<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) June 15, 1998
-----------------------------
Prime Retail, L.P.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Maryland 333-50139 52-1844882
- ---------------------------- ------------- -------------------
(State of other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
100 East Pratt Street
Nineteenth Floor, Baltimore, Maryland 21202
- ---------------------------------------- ----------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (410) 234-0782
--------------
No Change
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
================================================================================
<PAGE>
PRIME RETAIL, L.P.
ITEM 2: Acquisition or Disposition of Assets
On June 15, 1998, Prime Retail, Inc. ("Old Prime") completed its merger
with Horizon Group, Inc. ("Horizon") pursuant to an Amended and Restated
Agreement and Plan of Merger, dated as of February 1, 1998 (the "Merger
Agreement"), among Old Prime, Horizon, Prime Retail, L.P. ("Prime Partnership"),
Sky Merger Corp. ("New Prime"), Horizon Group Properties, Inc. ("HGP"), Horizon
Group Properties, L.P., and Horizon/Glen Outlet Centers Limited Partnership
("Horizon Partnership"). The merger and the other transactions contemplated
by the Merger Agreement (the "Transactions") were consummated through the
mergers of (i) Horizon Partnership with and into Prime Partnership and (ii)
Horizon with and into New Prime, a wholly owned subsidiary of Horizon, and the
subsequent merger of Old Prime with and into New Prime. Following the mergers,
New Prime was renamed Prime Retail, Inc. On June 12, 1998, the Transactions and
certain other related matters were approved by shareholders of Old Prime and
Horizon at shareholder meetings and by the limited partners of Prime Partnership
and Horizon Partnership. A copy of the press release announcing the closing of
the Transactions is attached hereto as Exhibit 99.1.
Pursuant to the Transactions, each outstanding share of common stock, par
value $0.01 per share, of Horizon is entitled to receive 0.597 of a share of
common stock, $0.01 par value per share, of New Prime and 0.20 of a share of
8.5% Series B Cumulative Participating Convertible Preferred Stock, $0.01 par
value per share, of New Prime. In addition, pursuant to the Transactions, each
limited partner of Horizon Partnership is entitled to receive 0.9193 of a common
unit of limited partnership interest in Prime Partnership for each unit of
limited partnership interest in Horizon Partnership. New Prime and Prime
Partnership have retained American Stock Transfer & Trust Company of New York to
serve as the Exchange Agent in connection with the exchanges.
Concurrent with the closing of the Transactions, a special cash
distribution of $0.50 per share/unit was made to holders of Old Prime's
Series C Preferred Securities, Common Stock and common units of limited
partnership interest, and a special cash distribution of $0.60 per share was
made to holders of Old Prime Series B Preferred Stock.
Also, in connection with the Transactions, the common equity of HGP, which
initially will own and operate 15 properties being spun-off from Old Prime and
Horizon, was distributed to the convertible preferred and common
shareholders and unitholders of Old Prime and the shareholders and limited
partners of Horizon based on their ownership of New Prime immediately following
the merger. Pursuant to this distribution, one share of Common Stock of HGP
was distributed for every 20 shares of Common Stock, Common Units or Series
C Preferred Stock of New Prime and 1.196 shares of Common Stock of HGP was
distributed for every 20 shares of Series B Preferred Stock held in New Prime.
<PAGE>
In addition in connection with the Transactions, New Prime completed a
$292.0 million debt financing with Nomura Asset Capital Corporation ("NACC").
The financing consists of (i) a $180.0 million nonrecourse permanent loan (the
"Permanent Loan") and (ii) a $112.0 million full recourse bridge loan (the
"Bridge Loan"). The Permanent Loan is (i) collateralized by first mortgages on
four factory outlet centers, (ii) bears a fixed rate of interest equal to 6.99%
and (iii) requires monthly principal and interest payments pursuant to an
approximate 26-year amortization schedule. The Bridge Loan is (i)
collateralized by first mortgages on six factory outlet centers, (ii) bears a
variable rate of interest equal to 30-day LIBOR plus 1.35%, (iii) matures in
three years, and (iv) requires monthly interest-only payments.
Following the spin-off of HGP, New Prime will be a guarantor or otherwise
obligated with respect to approximately $42 million of HGP's indebtedness,
including $12.2 million of obligations under HGP's $108.2 million three-year
secured credit facility with NACC and $11.8 of mortgage debt that is scheduled
to mature August 14, 1998. New Prime and HGP are continuing to seek the consent
of certain parties to the assumption by HGP or its affiliates of $14.3 million
of indebtedness in connection with the spin-off.
As a result of the Transactions and pursuant to Rule 12g-3(a) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), New Prime is
the successor issuer to Horizon and Old Prime and New Prime's Common Stock,
$0.01 par value per share, its 10.5% Series A Senior Cumulative Preferred Stock,
$0.01 par value per share, and its 8.5% Series B Cumulative Participating
Convertible Preferred Stock, $0.01 par value per share, are deemed registered
under Section 12(b) of the Exchange Act.
<PAGE>
ITEM 5: Other Events
Reference is made to the Press Release dated June 15, 1998 attached
hereto as Exhibit 99.1 and incorporated by reference herein.
ITEM 7: Financial Statements and Exhibits
A. Financial Statements of Businesses Acquired:
Financial statements of Horizon/Glen Outlet Centers
Limited Partnership for December 31, 1997 are
incorporated by reference to Prime Retail, L.P.'s
Registration Statement on Form S-4
(File No. 333-50139).
B. Pro Forma Financial Information: Pursuant to Item
7(b)(2) of the Form 8-K, the Partnership states
that it is impracticable to file the required pro
forma financial information at the time this
report is filed. Such pro forma financial
information is will be filed by amendment.
C. Exhibits:
Description Exhibit
----------- -------
Loan Agreement dated as of June 15, 1998 10.1
between Outlet Village of Kittery Limited
Partnership, the Prime Outlets at Gilroy
Limited Partnership, The Prime Outlets at
Michigan City Limited Partnership and Finger
Lakes Outlet Center, L.L.C. and Nomura Asset
Capital Corporation (Permanent Loan)
Form of Deed of Trust, Security Agreement, 10.2
Assignment of Rents and Fixture Filings
with Nomura Asset Capital Corporation
(Permanent Loan and Bridge Loan)
Loan Agreement dated as of June 15, 1998 10.3
between Buckeye Factory Shops Limited
Partnership, Latham Factory Stores
Limited Partnership, Carolina Factory
Shops Limited Partnership, Shasta
Outlet Center Limited Partnership, The
Prime Outlets at Calhoun Limited
Partnership and The Prime Outlets at Lee
Limited Partnership and Nomura Asset
Capital Corporation (Bridge Loan)
Guaranty dated as of June 15, 1998 10.4
by Prime Retail, Inc. to and for the
benefit of Nomura Asset Capital
Corporation
Guaranty dated as of June 15, 1998 10.5
by Prime Retail, L.P. to and for the
benefit of Nomura Asset Capital
Corporation
Guaranty and Indemnity Agreement dated 10.6
as of June 15, 1998 by and among Horizon
Group Properties, Inc., Horizon Group
Properties, L.P., Prime Retail, Inc. and
Prime Retail, L.P.
Contribution Agreement dated as of 10.7
June 15, 1998 by and among Horizon
Group, Inc., Sky Merger Corp.,
Horizon/Glen Outlet Centers Limited
Parntership, Horizon Group
Properties, Inc., and Horizon Group
Properties, L.P.
Press Release dated June 15, 1998 announcing 99.1
the consummation of the Transactions
<PAGE>
PRIME RETAIL, L.P.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PRIME RETAIL, L.P.
(Registrant)
Dated: June 23, 1998 By: Prime Retail, Inc., its
general partner
By: /s/ Robert P. Mulreaney
-------------------------
Name: Robert P. Mulreaney
Title: Executive Vice President,
Chief Financial Officer
and Treasurer
<PAGE>
EXHIBIT INDEX
-------------
Exhibit
-------
Loan Agreement dated as of June 15, 1998 10.1
between Outlet Village of Kittery Limited
Partnership, the Prime Outlets at Gilroy
Limited Partnership, The Prime Outlets at
Michigan City Limited Partnership and Finger
Lakes Outlet Center, L.L.C. and Nomura Asset
Capital Corporation (Permanent Loan)
Form of Deed of Trust, Security Agreement, 10.2
Assignment of Rents and Fixture Filings
with Nomura Asset Capital Corporation
(Permanent Loan)
Loan Agreement dated as of June 15, 1998 10.3
between Buckeye Factory Shops Limited
Partnership, Latham Factory Stores
Limited Partnership, Carolina Factory
Shops Limited Partnership, Shasta
Outlet Center Limited Partnership, The
Prime Outlets at Calhoun Limited
Partnership and The Prime Outlets at Lee
Limited Partnership and Nomura Asset
Capital Corporation (Bridge Loan)
Guaranty dated as of June 15, 1998 10.4
by Prime Retail, Inc. to and for
the benefit of Nomura Asset Capital
Corporation
Guaranty dated as of June 15, 1998 10.5
by Prime Retail, Inc. to and for
the benefit of Nomura Asset Capital
Corporation
Guaranty and Indemnity Agreement dated 10.6
as of June 15, 1998 by and among Horizon
Group Properties, Inc., Horizon Group
Properties, L.P., Prime Retail, Inc. and
Prime Retail, L.P.
Press Release dated June 15, 1998 announcing 99.1
the consummation of the Transactions
EXHIBIT 10.1
LOAN AGREEMENT
Dated as of June 15, 1998
Between
OUTLET VILLAGE OF KITTERY LIMITED PARTNERSHIP
THE PRIME OUTLETS AT GILROY LIMITED PARTNERSHIP,
THE PRIME OUTLETS AT MICHIGAN CITY LIMITED PARTNERSHIP
and
FINGER LAKES OUTLET CENTER, L.L.C.,
as Borrower
AND
NOMURA ASSET CAPITAL CORPORATION,
as Lender
LOAN AGREEMENT
LOAN AGREEMENT dated as of June 15, 1998 between OUTLET VILLAGE OF KITTERY
LIMITED PARTNERSHIP, a Delaware limited partnership ("Kittery Borrower"), THE
PRIME OUTLETS AT GILROY LIMITED PARTNERSHIP, a Delaware limited partnership
("Gilroy Borrower"), THE PRIME OUTLETS AT MICHIGAN CITY LIMITED PARTNERSHIP, a
Delaware limited partnership ("Michigan City Borrower") and FINGER LAKES OUTLET
CENTER, L.L.C., a Delaware limited liability company ("Finger Lakes Borrower")
(collectively, the "Borrowers"), each having an address c/o Prime Retail, L.P.,
100 East Pratt Street, 19th Floor, Baltimore, Maryland 21202 and NOMURA ASSET
CAPITAL CORPORATION, a corporation organized under the laws of the State of
Delaware (together with its permitted successors and assigns, "Lender").
All capitalized terms used herein shall have the respective meanings set
forth in Section 1 hereof.
W I T N E S S E T H :
WHEREAS, Gilroy Borrower is the owner of the Gilroy Fee Property and the
Gilroy Leased Property, Michigan City Borrower is the owner of the Michigan City
Property, Finger Lakes Borrower is the owner of the Finger Lakes Property and
Kittery Borrower is the owner of the Kittery Property;
WHEREAS, the Borrowers desire to obtain a loan in the amount of
$163,841,167.00 (the "Loan"), which Loan shall be secured by, among other
things, each of the Gilroy Fee Property, the Gilroy Leased Property, the
Michigan City Property, the Finger Lakes Property and the Kittery Property;
WHEREAS, Lender is willing to make the Loan to Borrowers, subject to and in
accordance with the terms of this Agreement and the other Loan Documents;
NOW, THEREFORE, in consideration of the making of the Loan by Lender and
the covenants, agreements, representations and warranties set forth in this
Agreement, the parties hereto hereby covenant, agree, represent and warrant as
follows:
I0 DEFINITIONS; PRINCIPLES OF CONSTRUCTION
Section I.1 Definitions. For all purposes of this Agreement, except as
otherwise expressly required or unless the context clearly indicates a contrary
intent:
"Accrued Interest" shall have the meaning set forth in Section 2.2.2.
