 Associates Limited
Partnership, a New York limited partnership, as tenant, which was recorded as
Exhibit B to a certain declaration dated as of January 15, 1987 and recorded in
the Office of the City Register in Reel 1225 Page 1174 and predecessor in
interest to Magnolia Associates, Ltd., as tenant, and which Air Rights Lease was
assigned to Mortgagee by Assignment of Air Rights Lease dated as of November 26,
1997 and recorded on ___________ __ 199_ in Reel ____ Page ____.
Belasco Sublease: Shall mean that certain Indenture of Sublease
dated as of November 13, 1986, by and between Belasco Theatre Corporation, a New
York Corporation, as landlord, and Tower 45 Associates Limited Partnership, a
New York limited partnership and predecessor in interest to Magnolia Associates,
Ltd., as tenant, recorded in the Office of the Register of the City of New York
on February 9, 1987 in Reel 1187 Page 1260, which was assigned to Mortgagee by
Assignment of Ground Sublease dated as of November 26, 1997 and recorded on
___________ __ 199_ in Reel ____ Page ____.
Ground Lease: Shall mean that certain Indenture of Ground Lease
dated as of November 13, 1986, by and between Tower 45 Associates Limited
Partnership, a New York limited partnership, as predecessor in interest to
Mortgagee, as landlord, and Belasco Theatre Corporation, as tenant, recorded in
the Office of the Register of the City of New York on February 9, 1987 in Reel
1187 Page 1247, which Ground Lease was assigned to Mortgagee by Assignment of
Ground Lease dated as of November 26, 1997 and recorded on ___________ __ 199_
in Reel ____ Page ____.
2. Exercise of Option. Notwithstanding anything contained in the
Consolidated Mortgage to the contrary, Mortgagor shall have the right, subject
to the conditions set forth below, to exercise the Option and (i) acquire the
Air Rights in the name of Mortgagor, and (ii) transfer its rights under the
Option Agreement to purchase the Air Rights Parcel (less the Air Rights) to a
third party or an Affiliate of Mortgagor so long as the assets of such Affiliate
will not be substantively consolidated with those of Mortgagor in any insolvency
proceeding of Mortgagor or such Affiliate, as confirmed in an Opinion of Counsel
in the form of the nonconsolidation opinion. Mortgagor acknowledges and agrees
that Mortgagor shall not acquire the Air Rights Parcel. Mortgagee acknowledges
that, pursuant to the Ground Lease, the Belasco Sublease, and the Option
Agreement, upon the
4
<PAGE> 6
conveyance of the Air Rights Parcel in connection with the exercise of the
Option, the Ground Lease, the Belasco Sublease and the Air Rights Lease shall
terminate, and upon the satisfaction of the conditions set forth in clauses (i)
to (iv) below, Granting Clause (B), references to the Air Rights Lease in
Granting Clause (C) of the Consolidated Mortgage and Section 57 of the
Consolidated Mortgage shall be deemed deleted. As a condition to the exercise of
the Option: (i) Mortgagor shall notify Mortgagee not less than thirty (30) days
prior to the exercise of the Option (the "Exercise Date"); (ii) no Event of
Default shall have occurred and be continuing as of the date of such notice and
the Exercise Date; (iii) Mortgagor shall deliver to Mortgagee each of the
following unexecuted documents, at least fifteen (15) days prior to the Exercise
Date: (a) termination of the Ground Lease in substantially the form attached
hereto as Exhibit C (the "Ground Lease Termination"); (b) termination of the
Belasco Sublease in substantially the form attached hereto as Exhibit D (the
"Sublease Termination"); (c) termination of the Air Rights Lease in
substantially the form attached hereto as Exhibit E (the "Air Rights Lease
Termination"); (d) Zoning Lot Development Agreement [and/or Air Rights
Allocation Agreement] in substantially the form attached hereto as Exhibit F
(the "ZLDA"); (e) an endorsement issued by Common wealth Land Title Insurance
Company to the mortgagee policy of title insurance delivered to Mortgagee on
November 26, 1997 in connection with the Consolidated Mortgage, insuring the fee
title to the Air Rights as part of the insured estate endorsement in the form
attached hereto as Exhibit G (the "Air Rights Endorsement"); and (f) termination
of the Collateral Assignment of Option Agreement in substantially the form
attached hereto as Exhibit H (the "Assignment Termination"); provided, however,
if the forms of documents referenced in clauses (a) through (f) above are not
substantially in the forms attached as exhibits hereto, Mortgagor shall deliver
to Mortgagee at least five (5) days prior to the Exercise Date, , and if
requested, Mortgagee shall, at Mortgagor's expense, facilitate obtaining,
written confirmation from the Rating Agencies that such release will not result
in a downgrade, withdrawal or qualification of the then current ratings of any
securities backed in part by the Consolidated Mortgage; (iv) upon Mortgagee's
confirmation that Mortgagor has satisfied the conditions set forth above (or
confirmation of the Rating Agencies, as the case may be), on or about the
Exercise Date, Mortgagor may exercise and close on the Option and thereafter
deliver a fully executed original of each of the following documents
(collectively, the "Air Rights Release Documents") in the form previously
approved by Mortgagee: (a) the Ground Lease Termination; (b) the Sublease
Termination; (c) the Air Rights Lease Termination; (d) the ZLDA; (e) the Air
Rights Endorsement and (f) the Assignment Termination. Mortgagee and Mortgagor
shall deliver such further assurances as may
5
<PAGE> 7
be reasonably requested by the other party to confirm that the Air Rights Parcel
(less the Air Rights) is not encumbered by the lien of the Consolidated
Mortgage.