"Affiliate" shall mean, as to any specified Person, any other Person that,
directly or indirectly, is in Control of, is Controlled by or is under common
Control with such specified Person or is a director or officer of such Person or
of an Affiliate of such Person.
"Allocated Loan Amount" shall mean, as to any Property, the Initial
Allocated Loan Amount for such Property, as such amount may be adjusted from
time to time as follows. Upon each adjustment in the principal amount of the
Note (each, an "Adjustment") whether as a result of amortization, defeasance or
prepayment or as otherwise expressly provided herein, the Allocated Loan Amount
<PAGE>
for each Property shall be increased or decreased, as the case may be, by an
amount equal to the product of (i) the Adjustment and (ii) 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 principal balance of
the Note prior to the Adjustment. However,
(a) when the principal of the Note is reduced or defeased as a result of
Lender's receipt, in connection with a release of a Property from the lien of
the Mortgage encumbering such Property, funds sufficient to defease or prepay,
as applicable, a portion of the Note in the amount of the applicable Release
Price for such Property, the Allocated Loan Amount for such Property shall be
reduced to zero (the amount by which such Allocated Loan Amount is reduced being
referred to as the "Released Allocated Amount") and the Allocated Loan Amount
for each other Property shall be decreased by an amount equal to the product of
(1) the excess of the Release Price over the Released Allocated Amount and (2) 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 all Properties other than the Property for which
the Release Price was paid (prior to the adjustment in question); and
(b) when the principal of the Note is reduced or defeased as a result of
the receipt by Lender of Loss Proceeds or partial prepayments or defeasances, as
applicable, made in accordance with Section 2.3 hereof, the Allocated Loan
Amount for the Property with respect to which the Loss or prepayments or
defeasances, as applicable, were received shall be decreased by an amount equal
to the sum of (x) with respect to Loss Proceeds, Loss Proceeds which are applied
toward the reduction of the principal balance of the Note as set forth in
Article VII hereof, if any, and (y) with respect to prepayments or defeasances,
as applicable, the amount of any such prepayment or defeasance which is applied
toward the reduction of the principal balance of the Note in accordance with the
provisions hereof, but in no event shall the Allocated Loan Amount for such
Property be reduced to an amount less than zero (the amount by which such
Allocated Loan Amount is reduced being referred to as the "Loss Proceeds or
Prepayment Allocated Amount") and each other Allocated Loan Amount shall be
decreased by an amount equal to the product of (1) the excess of (A) the Loss
Proceeds or such partial prepayments or defeasances, as applicable, over (B) the
Loss Proceeds or Prepayment Allocated Amount, and (2) 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 all the Allocated
Loan Amounts (prior to the adjustment in question) other than the Allocated Loan
Amount applicable to the Property to which such Loss Proceeds or partial
prepayments or defeasances, as applicable, were applied.
In the event that a Replacement Premises shall become a Property hereunder,
the Allocated Loan Amount for such Replacement Premises shall be the Allocated
Loan Amount of the Property for which the Replacement Premises is substituted.
"Allocated Premium Amount" shall mean, as to any Property, the amount set
forth for such Property on Schedule 6.
"ALTA" shall mean American Land Title Association, or any successor
thereto.
"Amortized Amount" shall have the meaning set forth in Section 2.7(b).
"Annual Budget" shall have the meaning set forth in Section 5.1(r).
"Appraisal" shall have the meaning set forth in Section 3.1(n).
<PAGE>
"Approved Capital Expenses" shall mean, with respect to a Property, Capital
Expenses incurred by a Borrower with respect to such Property which (i) are
included in the approved Capital Budget for the Current Month for such Property,
(ii) are not included in the approved Capital Budget for the Current Month, but
do not cause the total of the approved Capital Budget for such Property for the
Current Month and all prior months covered by such approved Capital Budget
(i.e., year to date) to be exceeded by more than 5%, (iii)have been approved by
the Lender or (iv) are emergency expenses necessary to protect life or property
or to comply wth unanticipated life safety laws or requirements.
"Approved Leasing Expenses" shall mean, with respect to a Property,
expenses incurred in leasing space at such Property pursuant to Leases entered
into in accordance with the provisions of Section 5.1(u) and the applicable
provisions of the Mortgage encumbering such Property, including brokerage
commissions, tenant improvements and other inducements, which expenses are
approved by Lender, which approval shall not be unreasonably withheld or
delayed.
"Approved Operating Expenses" shall mean, with respect to a Property,
Operating Expenses incurred by a Borrower with respect to such Property which
(i) are included in the approved Operating Budget for
<PAGE>
such Property for the Current Month, (ii) are not included in the approved
Operating Budget for such Property for the Current Month, but do not cause the
total of such approved Operating Budget for the Current Month to be exceeded by
more than 5%, (iii) are for electric, gas, oil, water, sewer or other utility
service to such Property or (iv) have been approved by the Lender, which
approval shall not be unreasonably withheld or delayed.
"Assignment of Agreements" shall mean, with respect to each Property, that
certain first priority Assignment of Agreements, Licenses, Permits and Contracts
dated as of the date hereof, from the applicable Borrower, as assignor, to
Lender, as assignee, assigning to Lender as security for the Loan, to the extent
assignable under law, all of such Borrower's interest in and to the Management
Agreement, if any, and all other licenses, permits and contracts necessary for
the use and operation of such Property, as the same may be amended, restated,
replaced, supplemented or otherwise modified from time to time.
"Assignment of Leases" shall mean, with respect to each Property, that
certain first priority Assignment of Leases and Rents dated as of the date
hereof, from the applicable Borrower, as assignor, to Lender, as assignee,
assigning to Lender as security for the Loan, to the extent assignable under
law, all of such Borrower's interest in and to the Rents and Leases for such
Property, as the same may be amended, restated, replaced, supplemented or
otherwise modified from time to time.
"Award" shall have the meaning set forth in Section 7.1.3.
"Borrower" shall mean Gilroy Borrower, Michigan City Borrower, Finger Lakes
Borrower and Kittery Borrower, or any one or more of them, as the context may
require, together with their permitted successors and assigns, but shall not
include any such entity after such time as all Properties owned or leased by
such Borrower have been released from the lien of the Mortgages.
"Business Day" shall mean any day other than a Saturday, Sunday or any
other day on which national banks in New York, Chicago or the state in which the
Collection Account Bank is located are not open for business.
"Capital Budget" shall have the meaning set forth in Section 5.1(r).
"Capital Expenses" shall mean capital expenditures as determined in
accordance with GAAP.
"Capital Reserve Fund" shall have the meaning set forth in Section 7.4.1.
"Cash Collateral Account" shall mean that account established and
maintained pursuant to each Cash Collateral Account Agreement.
"Cash Collateral Account Agreement" shall mean, with respect to each
Property, that certain Cash Collateral Account Agreement dated as of the date
hereof among the applicable Borrower, Lender, the Manager of such Property and
the Cash Collateral Account Bank for collecting and retaining all the rents from
such Property.
"Cash Collateral Account Bank" shall mean LaSalle National Bank, or any
successor chosen by Lender at no material additional cost to Borrower.
<PAGE>
"Cash Trap Event" shall mean the occurrence of (i) an Event of Default or
(ii) the Optional Prepayment Date.
"Casualty/Condemnation Prepayments" shall have the meaning set forth in
Section 2.3.2.
"Casualty Prepayment Amount" shall have the meaning set forth in Section
2.7(b)(ii).
"Casualty Return-of-Premium Amount" shall have the meaning set forth in
Section 2.7(b)(iii).
"Collection Account" shall have the meaning set forth in Section 2.6(a).
"Collection Account Agreement" shall mean that certain Collection Account
Agreement of even date herewith among Borrowers, Lender and the Collection Bank.
"Collection Account Bank" shall have the meaning set forth in Section
2.6(a).
"Closing Date" shall mean the date of the funding of the Loan.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and as it
may be further amended from time to time, any successor statutes thereto, and
applicable U.S. Department of Treasury regulations issued pursuant thereto.
"Condemnation" shall have the meaning set forth in Section 7.1.3.
"Condemnation Prepayment Amount" shall have the meaning set forth in
Section 2.7(b)(iv).
"Condemnation Proceeds" shall mean all proceeds and awards in respect of
any condemnation of a Property or purchase in lieu thereof.
"Condemnation Restoration" shall have the meaning set forth in
Section 7.1.3.
"Condemnation Return-of-Premium Amount" shall have the meaning set forth in
Section 2.7(b)(v).
"Consent and Subordination of Manager" shall mean that certain Consent and
Subordination of Manager dated the date hereof between each Manager and Lender.
"Control" shall mean with respect to any Person either (i) ownership
directly or through other entities, of more than 50% of all beneficial equity
interest in such Person, or (ii) the power to direct the management, operation
and business of such Person.
"Current Month" shall mean, as of the date of determination, the then
current calendar month.
"Debt" shall mean the outstanding principal amount set forth in, and
evidenced by, the Note, together with all interest accrued and unpaid thereon
and all other sums due to Lender in respect of the Loan, including the Yield
Maintenance Premium, any applicable Return-of-Premium Amount and any sums due
under the Note, this Agreement, the Mortgages or in any other Loan Document, but
shall not include any debt evidenced by a Defeased Note.
<PAGE>
"Debt Service" shall mean, with respect to any particular period of time,
scheduled principal and interest payments under the Note (other than Accrued
Interest and excess principal amortization required after the Optional
Prepayment Date).
"Debt Service Coverage Ratio" shall mean, as of any date, a ratio in which
(a) the numerator is the Net Operating Income for the Properties for the
12-month period immediately preceding such date, and (b) the denominator is the
aggregate amount of principal and interest that would be due and payable on the
Note (other than principal and interest under any Defeased Notes) for such
period based upon a debt service constant of 10.09.
"Default" shall mean the occurrence of any event hereunder or under any
other Loan Document which, but for the giving of notice or passage of time, or
both, would be an Event of Default.
"Default Rate" shall mean, with respect to the Loan, a rate per annum equal
to the lesser of (a) the maximum rate permitted by applicable law, or (b) five
percent (5%) above the Interest Rate.
"Defeasance" shall have the meaning set forth in Section 2.3.3 hereof.
"Defeasance Date" shall have the meaning set forth in Section 2.3.3.
hereof.
"Defeasance Deposit" shall mean an amount equal to the sum of (i) an amount
that will be sufficient to purchase U.S. Obligations providing payments to meet
the Scheduled Defeasance Payments, (ii) any costs and expenses incurred or to be
incurred in the purchase of U.S. Obligations necessary to meet the Scheduled
Defeasance Payments and (iii) any revenue, documentary stamp or intangible taxes
or any other tax or charge due in connection with the transfer of the Note, the
creation of the Defeased Note and the Undefeased Note, if applicable, any
transfer of the Defeased Note or any other amounts payable under Sections 2.3
and 2.4 hereof.
"Defeased Note" shall have the meaning set forth in Section 2.3.3 hereof.
"Early Prepayment Return-of-Premium Amount" shall have the meaning set
forth in Section 2.7(b)(vi).
"Environmental Indemnity" shall mean that certain Environmental and
Hazardous Substance Indemnification Agreement executed by Borrowers in
connection with the Loan for the benefit of Lender.
"Equipment" shall have the meaning set forth in the Mortgages.
"Event of Default" shall have the meaning set forth in Section 8.1.
"Event of Default Return-of-Premium Amount" shall have the meaning set
forth in Section 2.7(b)(vii).
<PAGE>
"Fiscal Year" shall mean each twelve month period commencing on January 1
and ending on December 31 during each year of the term of the Loan or such other
fiscal year of a Borrower as such Borrower may adopt from time to time with the
prior written consent of Lender.
"GAAP" shall mean generally accepted accounting principles in the United
States of America as of the date of the applicable financial report.
"General Partner" shall mean PRLP and PR Finance.
"Governmental Authority" shall mean any court, board, agency, commission,
office or authority of any nature whatsoever for any governmental unit (federal,
state, county, district, municipal, city or otherwise) whether now or hereafter
in existence having or asserting jurisdiction over a Person, Property or matter
at issue.
"Improvements" shall have the meaning set forth in the Mortgages.
"including" shall mean "including, without limitation".
"Indemnified Liabilities" shall have the meaning set forth in Section
10.13(b).
"Independent Director" shall have the meaning set forth in Section 4.1(dd).
"Initial Allocated Loan Amount" shall mean, for each Property, the amount
set forth for such Property on Schedule 6.
"Initial DSCR" shall mean 1.66.
"Insurance Premiums" shall have the meaning set forth in Section 7.1.1(c)
hereof.
"Insurance Proceeds" shall mean the proceeds of the insurance policies
required to be maintained pursuant to clauses (i), (iii), (iv), (v), (vi) and
(viii) of Section 7.1.1 hereof which are received by or on behalf of a Borrower.
"Insured Casualty" shall have the meaning specified in Section 7.1.1(d).
"Interest Rate" shall mean a rate of interest equal to 8.40% per annum.
"knowledge" shall mean, when used to modify a representation or warranty,
actual knowledge or such knowledge as a reasonable person should have had under
the circumstances.
"Lease" shall mean any lease, or, to the extent of the interest therein of
a Borrower, any sublease or sub-sublease, letting, license, concession or other
agreement (whether written or oral and whether now or hereafter in effect)
pursuant to which any person is granted a possessory interest in, or right to
use or occupy all or any portion of any space in the Properties, and every
modification, amendment or other agreement relating to such lease, sublease,
sub-sublease, or other agreement entered into in connection with such lease,
sublease, sub-sublease, or other agreement and every guarantee of the
performance and observance of the covenants, conditions and agreements to be
performed and observed by the other party thereto.
<PAGE>
"Legal Requirements" shall mean, with respect to the Properties, all
federal, state, county, municipal and other governmental statutes, laws, rules,
orders, regulations, ordinances, judgments, decrees and injunctions of
Governmental Authorities affecting the Properties or any part thereof or the
construction, use, alteration or operation thereof, or any part thereof, whether
now or hereafter enacted and in force, and all permits, licenses and
authorizations and regulations relating thereto.
"Lender" shall mean Nomura Asset Capital Corporation, together with its
successors and assigns.
"Licenses" shall have the meaning set forth in Section 4.1(w).
"Lien" shall mean, with respect to any Property, any mortgage, deed of
trust, lien, pledge, hypothecation, assignment, security interest, or any other
encumbrance, charge or transfer of, on or affecting such Property or any portion
thereof or a Borrower, or any interest therein, including 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.
"Loan" shall mean the loan made to Borrowers by Lender pursuant hereto in
the original principal amount of $163,841,167.00 and evidenced by the Note and
secured by the Mortgages and the other Loan Documents.
"Loan Documents" shall mean, collectively, this Agreement, the Note, the
Mortgages, the Assignments of Leases, the Assignments of Agreements, the
Environmental Indemnity, the Consents and Subordinations of Manager, if any, the
Collection Account Agreement, the Cash Collateral Account Agreement and any
other document, agreement or instrument (i) executed and delivered by a Borrower
or any Affiliate of a Borrower evidencing or securing the Loan, (ii) executed by
Borrower and Lender in connection with the Loan or (iii) which states it is a
Loan Document hereunder.
"Loss Proceeds" shall mean Insurance Proceeds and Condemnation Proceeds.
"Management Agreement" shall mean, with respect to the Properties, a
management agreement, if any, entered into by and between each Borrower and the
Manager, pursuant to which the Manager is to provide management and other
services with respect to the Properties.
"Management Fee" shall mean the fee, if any, payable to Manager pursuant to
the Management Agreement.
"Manager" shall mean PRLP or any successor manager of the Properties
approved by Lender, which approval shall not be unreasonably withheld or
delayed.
"Material Adverse Effect" shall mean any event or condition that has a
material adverse effect on (a) any Property, (b) the business, prospects,
profits, operations or condition (financial or otherwise) of any Property, (c)
the enforceability, validity, perfection or priority of the lien of any Loan
Document or (d) the ability of any Borrower to perform any obligations under any
Loan Document.
"Maturity Date" shall mean the date on which the final payment of principal
of the Note (or the Defeased Note, if applicable) becomes due and payable as
therein provided, whether at the Stated Maturity Date (July 11, 2028), by
declaration of acceleration, or otherwise.
<PAGE>
"Monthly Debt Service Payment Amount" shall have the meaning set forth in
Section 2.2.1.
"Mortgages" shall mean each of the mortgages and deeds of trust described
on Schedule 4 hereto, as the same may be amended, restated, replaced,
supplemented, consolidated or otherwise modified from time to time. A "Mortgage"
shall mean any of the Mortgages, as the context may require.
"NACC" shall mean Nomura Asset Capital Corporation, a Delaware corporation.
"Net Operating Income" shall mean, for any Property, for any period, the
difference between all Operating Income of such Property during such period,
minus all Operating Expenses of such Property during such period.
"Nomura" shall have the meaning set forth in Section 10.17.
"Note" shall mean that certain Note of even date herewith, made by
Borrowers in favor of Lender, substantially in the form of Exhibit A annexed
hereto, as the same may be amended, restated, replaced, supplemented,
consolidated or otherwise modified from time to time, including any Undefeased
Note that may exist from time to time but excluding any Defeased Note.
"Officer's Certificate" shall mean a certificate delivered to Lender by the
Borrowers which is signed by an authorized officer of the REIT on behalf of the
General Partner or Managing Member of each Borrower.
"Operating Budget" shall have the meaning set forth in Section 5.1(r).
"Operating Expenses" shall mean, with respect to a Property, for the
applicable period, all expenses directly attributable to the operation, repair
and/or maintenance of the Property including, without limitation, Taxes, Other
Charges, insurance premiums, management fees, marketing and promotion expenses
(to the extent not reimbursed or reimbursable by tenants under Leases), reserves
for bad debts, general administration costs and costs attributable to the
operation, repair and maintenance of the systems for heating, ventilating and
air conditioning the Improvements and actually incurred by a Borrower. Operating
Expenses shall not include interest, principal and premium, if any, due under
the Note or otherwise in connection with the Debt, income taxes, extraordinary
capital improvement costs, or any non-cash charge or expense such as
depreciation or amortization.
"Operating Income" shall mean, with respect to a Property, for the
applicable period, all revenue derived by a Borrower arising from the Property
including, without limitation, rental revenues (whether denominated as basic
rent, additional rent, percentage rent, escalation payments, electrical payments
or otherwise and including only that which is actually due and payable in such
period) and other fees and charges payable pursuant to Leases or otherwise in
connection with the Property, and business interruption, rent or other similar
insurance proceeds. Operating Income shall not include (a) Insurance Proceeds
(other than proceeds of rent, business interruption or other similar insurance
allocable to the applicable period) and Condemnation Proceeds (other than
Condemnation Proceeds arising from a temporary taking or the use and occupancy
of all or part of the applicable Property allocable to the applicable period),
or interest accrued on such Insurance Proceeds or Condemnation Proceeds, (b)
proceeds of any financing, (c) proceeds of any sale, exchange or transfer of the
Property or any part thereof or interest therein, (d) capital contributions or
loans to Borrower or an Affiliate of Borrower, (e) any item of income otherwise
includable in Operating Income but paid directly by any tenant to a Person other
than Borrower except for real estate taxes paid directly to any taxing authority
by any tenant, (f) any other extraordinary, non-recurring revenues or (g) Rents
<PAGE>
paid by or on behalf of any lessee under a Lease in whole or in partial
consideration for the termination of any Lease which, when added to all Rents
received during the applicable period pursuant to the terminated Lease, plus any
Rents received pursuant to any Lease which replaced the Lease which was
terminated, exceeds the Rents which otherwise would be paid pursuant to the
Lease which was terminated.
"Optional Prepayment Date" shall mean July 11, 2008.
"Other Charges" shall mean all ground rents, maintenance charges,
impositions other than Taxes, and any other charges, including vault charges and
license fees for the use of vaults, chutes and similar areas adjoining the
Properties, now or hereafter levied or assessed or imposed against the
Properties or any part thereof.
"Payment Date" shall mean the eleventh (11th) day of each calendar month
or, if in any month the eleventh (11th) day is not a Business Day, than the
Payment Date for such month shall be the first Business Day thereafter.
"Permitted Encumbrances" shall mean, with respect to a Property,
collectively, (a) the Liens and security interests created by the Loan
Documents, (b) all Liens, encumbrances and other matters disclosed in the Title
Insurance Policy relating to such Property or any part thereof, (c) Liens, if
any, for Taxes or Other Charges not yet payable or delinquent or being contested
in good faith and by appropriate proceedings in accordance with Section 5.1(b),
(d) any mechanics' and materialmen's liens affirmatively insured against by the
Title Insurance Policy or being contested in good faith and by appropriate
proceedings in accordance with Section 6.1(b), (e) any and all governmental,
public or private utility and private restrictions, covenants, reservations,
easements, licenses or other agreements of an immaterial nature which may
hereafter be granted by a Borrower and which do not materially and adversely
affect (x) the marketability of title to the Property or (y) the fair market
value of the Property, (f) rights of future tenants, as tenants only, pursuant
to Leases entered into in accordance with the provisions of the Loan Documents
(g) liens incurred in connection with the financing or leasing of equipment in
the ordinary course of business and in accordance with the Prudent Manager
Standard and (h) such other title and survey exceptions as Lender has approved
or may approve in writing in Lender's reasonable discretion.
"Permitted Indebtedness" shall mean (a) the Debt, and (b) normal and
customary unsecured trade debt incurred in the ordinary course of business in
accordance with the Prudent Manager Standard (including obligations under any
construction contracts for tenant improvements).
"Permitted Investments" shall have the meaning set forth in the Cash
Collateral Account Agreement.
"Person" shall mean any individual, corporation, partnership, joint
venture, estate, trust, unincorporated association, any federal, state, county
or municipal government or any bureau, department or agency thereof and any
fiduciary acting in such capacity on behalf of any of the foregoing.
"Policies" shall have the meaning specified in Section 7.1.1(c).
"Pooling and Servicing Agreement" shall mean the Servicing Agreement
entered into with the Servicer in connection with any Securitization of the
Loan.
<PAGE>
"Premises" shall, with respect to a Property, have the meaning set forth in
the Granting Clause of the Mortgage encumbering such Property.
"Premium Amount" shall have the meaning set forth in Section 2.7(a).
"Principal Indebtedness" shall have the meaning set forth in Section
2.7(b)(viii).
"PR Finance" shall mean Prime Retail Finance VII, Inc., a Maryland
corporation.
"PRLP" shall mean Prime Retail, L.P., a Delaware limited partnership.
"Properties" shall mean, collectively, the properties described on Schedule
5 attached hereto and each Additional Premises and Replacement Premises, but
shall not include any Property which is released from the lien of a Mortgage
after the date of such release. A "Property" shall mean any one of the
Properties.
"Property Agreements" shall mean all material agreements, grants of
easements and/or rights-of-way, reciprocal easement agreements, permits,
declarations of covenants, conditions and restrictions, disposition and
development agreements, planned unit development agreements, management or
parking agreements, party wall agreements or other instruments to which a
Borrower is a party, bound or subject or a Property is subject, including,
without limitation, all reciprocal easement agreements, but not including any
brokerage agreements, management agreements, service contracts, Leases or the
Loan Documents.
"Property Worth" shall mean, with respect to each Borrower, the fair market
value of the Property owned by such Borrower as of the Closing Date.
"Prudent Manager Standard" shall mean that standard of property management,
business operations, practices and procedures customarily employed by prudent,
professional managers with significant experience in the operation and
management of retail shopping centers of a size and type comparable to the
Properties who are seeking to maximize the value of such shopping centers.