3. Transfers of Interests in Mortgagor. Section 11(b) of the Consolidated
Mortgage is hereby deleted and is hereby replaced with the following: "Not
withstanding anything contained herein to the contrary, Mortgagee's consent
shall not be required with respect to Transfers of direct or indirect beneficial
interests in Mortgagor provided that (i) no Event of Default shall have occurred
and be continuing, (ii) Mortgagor remains a Single Purpose Entity, (iii) no
transfer of limited partner, non-managing member or shareholder interests
results in any one Person (or any group of Affiliates) owning, directly or
indirectly, forty-nine percent (49%) of more of the beneficial ownership
interests of Mortgagor, and (iv) Tower Realty Operating Partnership, L.P. shall
at all times directly or indirectly own not less than fifty-one percent (51%) of
the beneficial interests in Mortgagor, and if Mortgagor shall be a partnership,
all general partners thereof shall be wholly-owned subsidiaries of Tower Realty
Operating Partnership, L.P. If ten percent (10%) or more of direct beneficial
interests in Mortgagor are Transferred or if any Transfer shall result in a
Person or a group of Affiliates acquiring more than a forty-nine percent (49%)
interest as set forth above, Mortgagor shall also deliver or cause to be
delivered to the Rating Agencies and Mortgagee (x) an Opinion of Counsel
addressed to the Rating Agencies and Mortgagee and dated as of the date of the
Transfer to the effect that in a properly presented case, a bankruptcy court in
a case involving such transferee, or any Affiliate thereof, would not disregard
the corporate or partnership forms of such entity, their Affiliates and/or their
partners, as the case may be, so as to consolidate the assets and liabilities of
such entity or entities and/or their Affiliates with those of Mortgagor or their
respective general partners, and (y) an Officer's Certificate certifying that
such Transfer is not an Event of Default. For the purposes hereof, the sale of
stock in Tower Realty Trust, Inc. on a publicly traded exchange shall not be
deemed an indirect Transfer of a beneficial interest in Mortgagor."
4. Notice. Notices required or permitted to be given or served under
Section 26 of the Consolidated Mortgage shall be addressed to Mortgagor at 292
Madison Avenue, New York, New York 10017, Attention: Lawrence H. Feldman, with a
copy to Tower Realty Operating Partnership, L.P., 292 Madison Avenue, New York,
New York 10017, Attention: Lawrence H. Feldman, with a copy to Battle Fowler
LLP, 75 East 55th Street, New York, New York 10022.
6
<PAGE> 8
5. Release. The first clause of Section 38(c) of the Consolidated Mortgage
is hereby deleted and is hereby replaced with the following: "Notwithstanding
anything contained in Section 38(b) hereof, Mortgagor shall be entitled to have
either one (1) Property released from the Lien of this Mortgage or both the
Properties released from the Lien of this Mortgage, from and after the earlier
to occur of (1) the second (2nd) anniversary of the date of the Securitization
and (2) October 16, 2000 in connection with the delivery of Defeasance
Collateral. The release of the Properties shall be subject to the satisfaction
of the conditions set forth in Section 46 of the Mortgage. The release of one
(1) Property shall be subject to the satisfaction of the following conditions:"
6. Defeasance. Section 46(b)(iii) shall be deleted and shall be replaced
by the following: "(iii) Mortgagor shall have delivered or caused to have been
delivered to Mortgagee the Defeasance Collateral for deposit into the Defeasance
Collateral Account such that it will satisfy the Minimum Defeasance Collateral
Requirement with respect to a release of one (1) of the Properties or the Total
Defeasance Collateral Requirement with respect to a release of both the
Properties, as the case may be, at the time of delivery and all such Defeasance
Collateral, if in registered form, shall be registered in the name of Mortgagee
or its nominee (and, if registered in nominee name endorsed to Mortgagee or in
blank) and, if issued in book-entry form, the name of Mortgagee or its nominee
shall appear as the owner of such securities on the books of the Federal Reserve
Bank or other party maintaining such book -entry system;"
7. Counterparts. This Amendment may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original,
but all of such counterparts shall together constitute but one and the same
instrument.