"Rating Agency" shall mean each of Standard & Poor's Ratings Group, a
division of McGraw-Hill, Inc., Moody's Investors Service, Inc., Duff & Phelps
Credit Rating Co. and Fitch Investors Service, Inc. or, after a Securitization,
any other nationally recognized statistical rating agency which rates the
securities in connection therewith.
"REIT" shall mean Prime Retail, Inc., a Maryland corporation.
"Release Date" shall mean the earlier of (a) three (3) years after the
Closing Date and (b) two (2) years from the "start-up day" (within the meaning
of Section 860G(2)(9) of the Code) of the REMIC Trust.
"Remaining Realty" shall have the meaning set forth in Section 2.4.3.
"REMIC" shall mean a "real estate mortgage investment conduit" within the
meaning of Section 860D of the Code.
"REMIC Trust" shall mean a REMIC which holds the Note.
<PAGE>
"Rents" shall mean, with respect to the Properties, all rents, rent
equivalents, moneys payable as damages or in lieu of rent or rent equivalents,
royalties (including all oil and gas or other mineral royalties and bonuses),
income, receivables, receipts, revenues, deposits (including security, utility
and other deposits), accounts, cash, issues, profits, charges for services
rendered, and other consideration of whatever form or nature received by or paid
to or for the account of or benefit of a Borrower or its agents or employees
from any and all sources arising from or attributable to the Properties,
including all receivables, customer obligations, installment payment obligations
and other obligations now existing or hereafter arising or created out of the
sale, lease, sublease, license, concession or other grant of the right of the
use and occupancy of the Properties and proceeds, if any, from business
interruption or other loss of income insurance.
"Required Repair Account" shall have the meaning set forth in
Section 7.2.1.
"Required Repair Fund" shall have the meaning set forth in Section 7.2.1.
"Required Repairs" shall have the meaning set forth in Section 7.2.1.
"Restoration" shall have the meaning set forth in Section 7.1.2(b).
"Return-of-Premium Amount" shall have the meaning set forth in Section
2.7(b)(ix).
"Revised Interest Rate" shall mean the per annum rate of interest which is
the greater of (i) the Interest Rate plus 5% and (ii) the Treasury Rate on the
Optional Prepayment Date plus 6.50%.
"Scheduled Defeasance Payments" shall have the meaning set forth in
Section 2.3.3.
"Secondary Market Transaction" shall mean any transaction in which Lender
(i) sells the Loan, the Note and the other Loan Documents to one or more
investors as a whole loan, (ii) participates the Loan to one or more investors,
(iii) deposits the Loan, the Mortgages, the Note and other Loan Documents with a
trust, which trust may sell certificates to investors evidencing an ownership
interest in the trust assets, or (iv) otherwise sells the Loan or an interest
therein to investors.
"Securitization" shall mean the sale of the Note or participation therein
or the securitization of rated single or multi-class securities secured by or
evidencing ownership interests in the Note and the Mortgages.
"Security Agreement" shall have the meaning set forth in
Section 2.3.3(vii).
"Servicer" shall mean the entity appointed by Lender to service the Loan or
its successor in interest, or if any successor servicer is appointed pursuant to
the Pooling and Servicing Agreement, such successor servicer.
"Solvent" shall mean, as to any Person, that (a) the sum of the assets of
such Person, at a fair valuation, exceeds its liabilities, including contingent
liabilities, (b) such Person has sufficient capital with which to conduct its
business as presently conducted and as proposed to be conducted and (c) such
Person has not incurred debts, and does not intend to incur debts, beyond its
ability to pay such debts as they mature. For purposes of this definition,
<PAGE>
"debt" means any liability on a claim, and "claim" means (a) a right to payment,
whether or not such right is reduced to judgment, liquidated, unliquidated,
fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable,
secured or unsecured, or (b) a right to an equitable remedy for breach of
performance if such breach gives rise to a payment, whether or not such right to
an equitable remedy is reduced to judgment, fixed, contingent, matured,
unmatured, disputed, undisputed, secured, or unsecured. With respect to any such
contingent liabilities, such liabilities shall be computed in accordance with
GAAP at the amount which, in light of all the facts and circumstances existing
at the time, represents the amount which can reasonably be expected to become an
actual or matured liability.
"Special Transfer" shall mean the sale by the original Borrowers of the
Properties to a purchaser pursuant to which such purchaser shall assume in
writing all of the obligations of Borrowers under the Loan, provided that Lender
shall have received evidence in writing from the applicable Rating Agencies to
the effect that there will be no qualification, withdrawal or downgrading of the
ratings in effect immediately prior to such sale for the Securities issued in
connection with the Securitization which are then outstanding as a direct result
of such a sale and assumption of the Loan by such purchaser.
"SPE" shall have the meaning set forth in Section 4.1(dd) and shall
initially be PR Finance.
"State" shall mean the State of Illinois.
"Stated Maturity Date" shall mean July 11, 2028.
"Successor Borrower" shall have the meaning set forth in Section 2.3.3(c).
"Survey" shall mean a survey of the Property in question prepared by a
surveyor licensed in the state in which such Property is located and
satisfactory to Lender and the company or companies issuing the Title Insurance
Policies, and containing a certification of such surveyor satisfactory to
Lender.
"Tax and Insurance Escrow Fund" shall have the meaning set forth in
Section 7.3.1.
"Taxes" shall mean all real estate and personal property taxes,
assessments, fees or payments in lieu of real estate taxes, water rates or sewer
rents, now or hereafter levied or assessed or imposed against the Properties or
part thereof.
"Term" shall mean the entire term of this Agreement, which shall expire
upon repayment in full of the Debt and full performance of each and every
obligation to be performed by Borrowers pursuant to the Loan Documents.
"Title Insurance Policies" shall mean, with respect to the Properties, ALTA
mortgagee title insurance policy or policies acceptable to Lender issued with
respect to the Properties and insuring the liens of the Mortgages encumbering
the Properties.
"Transfer" shall have the meaning set forth in Section 6.1(j).
"Treasury Rate" shall mean, as of the Optional Prepayment Date, the linear
interpolation of the bond equivalent yields as reported in Federal Reserve
Statistical Release H.15-Selected Interest Rates under the heading "U.S.
Government Securities/Treasury Constant Maturities" for the week ending prior to
the Optional Prepayment Date of U.S. Treasury constant maturities with maturity
dates (one longer and one shorter) most nearly approximating the remaining term
of the Note as of the Optional Prepayment Date.
<PAGE>
"UCC" or "Uniform Commercial Code" shall mean the Uniform Commercial Code
as in effect in the State in which the applicable Property is located.
"Undefeased Note" shall have the meaning set forth in Section 2.3.3 hereof.
"U.S. Obligation" shall mean direct non-callable obligations of the United
States of America.
"Yield Maintenance Premium" shall mean the amount (if any) which, when
added to the remaining principal amount of the Note or the principal amount of
Defeased Note, as applicable, will be sufficient to purchase U.S. Obligations
providing the required Scheduled Defeasance Payments.
Section I.2 Principles of Construction. All references to sections,
schedules and exhibits are to sections, schedules and exhibits in or to this
Agreement unless otherwise specified. Unless otherwise specified, the words
"hereof," "herein" and "hereunder" and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not to any particular
provision of this Agreement. Unless otherwise specified, all meanings attributed
to defined terms herein shall be equally applicable to both the singular and
plural forms of the terms so defined. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP, as modified herein.
II. GENERAL
Section II.1 The Loan
II.1.1 Commitment. Subject to and upon the terms and conditions set forth
herein, including the conditions precedent set forth in Section 3.1, Lender
hereby agrees to make the Loan to Borrowers on the Closing Date, in the
aggregate original principal amount set forth in the Note and which Loan shall
mature on the Stated Maturity Date. Borrowers hereby agree to accept the Loan on
the Closing Date, subject to and upon the terms and conditions set forth herein.
II.1.2 Disbursement to Borrower. Borrowers may request and receive only one
borrowing hereunder in respect of the Loan. Borrowers shall receive the Loan
upon the Closing, subject to the direction given by Borrowers as to the
application of Loan proceeds for the uses set forth in Section 2.1.4. Any amount
borrowed and repaid hereunder in respect of the Loan may not be reborrowed.
II.1.3 The Note. The Loan shall be evidenced by the Note, in the aggregate
original principal amount of the Loan. The Note shall bear interest as provided
therein. The Note shall be subject to repayment as provided in Section 2.3, may
be defeased as provided in Section 2.3, shall be entitled to the benefits of
this Agreement and shall be secured by the Mortgages and the other Loan
Documents.
II.1.4 Use of Proceeds of Loan and Premium Amount. Borrowers shall use the
proceeds of the Loan and Premium Amount (i) to repay and discharge any existing
loans relating to the Properties (ii) to pay costs and expenses incurred in
connection with the Closing of the Loan, as approved by Lender and (iii) for any
other lawful purpose.
Section II.2 Interest; Monthly Payments
II.2.1 Generally
<PAGE>
(a) From the date hereof through but not including the Optional Prepayment
Date, Borrowers shall pay interest on the outstanding principal balance of the
Loan at the Interest Rate.
(b) On the Payment Date occurring on July 11, 1998, Borrowers shall pay
interest on the outstanding principal balance of the Loan from the date hereof
through July 10, 1998. Commencing with the Payment Date on August 11, 1998 and
on each and every Payment Date thereafter through and including the Maturity
Date, the principal amount of the Loan and interest thereon at the Interest Rate
shall be payable in equal monthly installments of $1,248,203.71 (the "Monthly
Debt Service Payment Amount"); such Monthly Debt Service Payment Amount being
based on the Interest Rate and a 360-month amortization schedule. The Monthly
Debt Service Payment Amount due on any Payment Date shall first be applied to
the payment of interest accrued from the eleventh (11th) day of the month
preceding the Payment Date through the tenth (10th) day of the month in which
the Payment Date occurs, notwithstanding that the Payment Date may have been
deferred because the eleventh (11th) day of such month is not a Business Day.
The remainder of such Monthly Debt Service Payment Amount shall be applied to
the reduction of the outstanding principal balance of the Note.
(c) From and after the Optional Prepayment Date, interest on the Loan shall
accrue at the Revised Interest Rate and shall be payable as provided in Sections
2.2.2 and 2.2.3.
II.2.2 Accrued Interest. From and after the Optional Prepayment Date, all
interest accruing in respect of the Note in excess of the Interest Rate
("Accrued Interest") shall be deferred, be added to the Debt and, to the extent
permitted by applicable law, accrue interest at the Revised Interest Rate,
compounded monthly. All Accrued Interest and interest on Accrued Interest shall
be due and payable on the Maturity Date.
II.2.3 Property Cash Flow Allocation After the Optional Prepayment Date.
Commencing upon the occurrence of a Cash Trap Event and continuing on each
Payment Date occurring during the existence of a Cash Trap Event, any Rents
deposited into the Cash Collateral Account (or otherwise received by Borrowers)
during the immediately preceding calendar month shall be applied as follows in
the following order of priority:
(a) First, to make required payments to the Tax and Insurance Escrow Fund;
(b) Second, to Lender to pay the Monthly Debt Service Payment Amount (plus,
if applicable, interest at the Default Rate);
(c) Third, to make required payments to the Capital Reserve Fund;
(d) Fourth, payments for Approved Operating Expenses, Approved Capital
Expenses and Approved Leasing Expenses of the Properties;
(e) Fifth, following the Optional Prepayment Date, payments to Lender to
prepay the outstanding principal balance under the Note until paid in full;
(f) Sixth, following the Optional Prepayment Date, payments to Lender to be
applied against Accrued Interest and interest accrued thereon; and
(g) Lastly, following the Optional Prepayment Date only, payments to
Borrowers of any excess amounts
<PAGE>
Notwithstanding anything herein to the contrary, the failure of Borrowers
to make all of the payments required under clauses (a) through (d) above in full
on each Payment Date shall constitute a Default under this Agreement. However,
the failure of Borrowers to pay any Accrued Interest or interest on Accrued
Interest on the Optional Prepayment Date or any Payment Date thereafter as a
result of insufficient Rents for such payment shall not constitute a Default
hereunder. All Accrued Interest or interest on Accrued Interest shall
nonetheless be due and payable on the Maturity Date.
II.2.4 Default Rate. After the occurrence and during the continuance of an
Event of Default, the entire outstanding principal balance of the Loan shall
bear interest at the Default Rate, and shall be payable upon demand from time to
time, to the extent permitted by applicable law. Payment or acceptance of the
increased rates provided for in this subsection is not a permitted alternative
to timely payment and shall not constitute a waiver of any Default or Event of
Default or an amendment to this Agreement or any other Loan Document and shall
not otherwise prejudice or limit any rights or remedies of Lender.
Section II.3 Loan Repayment and Defeasance
II.3.1 Repayment. Borrowers shall repay any outstanding principal
indebtedness of the Loan in full on the Maturity Date of the Loan, together with
interest thereon to (but excluding) the date of repayment. Other than as set
forth in Section 2.3.2 below, Borrowers shall have no right to prepay all or any
portion of Loan during the period commencing on the Closing Date to but not
including the third (3rd) Payment Date immediately preceding the Optional
Prepayment Date. Upon and after the third (3rd) Payment Date immediately
preceding the Optional Prepayment Date, the Loan may be prepaid in whole or in
part without penalty or premium, but with payment of the Early Prepayment
Return-of-Premium Amount, if any.
II.3.2 Mandatory Prepayments. The Loan is subject to mandatory prepayment,
without premium or penalty except as provided in Section 7.1.2(c), in certain
instances of Insured Casualty or Condemnation (each a "Casualty/Condemnation
Prepayment"), in the manner and to the extent set forth in Sections 7.1.2 and
Section 7.1.3 hereof. Each Casualty/Condemnation Prepayment shall be made only
on a Payment Date and shall include (i) all accrued and unpaid interest on the
amount prepaid up to but not including such Payment Date and (ii) any Casualty
Return-of-Premium Amount or Condemnation Return-of-Premium Amount that may be
due.
II.3.3 Voluntary Defeasance of the Note
(a) Subject to the terms and conditions set forth in this Section 2.3.3,
Borrowers may defease all or any portion of the Loan evidenced by the Note
(hereinafter, a "Defeasance"); provided, that no such Defeasance may occur prior
to the Release Date. Each Defeasance shall be subject, in each case, to the
satisfaction of the following conditions precedent:
(i) Borrowers shall provide not less than thirty (30) days prior written
notice to Lender specifying a Payment Date (the "Defeasance Date") on which the
Defeasance is to occur. Such notice shall indicate the principal amount of the
Note to be defeased.
(ii) Borrowers shall pay to Lender all accrued and unpaid interest on the
principal balance of the Note to but not including the Defeasance Date. If for
any reason the Defeasance Date is not a Payment Date, Borrowers shall also pay
interest that would have accrued on the Note to but not including the next
Payment Date.
<PAGE>
(iii) Borrowers shall pay to Lender all other sums, not including scheduled
interest or principal payments, then due under the Note, this Agreement, the
Mortgages and the other Loan Documents.
(iv) No Event of Default shall exist.
(v) Borrowers shall pay to Lender the required Defeasance Deposit for the
Defeasance.
(vi) In the event only a portion of the Loan evidenced by the Note is the
subject of the Defeasance, Borrowers shall execute and deliver all necessary
documents to amend and restate the Note and issue two substitute notes: one
having a principal balance equal to the defeased portion of the original Note
(the "Defeased Note") and one note having a principal balance equal to the
undefeased portion of the original Note (the "Undefeased Note"). The Defeased
Note and Undefeased Note shall have identical terms as the Note, except for the
principal balance and the Monthly Debt Service Payment Amount, which Monthly
Debt Service Amount shall be calculated by allocating the Monthly Debt Service
Payment Amount under the original Note to the Defeased Note and Undefeased Note
in proportion to their respective principal balances. A Defeased Note cannot be
the subject of any further Defeasance.
(vii) Borrowers shall execute and deliver a security agreement, in form and
substance reasonably satisfactory to Lender, creating a first priority lien on
the Defeasance Deposit and the U.S. Obligations purchased with the Defeasance
Deposit in accordance with this provision of this Section 2.3.3 (the "Security
Agreement").
(viii) Borrowers shall deliver an opinion of counsel for Borrowers in form
satisfactory to Lender in its reasonable discretion stating, among other things,
that (A) Lender has a perfected first priority security interest in the
Defeasance Deposit and the U.S. Obligations delivered by Borrowers and (B) said
U.S. Obligations have been validly assigned to the REMIC Trust.
(ix) The Rating Agencies shall have confirmed in writing that the forms of
the items to be delivered to Lender on the date proposed for defeasance comply
with the requirements of this Section 2.3.3(a)
(x) Borrowers shall deliver an Officer's Certificate certifying that the
requirements set forth in clauses (vi), (vii) and (viii) of this
Section 2.3.3(a) have been satisfied.
(xi) Borrowers shall deliver such other certificates, documents or
instruments as Lender may reasonably request.
(xii) Borrowers shall pay all reasonable costs and expenses of Lender
incurred in the Defeasance, including any costs and expenses associated with a
release of Lien as provided in Section 2.4 hereof and reasonable attorney's fees
and expenses.
(xiii) In the event Borrowers desire to allocate all or any portion of the
Defeasance Deposit to reduce the Allocated Loan Amount of one or more specific
Properties in a manner other than pro rata among all Properties, Borrowers shall
include in the notice required to be given pursuant to clause (i) of this
Section a statement designating the manner of allocating the Defeasance Deposit
among the Properties.
<PAGE>
(b) In connection with each Defeasance of all or any portion of the Note,
each Borrower hereby appoints Lender as its agent and attorney-in-fact for the
purpose of using the Defeasance Deposit to purchase U.S. Obligations (which
purchases, if made by Lender, shall be made by Lender on an arms-length basis at
then prevailing market rates) which provide payments on or prior to, but as
close as possible to, all successive Payment Dates after the Defeasance Date
through and including the Optional Prepayment Date, in the case of a Defeasance
for the entire outstanding principal balance of the Note, or the Defeased Note,
in the case of a Defeasance for only a portion of the outstanding principal
balance of the Note, as applicable (including, on the Optional Prepayment Date,
the outstanding principal balance of either the Note or the Defeased Note), and
in amounts equal to the scheduled payments of principal and interest due on such
dates under the Note or the Defeased Note, as applicable (the "Scheduled
Defeasance Payments"). Borrowers, pursuant to the Security Agreement or other
appropriate document, shall irrevocably authorize and direct that the payments
received from the U.S. Obligations may be made directly to Lender and applied to
satisfy the obligations of Borrowers under the Note or the Defeased Note, as
applicable. Any portion of the Defeasance Deposit in excess of the amount
necessary to purchase the U.S. Obligations required by this Section 2.3(b) and
satisfy Borrowers' obligations under Sections 2.3 or 2.4 shall be remitted to
Borrowers. Any amounts received in respect of the U.S. Obligations in excess of
the amounts necessary to make monthly payments pursuant to Section 2.2 shall be
retained by Lender and shall be held for application to the next such monthly
payments, and shall not be paid to Borrowers until payment in full of the Debt.
Semi-annual payments in respect of U.S. Obligations shall be applied to payments
under the Note or the Defeased Note, as applicable, as the same become due
thereunder.
(c) If requested by Borrowers in connection with any Defeasance under this
Section 2.3.3, NACC shall establish or designate a successor entity (the
"Successor Borrower") and Borrowers shall transfer and assign all obligations,
rights and duties under and to the Note or the Defeased Note, as applicable,
together with the pledged U.S. Obligations to such Successor Borrower. The
obligation of NACC to establish or designate a Successor Borrower shall be
retained by NACC notwithstanding the sale or transfer of this Agreement unless
such obligation is specifically assumed by the transferee. Such Successor
Borrower shall assume the obligations under the Loan Documents relating to the
principal amount so defeased, including, without limitation, the pledged U.S.
Obligations and the Security Agreement, and Borrowers shall be relieved of their
obligations thereunder. Borrowers shall pay $1,000 to any such Successor
Borrower as consideration for assuming the obligations under the Note or the
Defeased Note, as applicable, and the Security Agreement. Notwithstanding
anything in this Agreement to the contrary, no other assumption fee shall be
payable upon a transfer of the Note or the Defeased Note in accordance with this
Section 2.3.3, but Borrowers shall pay all costs and expenses incurred by
Lender, including Lender's reasonable attorneys' fees and expenses, incurred in
connection therewith.
Section II.4 Except as set forth in this Section 2.4, no repayment,
prepayment or defeasance of all or any portion of the Note shall cause, give
rise to a right to require, or otherwise result in, the release of the Lien of
the Mortgages on the Properties.
II.4.1 Release of the Properties
(a) If Borrowers have elected to defease the Note in its entirety, and the
requirements of Section 2.3 have been satisfied, the Properties shall be
released from the Liens of the Mortgages and the other Loan Documents, and the
U.S. Obligations pledged pursuant to the Security Agreement shall be the sole
collateral securing the Note.
<PAGE>
(b) If Borrowers make a Casualty/Condemnation Prepayment or defease a
portion of the Note, Lender shall, upon satisfaction of all of the following
terms and conditions, permit a release of the Lien of the Mortgage on Property:
(i) Lender shall have received, or defeased Debt in, an amount equal to the
sum of (1) 100% of the Allocated Loan Amount for such Property plus (2) twenty
percent (20%) of the Initial Allocated Loan Amount for such Property in the case
of the Finger Lakes Property, the Michigan City Property and the Kittery
Property and thirty percent (30%) of the Initial Allocated Loan Amount for such
Property in the case of the Gilroy Fee Property and the Gilroy Leased Property
(the "Release Price");
(ii) Except in connection with a defeasance where at least fifty (50%) of
the Release Price is derived from Loss Proceeds with respect to the Property to
be released, Lender shall have received from Borrowers evidence in form and
substance satisfactory to Lender that the Debt Service Coverage Ratio (computed
based on the remaining principal amount of the Note and the Net Operating Income
of the remaining Properties) immediately following the release of the Property
is at least equal to the greater of (A) the Initial DSCR and (B) the Debt
Service Coverage Ratio immediately prior to the release of the Property,
accompanied by an Officer's Certificate stating that the statements,
calculations and information comprising such evidence are true and correct and
complete in all respects;
(iii) There shall exist no Default or Event of Default; and
(iv) PR Finance shall have resigned as general partner or member, as
applicable, of the Borrower whose Property is being released.
(c) In connection with the release of the Lien of a Mortgage, Borrowers
shall submit to Lender, not less than twenty (20) days prior to the Defeasance
Date, a release of Lien (and related Loan Documents) for the applicable Property
(for execution by Lender) in a form appropriate in the state in which such
Property is located satisfactory to Lender in its sole discretion and all other
documentation Lender requires to be delivered by Borrowers in connection with
such release, together with an Officer's Certificate certifying that such
documentation (i) is in compliance with all Legal Requirements, and (ii) will
effect such release in accordance with the terms of this Agreement; and
(d) Simultaneously with the release of a Property from the lien of a
Mortgage pursuant to this Section, Lender shall release that portion of all cash
or other accounts maintained pursuant to this Agreement relating to such
Property.
II.4.2 Release on Payment in Full. Lender shall, upon the written request
and at the expense of Borrowers, upon payment in full of all principal and
interest on the Loan and all other amounts due and payable under the Loan
Documents in accordance with the terms thereof, release the Properties from the
Liens of the Mortgages and the other Loan Documents if not theretofore released.