8. Ratification of Consolidated Mortgage. Except as modified and expressly
amended by this Amendment, the Consolidated Mortgage is in all respects ratified
and confirmed, and all terms, provisions and conditions thereof shall be and
remain in full force and effect.
7
<PAGE> 9
IN WITNESS WHEREOF, this Amendment has been duly executed Mortgagor and
Mortgagee on the date first hereinabove written.
MORTGAGOR:
MAGNOLIA ASSOCIATES, LTD.,
a Florida limited partnership
By: Tower Orlando GP LLC,
a Delaware limited liability company,
its general partner
By: Tower QRS No. 3 Corp.,
a Delaware corporation,
its managing member
By: /s/ Lawrence H. Feldman
-------------------------------------
Name: Lawrence H. Feldman
Title: President
MORTGAGEE:
MERRILL LYNCH MORTGAGE CAPITAL INC.
By: /s/ Bruce L. Ackerman
---------------------------------------------
Name: Bruce L. Ackerman
Title: Vice President
<PAGE> 1
Exhibit 21.1
SUBSIDIARIES OF THE REGISTRANT
<TABLE>
<CAPTION>
State or Other Jurisdiction of
Name of Subsidiary Incorporation or Organization
- ------------------ ------------------------------
<S> <C>
Tower Realty Operating Partnership, L.P. Delaware
Tower Equities Management, Inc. Delaware
286 Madison, L.P. New York
290 Madison, L.P. New York
292 Madison, L.P. New York
810 7th Avenue GP LLC Delaware
810 7th Avenue L.P. New York
2800 Associates, L.P. Delaware
2800 GP LLC Delaware
2800 I LLC Delaware
5750 Associates, L.P. Delaware
Corporate Center Associates, L.P. Delaware
Corporate Tower Center, GP LLC Delaware
East Broadway 5151, L.P. Delaware
Magnolia Associates, L.P. Florida
Maitland Associates, Ltd. Florida
Maitland West Associates Limited Partnership Florida
Mineola UPREIT, LLC Delaware
Tower Madison GP LLC Delaware
Tower Mineola, L.P. Delaware
Tower Orlando GP LLC Delaware
Tower QRS No. 1 Corp. Delaware
Tower QRS No. 3 Corp. Delaware
Tower QRS No. 4 Corp. Delaware
Tower QRS No. 5 Corp. Delaware
Tower 45 GP LLC Delaware
</TABLE>
694583.1
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements of Tower Predecessor for the period from January 1, 1997
through October 15, 1997 and the financial statements of Tower Realty Trust,
Inc. for the period from March 27, 1997 (date of inception) through
December 31, 1997.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 11-MOS<F1> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997
<PERIOD-START> JAN-01-1997 MAR-27-1997
<PERIOD-END> OCT-15-1997 DEC-31-1997
<CASH> 0 1,347
<SECURITIES> 0 0
<RECEIVABLES> 0 3,820
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 0 0
<PP&E> 0 620,557
<DEPRECIATION> 0 2,444
<TOTAL-ASSETS> 0 656,096
<CURRENT-LIABILITIES> 0 0
<BONDS> 0 228,990
0 0
0 0
<COMMON> 0 169
<OTHER-SE> 0 362,248
<TOTAL-LIABILITY-AND-EQUITY> 0 656,096
<SALES> 0 0
<TOTAL-REVENUES> 22,802 18,360
<CGS> 0 0
<TOTAL-COSTS> 28,258 14,359
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 11,725 2,369
<INCOME-PRETAX> (5,322) 3,981
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (5,322) 3,981
<DISCONTINUED> 0 0
<EXTRAORDINARY> 6,475 0
<CHANGES> 0 0
<NET-INCOME> 1,153 3,981
<EPS-PRIMARY> 0 .24
<EPS-DILUTED> 0 .24
<FN>
<F1>FIGURES ACTUALLY REPRESENT 10 AND 1/2 MONTHS.
</FN>
</TABLE>