II.4.3 Out-Parcel Severance. (a) A Borrower shall be permitted to transfer,
and Lender shall release from the lien of the applicable Mortgage and the other
Loan Documents, any unimproved out-parcel or unimproved expansion parcel
comprising a portion of a Property (either of which is hereinafter referred to
as the "Out-Parcel"), upon not less than thirty (30) nor more than ninety (90)
days' prior written notice to Lender, upon satisfaction of all of the following
terms and conditions:
(i) No Default shall have occurred and be continuing and all amounts which
are then required to be deposited into the sub-accounts of the Cash Collateral
Account pursuant to the Cash Collateral Account Agreement shall have been so
deposited.
<PAGE>
(ii) The Out-Parcel shall be designated by a metes and bounds description
and a survey reasonably satisfactory to Lender.
(iii) The following conditions shall have been satisfied, and Lender shall
in addition have received an Officer's Certificate, not less than fifteen (15)
Business Days prior to the proposed transfer or release of the Out-Parcel,
stating that:
(A) the use to which the Out-Parcel will be put shall be consistent with
the use to which out-parcels and expansion parcels are generally put in other
first class retail shopping centers;
(B) the portion of the Property remaining subject to the lien of the
Mortgage encumbering the Out-Parcel after release of the Out-Parcel (the
"Remaining Realty") will remain in full compliance with all Legal Requirements
and with the terms of all Leases and Property Agreements affecting the Remaining
Realty;
(C) the proposed use of the Out-Parcel will not violate the provisions of
any Lease or Property Agreement affecting the Remaining Realty. To the extent
reasonably required, the permitted uses of the Out-Parcel will be restricted of
record, as reasonably agreed to by Lender, to insure that use of the Out-Parcel
will not violate the provisions of the Loan Documents or any Leases or Property
Agreements;
(D) Borrowers shall have caused the Out-Parcel to be a separate parcel of
land for all subdivision, zoning, and taxing purposes;
(E) title to the Out-Parcel shall have been or shall simultaneously be
conveyed to a Person other than a Borrower;
(F) the disposition of the Out-Parcel shall not have a Material Adverse
Effect on the Net Operating Income for the Property of which it was a part;
(G) the occupancy rate of the Remaining Realty shall be greater than 80%;
(H) the Debt Service Coverage Ratio (computed based on the Net Operating
Income of the Remaining Realty and the Allocated Loan Amount for the applicable
Property) shall not be less than the Initial DSCR; and
(I) no tenant under any Lease has executed, or is negotiating in
contemplation of executing, a lease or other occupancy agreement with respect to
a portion of such Out-Parcel unless a replacement tenant or tenants acceptable
to Lender have executed a lease for the space to be vacated, and Lender receives
satisfactory evidence thereof;
provided, however, that if the conditions set forth in clauses (G) or (H) are
not satisfied, provided that all of the other conditions required for the
release of an Out-Parcel shall have been satisfied, an Out-Parcel may be
released from the lien of the applicable Mortgage if it is sold to a bona-fide
third Person and all sums received in consideration of such sale are applied to
partially defease the Debt in accordance with the provisions of Section 2.3.3
hereof.
(iv) To the extent reasonably required, an appropriate Property Agreement
shall be executed and recorded (and a copy delivered to Lender) to govern the
integrated use and operation, if applicable, of the Remaining Realty and the
Out-Parcel.
(v) Lender shall receive, at Borrower's sole cost, an endorsement to
Lender's title insurance policy to the effect that the release of the Out-Parcel
will not have an adverse affect on the priority of the lien of the applicable
Mortgage with respect to the Remaining Realty encumbered by such Mortgage.
(vi) Borrowers shall, at their sole cost and expense, prepare any and all
documents and instruments necessary to effect the release of the Out-Parcel, all
of which shall be subject to the reasonable approval of Lender, and Borrowers
shall pay all costs reasonably incurred by Lender (including, but not limited
to, reasonable attorneys' fees and disbursements, title search costs and
endorsement premiums) in connection with the review, execution and delivery of
such release and any other documents, including Project Agreements, required in
connection with the release of the Out-Parcel.
(vii) All agreements and instruments to be delivered to Lender pursuant to
this Section 2.4.3 shall be in form and substance reasonably satisfactory to
Lender and its counsel, and included with the Officer's Certificate required to
be delivered pursuant to clause (iii) of this Section 2.4.3 shall be evidence in
form and substance satisfactory to Lender supporting the statements,
calculations and information required pursuant to clauses (iii)(F), (G) and (H)
of this Section 2.4.3.
(b) No Release Price or other consideration shall be payable by Borrowers
to Lender in connection with a release of an Out-Parcel made in accordance with
the provisions of this Section 2.4.3.
II.4.4 Replacement Properties. At any time prior to the Optional Prepayment
Date, Borrowers shall have the right to obtain the release of a Property from
the lien of the Mortgage encumbering such Property, provided that simultaneously
with such release, Borrowers shall execute and deliver to Lender, as security
for the Debt, a mortgage, deed of trust or deed to secure debt, as applicable (a
"Replacement Mortgage"), encumbering a factory outlet center or other retail
property acceptable to Lender (a "Replacement Premises"), in substantially the
same form as the Mortgage to be released and such other documents (together with
the Replacement Mortgage, the "Replacement Documents") as Lender may in its sole
discretion require in order to grant Lender a first priority, perfected lien on
and security interest in such Replacement Premises and all related rents,
personal property, reserves and escrows on the same terms and conditions as the
liens and security interests granted to Lender in such Property on the Closing
Date. Borrowers' right to obtain a release of a Property shall also be subject
to the following conditions and restrictions:
(a) No Default or Event of Default shall have occurred and be continuing;
(b) Borrowers shall not be entitled to replace more than two (2) individual
Properties in any calendar year;
(c) at least sixty (60) days prior to the proposed date of such release,
Borrowers shall have delivered to Lender appraisals, prepared by Cushman &
<PAGE>
Wakefield, Inc., or such other third-party real estate professional as is
approved by the Rating Agencies, indicating that the fair market value for the
proposed Replacement Premises is at least equal to the fair market value of the
Property proposed to be released, as of the date of such proposed release;
(d) Borrowers shall have delivered a Phase I environmental report and, if
recommended by such Phase I report, a Phase II environmental report prepared by
Environmental Management Group, Inc., IVI Environmental, Inc., or such other
environmental consultant as is approved by the Rating Agencies, stating that the
Replacement Premises comply with all applicable environmental laws, or if
remedial steps are required to effect such compliance, identifying such steps
and projecting the cost thereof, in which case Lender shall have the option to
not accept such Replacement Premises and release the applicable Property and, if
Lender agrees to accept the Replacement Premises, Borrowers shall be required to
deposit with Lender an amount equal to one hundred fifty percent (150%) of such
projected costs (the "Engineering Escrow Fund");
(e) Borrowers shall have delivered an engineering report, prepared by
Merrit & Harris, Inc., or such other consulting engineer as is approved by the
Rating Agencies, stating that the Replacement Premises comply with all
applicable building laws and do not require performance of deferred maintenance
or if remedial steps are required to effect such compliance or such deferred
maintenance, identifying such steps and projecting the cost thereof, in which
case Borrowers shall be required to deposit into the Engineering Escrow Fund an
amount equal to one hundred fifty percent (150%) of such projected costs;
(f) Borrowers shall have caused to be delivered all leases, title
commitments, title insurance policies, surveys, hazard and liability insurance,
evidence of compliance with zoning and other laws, legal opinions and other
items of due diligence with respect to Replacement Premises as the Rating
Agencies may require, all of which shall be in form and substance acceptable to
the Rating Agencies;
(g) the Net Operating Income of the Replacement Premises (determined as if
the Replacement Premises was a Property as of the date of determination) as of
the time of such release shall be at least equal to the Net Operating Income of
the Property to be released;
(h) the Person transferring the Replacement Premises to a Borrower shall be
solvent and shall be making such transfer on an arm's length basis and for fair
consideration, and such Borrower and such Person shall deliver certifications
and evidence to such effect and such other certifications as Lender shall
reasonably require to assure itself that the substitution does not constitute a
fraudulent conveyance on the part of any Person (assuming such Person was not
solvent at the time of substitution);
(i) Borrowers shall comply with such other terms and conditions as the
Rating Agencies shall require in connection with such substitution;
(j) each Rating Agency shall have delivered written confirmation that any
rating issued by such Rating Agency in connection with the Securitization will
not, as a result of the proposed release and substitution of the Replacement
Premises, be downgraded from the then current ratings thereof, qualified or
withdrawn;
<PAGE>
(k) the organizational documents of the applicable Borrower shall, if
required, be modified to permit the ownership and operation of the Replacement
Premises and shall be in form and substance reasonably acceptable to Lender; and
(l) The applicable Borrower shall transfer title to the Property to be
released to a Person other than such Borrower or any other Borrower.
If either or both of the conditions described in clauses (c) or (g) above
are not satisfied, Lender shall have the authority to waive either or both of
such conditions in its sole and absolute discretion.
II.4.5 Additional Properties. Borrowers shall have the right to add to the
Properties any real property which a Borrower acquires subsequent to the Closing
Date provided such real property is immediately adjacent to a Property and is
operated or is to be operated as a factory outlet center or for parking or other
uses complementary to a factory outlet center ("Additional Premises") by
executing an agreement of spreader and modification of mortgage, deed of trust
or deed to secure debt, as applicable (a "Spreader Agreement"), to spread the
lien of the applicable Mortgage to include such Additional Premises and such
other documents (together with the Spreader Agreement, the "Spreader
Documents"), as Lender may in its reasonable discretion require in order to
grant Lender a first priority, perfected lien on and security interest in such
Additional Premises and all related rents, personal property, reserves and
escrows on the same terms and conditions as the liens and security interests
granted to Lender in the Property on the Closing Date. Borrowers' right to add
an Additional Premises to the Properties shall also be subject to the following
conditions and restrictions:
(a) No Default or Event of Default shall have occurred and be continuing;
(b) Borrowers shall have delivered Phase I environmental report and, if
recommended by such Phase I report, a Phase II environmental report prepared by
Environmental Management Group, Inc., IVI Environmental, Inc., or such other
environmental consultant as is approved by the Rating Agencies, stating that the
Additional Premises comply with all applicable environmental laws, or if
remedial steps are required to effect such compliance, identifying such steps
and projecting the cost thereof, in which case Lender shall have the option to
not permit the acquisition of the Additional Premises and, if Lender does permit
the same, Borrowers shall be required to deposit into the Engineering Escrow
Fund an amount equal to one hundred fifty percent (150%) of such projected
costs;
(c) Borrowers shall have delivered an engineering report and prepared by
Merrit & Harris, Inc., or such other consulting engineer as is approved by the
Rating Agencies, stating that the Additional Premises comply with all applicable
building laws and do not require performance of deferred maintenance or if
remedial steps are required to effect such compliance or such deferred
maintenance, identifying such steps and projecting the cost thereof, in which
case Borrowers shall be required to deposit into the Engineering Escrow Fund an
amount equal to one hundred fifty percent (150%) of such projected costs;
(d) Borrowers shall have caused to be delivered all leases, title
commitments, title insurance policies, surveys, hazard and liability insurance,
evidence of compliance with zoning and other laws, legal opinions, and other
items of due diligence with respect to Additional Premises as the Rating
Agencies may require, all of which shall be in form and substance acceptable to
the Rating Agencies;
<PAGE>
(e) Borrowers shall comply with such other terms and conditions as the
Rating Agencies shall require in connection with such addition;
(f) each Rating Agency shall have delivered written confirmation that any
rating issued by such Rating Agency in connection with the Securitization will
not, as a result of the proposed addition of the Additional Premises, be
downgraded from the then current ratings thereof, qualified or withdrawn; and
(g) the organizational documents of the applicable Borrower shall, if
required, be modified to permit the ownership and operation of the Additional
Premises and shall be in form and substance reasonably acceptable to Lender;
provided, however that prior to the date of Securitization the provisions in
clauses (b), (c) and (d) of this Section 2.4.5 which relate to the Rating
Agencies' discretion shall be deemed to be the Lender's reasonable discretion.
Section II.5 Payments and Computations
II.5.1 Making of Payments. Each payment by Borrowers hereunder or under the
Note shall be made in funds settled through the New York Clearing House
Interbank Payments System or other funds immediately available to Lender by 2:00
p.m., New York City time, on the date such payment is due, to Lender by deposit
to such account as Lender may designate by written notice to Borrowers. Whenever
any payment hereunder or under the Note shall be stated to be due on a day which
is not a Business Day, such payment shall be made on the first Business Day
thereafter.
II.5.2 Computations. Interest payable hereunder or under the Note by
Borrowers shall be computed on the basis of the actual number of days elapsed in
the related interest accrual period and a 360-day year.
II.5.3 Late Payment Charge. If any principal, interest or any other sums
due under the Loan Documents is not paid by Borrowers within five (5) days after
the date on which it is due and payable, Borrowers shall pay to Lender upon
demand an amount equal to the lesser of five percent (5%) of such unpaid sum or
the maximum amount permitted by applicable law in order to defray the expense
incurred by Lender in handling and processing such delinquent payment and to
compensate Lender for the loss of the use of such delinquent payment. Any such
amount shall be secured by the Mortgages and the other Loan Documents.
Section II.6 Cash Management Arrangements
(a) All Rents will be transmitted directly into an account or accounts (the
"Collection Account") maintained by Borrowers but controlled by Lender at
Mercantile Safe Deposit and Trust Company or at such other bank or banks
selected by Borrowers (the "Collection Account Bank"). Borrower will establish a
separate "A" Account (the "A" Account) and "B" Account (the "B" Account) with
the Collection Account Bank. Borrowers shall cause all Rents to be sent directly
to the Collection Account Bank by tenants (where practicable) for deposit into
the "A" Account. All other income or revenue received by Borrowers or Manager in
connection with the Properties will be deposited into the "A" Account within one
Business Day after the date of receipt. Until the occurrence of a Cash Trap
Event, the Collection Account Bank shall transfer property receipts that are
cleared on a daily basis from the "A" Account to the "B" Account, which shall be
an account not subject to any restrictions and under the sole control of
Borrower. Following and during the continuance of a Cash Trap Event, the
Collection Account Bank will transfer property receipts that are cleared on a
daily basis to the Cash Collateral Account Bank for deposit into the Cash
Collateral Account. The duties of the Collection Account Bank and the
application and disbursement of all funds deposited with the Collection Account
<PAGE>
Bank shall be governed by the terms of this Agreement and the Collection Account
Agreement. Any amounts so deposited into the Cash Collateral Account shall be
applied and disbursed in accordance with the terms and provisions of this
Agreement and the Cash Collateral Account Agreement.
(b) Lender shall have a senior security interest in the aforementioned
accounts and all subaccounts established thereunder. The upfront and ongoing
expenses of maintaining such accounts and subaccounts, and any other accounts
and reserves maintained pursuant to the Loan Documents, shall be the
responsibility of Borrowers. Funds in each account shall be invested for the
benefit of Borrowers in Permitted Investments (as defined in the Cash Collateral
Account Agreement).
(c) Anything hereinabove in this Section to the contrary notwithstanding,
from and after the acceleration of the Loan, 100% of all Rents and other sums
deposited into the Collection Account in any month which remain in the
Collection Account or the Cash Collateral Account shall be applied to the
payment of Debt Service on the Loan (including, if applicable, interest at the
Default Rate), required reserves and Approved Operating Expenses and/or to the
payment of the principal amount of the Note, in such order as Lender shall
determine in its sole discretion.
Section II.7 Buy-Up of Interest Rate
(a) Borrowers acknowledge that at Closing Lender shall pay to Borrowers
$16,158,833.00 (the "Premium Amount") in consideration for Borrowers' agreement
to pay during the period commencing on the Closing Date and terminating on the
Optional Prepayment Date the Interest Rate on the Loan which is in excess of
that which was initially contemplated to have been paid by Borrowers during such
period. Borrowers and Lender both intend that Lender recover the Premium Amount
through Borrowers' payment of the increased interest payments on the Loan at the
Interest Rate through the Optional Prepayment Date. In order to assure Lender
that Lender does in fact recover the Premium Amount in the event the Loan is for
any reason repaid prior to the Optional Prepayment Date, Borrowers hereby agree
to pay Lender the Return-of-Premium Amounts described in Section 2.7(b) in the
amounts and under the prepayment circumstances described therein. Accordingly,
in consideration of Lender's payment of the Premium Amount to Borrowers,
Borrowers hereby unconditionally and irrevocably waive any and all rights of any
kind or nature whatsoever that Borrowers may have to contest the validity and/or
enforceability of any payment of any Return-of-Premium Amount or Yield
Maintenance Premium.
(b) As used herein, the following terms shall have the following meanings:
(i) The term "Amortized Amount" means, with respect to any time subsequent
to the Closing Date, an amount determined by Lender in its reasonable discretion
equal to the amount the Principal Indebtedness would have been at such time if
(i) the amount of the Loan on the Closing Date had been One Hundred Eighty
Million Dollars ($180,000,000.00) ("Loan Amount"), (ii) the Interest Rate had
been 6.99% ("Loan Rate"), (iii) the amortization schedule had been based on
315.5 months, (iv) the amortization schedule referred to in clause (iii) had
been calculated based on interest payable on a 360 day basis, and (v) all
payments that had been made on the Loan between the Closing Date and the date of
determination of the Amortized Amount had instead been made on a loan with
parameters set forth in clauses (i) through (iv) above.
(ii) The term "Casualty Prepayment Amount" means, with respect to any
Insurance Proceeds received after the Closing Date which the Lender has elected
to apply to the obligations under the Note in accordance with the provisions of
<PAGE>
Article VII hereof, a portion of such Insurance Proceeds determined by Lender in
its reasonable discretion (at the time immediately prior to the payment of such
amount to Lender) equal to (i) if the amount of the Insurance Proceeds is less
than the Amortized Amount at such time, the product obtained by multiplying
(a) the amount of such Insurance Proceeds by (b) the quotient obtained by
dividing (1) the Principal Indebtedness at such time by (2) the Amortized Amount
at such time or (ii) if the amount of the Insurance Proceeds is greater than or
equal to the Amortized Amount at such time, the outstanding Principal
Indebtedness at such time; provided, however, that after the Optional Prepayment
Date, the Casualty Prepayment Amount shall equal the amount of the Insurance
Proceeds but shall not exceed the amount of the Principal Indebtedness.
(iii) The term "Casualty Return-of-Premium Amount" means, with respect to
any Insurance Proceeds received after the Closing Date which the Lender has
elected to apply to the obligations under the Note in accordance with
Article VII hereof, a portion of such Insurance Proceeds determined by Lender in
its reasonable discretion (at the time immediately prior to the payment of such
amount to Lender) equal to (i) if the amount of the Insurance Proceeds is less
than the Amortized Amount at such time, the excess of the amount of the
Insurance Proceeds over the Casualty Prepayment Amount at such time or (ii) if
the amount of the Insurance Proceeds is greater than or equal to the Amortized
Amount at such time, the excess of the Amortized Amount at such time over the
outstanding Principal Indebtedness at such time; provided, however, that after
the Optional Prepayment Date, the Casualty Return-of-Premium Amount shall be
zero.
(iv) The term "Condemnation Prepayment Amount" means, with respect to any
Condemnation Proceeds received after the Closing Date which the Lender has
elected to apply to the obligations under the Note in accordance with
Article VII hereof, a portion of such Condemnation Proceeds determined by Lender
in its reasonable discretion (at the time immediately prior to the payment of
such amount to Lender) equal to (i) if the amount of the Condemnation Proceeds
is less than the Amortized Amount at such time, the product obtained by
multiplying (a) the amount of such Condemnation Proceeds by (b) the quotient
obtained by dividing (1) the outstanding Principal Indebtedness at such time by
(2) the Amortized Amount at such time or (ii) if the amount of the Condemnation
Proceeds is greater than or equal to the Amortized Amount at such time, the
outstanding Principal Indebtedness at such time; provided, however, that after
the Optional Prepayment Date, the Condemnation Prepayment Amount, shall equal
the amount of the Condemnation Proceeds but shall not exceed the amount of the
Principal Indebtedness.
(v) The term "Condemnation Return-of-Premium Amount" means, with respect to
any Condemnation Proceeds received after the Closing Date which the Lender has
elected to apply to the obligations under the Note in accordance with
Article VII hereof, a portion of such Condemnation Proceeds determined by Lender
in its reasonable discretion (at the time immediately prior to the payment of
such amount to Lender) equal to (i) if the amount of the Condemnation Proceeds
is less than or equal to the Amortized Amount at such time, the excess of the
amount of the Condemnation Proceeds over the Condemnation Prepayment Amount at
such time or (ii) if the amount of the Condemnation Proceeds is greater than the
Amortized Amount at such time, the excess of the Amortized Amount at such time
over the outstanding Principal Indebtedness at such time; provided, however,
that after the Optional Prepayment Date, the Condemnation Return-of-Premium
Amount shall equal zero.
(vi) The term "Early Prepayment Return-of-Premium Amount" means, with
respect to any prepayment of the Loan other than in connection with a Casualty,
Condemnation, or Event of Default, an amount determined by Lender in its
reasonable discretion which is equal to the excess of (i) the Amortized Amount
immediately prior to a prepayment made after the Closing Date over (ii) the
outstanding Principal Indebtedness immediately prior to such prepayment.
<PAGE>
(vii) The term "Event of Default Return-of-Premium Amount" means, with
respect to any time after the Closing Date that an Event of Default has occurred
and a repayment of the Loan is made as a consequence thereof, an amount (which
is intended to be a repayment by Borrowers to Lender on account of the Premium
Amount Lender actually paid to Borrowers as set forth in this Section 2.7) equal
to the excess of (i) the Amortized Amount at such time over (ii) the outstanding
Principal Indebtedness at such time.
(viii) The term "Principal Indebtedness" means the outstanding principal
balance under the Note as of any date of determination of any principal then
outstanding under the Note.
(ix) The term "Return-of-Premium Amount" means any applicable Early
Prepayment Return-of-Premium Amount, Event of Default Return-of-Premium Amount,
Casualty Return-of-Premium Amount or Condemnation Return-of-Premium Amount.
Notwithstanding anything in this Loan Agreement or any other Loan Document
to the contrary, Borrowers and Lender agree that no payment of any Yield
Maintenance Premium or applicable Return-of-Premium Amount required to be paid
by Borrowers pursuant to this Loan Agreement or any other Loan Document shall
constitute or be deemed to constitute a penalty of any kind or nature
whatsoever.
Section II.8 Fees. Borrowers shall pay to Lender, on the Closing Date, a
structuring fee equal to .125% of the amount funded hereunder (including
principal and Premium Amount).
III. CONDITIONS PRECEDENT
Section III.1 Conditions Precedent to the Loan. The obligation of Lender to
make the Loan hereunder is subject to the fulfillment by Borrowers or waiver by
Lender of the following conditions precedent no later than the Closing Date:
(a) Representations and Warranties: Compliance with Conditions. The
representations and warranties of Borrowers contained in this Agreement and the
other Loan Documents shall be true and correct in all material respects on and
as of the Closing Date with the same effect as if made on and as of such date,
and no Default or Event of Default shall have occurred and be continuing; and
Borrowers shall be in compliance in all material respects with all terms and
conditions set forth in this Agreement and in each other Loan Document on its
part to be observed or performed.
(b) Loan Agreement and Note. Lender shall have received a copy of this
Agreement and the Note, in each case, duly executed and delivered on behalf of
Borrowers.
(c) Delivery of Loan Documents: Title Insurance: Reports: Leases.
(i) Mortgage, Assignments of Agreements. Lender shall have received from
Borrowers fully executed and acknowledged counterparts of the Mortgage,
Assignment of Leases, the Assignment of Agreements and the Consent and
Subordination of Manager relating to each Property and evidence that
counterparts of the Mortgages have been delivered to the title company for
recording, in the reasonable judgment of Lender, so as to effectively create
upon such recording valid and enforceable Liens upon the Properties, of the
requisite priority, in favor of Lender (or such other trustee as may be required
or desired under local law), subject only to the Permitted Encumbrances and such
other Liens as are permitted pursuant to the Loan Documents. Lender shall have
also received from Borrowers fully executed counterparts of the Environmental
Indemnity and each Consent and Subordination of Manager.
<PAGE>
(ii) Title Insurance. Lender shall have received a Title Insurance Policy
for each Property acceptable to Lender and evidence that the premium in respect
of such Title Insurance Policy has been paid.
(iii) Survey. Lender shall have received a Survey for each Property.
(iv) Insurance. Lender shall have received valid certificates of insurance
for the policies of insurance required hereunder, satisfactory to Lender in its
reasonable discretion, and evidence of the payment of all premiums payable for
the existing policy period which period shall not be less than one year in
advance.
(v) Environmental Reports. Lender shall have received an environmental
report in respect of each Property satisfactory to Lender.
(vi) Zoning. With respect to each Property, Lender shall have received, at
Lender's option, (i) letters or other evidence with respect to such Property
from the appropriate municipal authorities (or other Persons) concerning
applicable zoning and building laws, in each case reasonably satisfactory to
Lender (ii) an ALTA 3.1 zoning endorsement for the Title Insurance Policy, or
(iii) a zoning opinion letter, in substance reasonably satisfactory to Lender.
(vii) Encumbrances. Borrowers shall have taken or caused to be taken such
actions so that Lender has a valid and perfected Lien of the requisite priority
as of the Closing Date with respect to the Mortgage on each Property, subject
only to applicable Permitted Encumbrances and such other Liens as are permitted
pursuant to the Loan Documents, and Lender shall have received satisfactory
evidence thereof.
(d) Related Documents. Each additional document not specifically referenced
herein, but relating to the transactions contemplated herein, shall have been
duly authorized, executed and delivered by all parties thereto and Lender shall
have received and approved certified copies thereof.
(e) Delivery of Organizational Documents. On or before the Closing Date,
Borrowers shall deliver or cause to be delivered to Lender (i) copies certified
by each Borrower of all organizational documentation related to such Borrower
and/or the formation, structure, existence, good standing and/or qualification
to do business of such Borrower, as Lender may request in its reasonable
discretion, including good standing certificates, qualifications to do business
in the appropriate jurisdictions, resolutions authorizing the entering into of
the Loan and incumbency certificates as may be requested by Lender.
(f) Opinions of Borrower's Counsel. Lender shall have received opinions of
Borrowers' counsel (i) with respect to non-consolidation, true sale or true
contribution, and fraudulent transfer issues, and (ii) with respect to due
execution, authority, enforceability of the Loan Documents and such other
matters as Lender may require, all such opinions in form, scope and substance
satisfactory to Lender and Lender's counsel in their reasonable discretion.
(g) Basic Carrying Costs. Borrowers shall have paid or deposited into an
applicable reserve fund all (i) the amount described in clause (b) of
Section 7.3.1 and (ii) currently due Other Charges (other than ground lease
rents), which amounts shall be funded with proceeds of the Loan.
<PAGE>
(h) Completion of Proceedings. All corporate and other proceedings taken or
to be taken in connection with the transactions contemplated by this Agreement
and other Loan Documents and all documents incidental thereto shall be
reasonably satisfactory in form and substance to Lender, and Lender shall have
received all such counterpart originals or certified copies of such documents as
Lender may reasonably request.
(i) Financial Statements. Borrowers shall have provided financial
statements for each Property acceptable to Lender.
(j) Leases, Rent Roll and Estoppel Certificates. Borrowers shall have
provided Lender with certified copies of each of the Leases in effect as of the
date hereof and requested by Lender, a current rent roll for each Property, and
tenant estoppel certificates and subordination, non-disturbance and attornment
agreements reasonably satisfactory to Lender.
(k) REA Estoppels. Borrowers shall have provided Lender with copies of all
reciprocal easement and operating agreements affecting any of the Properties,
together with original executed estoppel certificates in form and substance
satisfactory to Lender from each of the parties (other than a Borrower) to such
agreements as is required by Lender.
(l) Debt Service Coverage Ratio. The Debt Service Coverage Ratio shall be
at least equal to the Initial DSCR.
(m) Loan to Value Ratio; Appraisals. Lender shall have received an
appraisal ("Appraisal") for each Property satisfactory to Lender indicating that
(i) the sum of (A) the Allocated Loan Amount and (B) the Allocated Premium
Amount for such Property is not more than seventy-five percent (75%) of the fair
market value of such Property as of the date hereof and (ii) the sum of (A) the
original principal balance of the Loan and (B) the Premium Amount is not more
than seventy-five percent (75%) of the fair market value of all of the
Properties as of the date hereof.
(n) Engineering Reports. Lender shall have received a structural
engineering report for each Property from Merrit & Harris, acceptable to Lender,
identifying, among other things, (i) deferred maintenance for such Property and
the cost thereof and (ii) a ten (10) year schedule of anticipated capital
expenditures and the per annum cost thereof.
(o) Declarations of Covenants. Borrowers shall have delivered to Lender
recorded declarations of covenants and cross-easements in form and substance
reasonably satisfactory to Lender covering any parcels adjoining any of the
Properties owned by Borrowers or their Affiliates which contain or are expected
to contain additional phases of the shopping centers on the Properties and are
to be operated in an integrated manner.
(p) Utility Service and Tax Assessment. Borrowers shall have delivered
evidence that all utility services required for the Properties are available and
that each Property is subject to separate tax assessment.
(q) Absence of Adverse Changes. Lender shall have determined that there
have been no material developments prior to the Closing Date which could, in
Lender's sole judgment, adversely affect the ownership or operation of any
Property or the ability of Borrowers to repay the Loan or the ability of any
Borrower to perform any of its covenants and agreements set forth in this
Agreement and the other Loan Documents.
<PAGE>
V. REPRESENTATIONS AND WARRANTIES
Section IV.1 Borrower Representations. Each Borrower represents and
warrants as of the date hereof and as of the Closing Date that, except as
disclosed in Schedule 1:
(a) Organization. Each Borrower and each General Partner has been duly
organized and is validly existing and in good standing with requisite power and
authority to own its properties and to transact the businesses in which it is
now engaged. Each Borrower and each General Partner is duly qualified to do
business and is in good standing in each jurisdiction where it is required to be
so qualified in connection with its properties, businesses and operations. Each
Borrower and each General Partner possesses all rights, licenses, permits and
authorizations, governmental or otherwise, necessary to entitle it to own its
properties and to transact the businesses in which it is now engaged, and the
sole business of each Borrower is the ownership, management and operation of the
Property owned by it.
(b) Proceedings. Each Borrower and each General Partner has taken all
necessary action to authorize the execution, delivery and performance of this
Agreement and the other Loan Documents to which it is a party. This Agreement
and such other Loan Documents have been duly executed and delivered by or on
behalf of each Borrower which is a party thereto and constitute legal, valid and
binding obligations of each such Borrower enforceable against such Borrower in
accordance with their respective terms, subject to applicable bankruptcy,
insolvency and similar laws affecting rights of creditors generally, and
subject, as to enforceability, to general principles of equity (regardless of
whether enforcement is sought in a proceeding in equity or at law).
(c) No Conflicts. The execution, delivery and performance by Borrower of
this Agreement and the other Loan Documents to which Borrowers or any of them
are a party will not conflict with or result in a breach of any of the terms or
provisions of, or constitute a default under, or result in the creation or
imposition of any lien, charge or encumbrance (other than pursuant to the Loan
Documents) upon any of the property or assets of any Borrower pursuant to the
terms of any indenture, mortgage, deed of trust, loan agreement, partnership
agreement or other agreement or instrument to which any Borrower or General
Partner is a party or by which any Borrower's property or assets is subject, nor
will such action result in any violation of the provisions of any statute or any
order, rule or regulation of any court or governmental agency or body having
jurisdiction over any Borrower or any of its properties or assets, and any
consent, approval, authorization, order, registration or qualification of or
with any court or any such regulatory authority or other governmental agency or
body required for the execution, delivery and performance by any Borrower of
this Agreement or any other Loan Documents has been obtained and is in full
force and effect.
(d) Litigation. There are no actions, suits or proceedings at law or in
equity by or before any Governmental Authority or other agency now pending or
threatened against or affecting any Borrower or any of the Properties, which
actions, suits or proceedings, if determined against such Borrower or Property,
either individually or collectively has or is reasonably likely to have a
Material Adverse Effect.
(e) Property Agreements.
(i) Borrowers have delivered to Lender true, correct and complete copies of
all material Property Agreements.
<PAGE>
(ii) No Property Agreement provides any party with the right to obtain a
lien or encumbrance upon any Property superior to the lien of the Mortgage
encumbering such Property.
(iii) No Borrower nor any other party to any Property Agreement affecting a
Property (iii) No Borrower nor any other party to any Property Agreement
affecting a Property is in default of its monetary or other material obligations
thereunder beyond any notice and applicable grace period and no event has
occurred which, with the giving of notice or the passage of time, or both, would
constitute such a monetary default or, to the knowledge of Borrower, any such
other default, in each case which would have a Material Adverse Effect.
(iv) Borrowers have not received or given any written communication which
alleges that a material default exists or, with the giving of notice or the
lapse of time, or both, would exist under the provisions of any Property
Agreement except for such defaults which have been cured.
(v) No condition exists whereby a Borrower or any future owner of a
Property may be required to purchase any other parcel of land which is subject
to any Property Agreement or which gives any Person a right to purchase, or
right of first refusal with respect to, such Property.
(vi) To the best knowledge of Borrowers, no offset or any right of offset
exists respecting continued contributions to be made by any party to any
Property Agreement except as expressly set forth therein. Except as previously
disclosed to Lender in writing, no material exclusions or restrictions on the
utilization, leasing or improvement of any Property (including non-compete
agreements) exists in any Property Agreement.
(vii) Except as previously disclosed to Lender in writing, all
"pre-opening" requirements contained in all Property Agreements (including, but
not limited to, all off-site and on-site construction requirements), if any,
have been fulfilled and, to the best of Borrowers' knowledge, no condition now
exists whereby any party to any such Property Agreement could refuse to honor
its obligations thereunder if such refusal is reasonably likely to have a
Material Adverse Effect.
(viii) Except as previously disclosed to Lender in writing, all work, if
any, to be performed by a Borrower under each of the Property Agreements has
been substantially performed, all contributions to be made by a Borrower to any
party to such Property Agreements have been made, and all other conditions to
such party's obligations thereunder have been satisfied if the failure to so
perform, contribute or satisfy is reasonably likely to have a Material Adverse
Effect.
(f) Title. Each Borrower has good insurable and marketable fee simple or
leasehold title (as shown on Schedule 7) to the real property comprising part of
the Property owned or leased by it, and good title to the balance of such
Property, free and clear of all Liens whatsoever except the Permitted
Encumbrances, such other Liens as are permitted pursuant to the Loan Documents
and the Liens created by the Loan Documents. Each Mortgage when properly
recorded in the appropriate records, together with any Uniform Commercial Code
financing statements required to be filed in connection therewith, will create
(i) a valid, perfected first priority lien on the Property it purports to
encumber, subject only to Permitted Encumbrances and the Liens created by the
Loan Documents and (ii) perfected security interests in and to, and perfected
collateral assignments of, all personalty (including the Leases), all in
accordance with the terms thereof, in each case subject only to any applicable
Permitted Encumbrances, such other Liens as are permitted pursuant to the Loan
<PAGE>
Documents and the Liens created or permitted by the Loan Documents. The
Permitted Encumbrances do not materially adversely affect the value or use of
any Property, or any Borrowers' ability to repay the Loan. Except for Permitted
Encumbrances there are no claims for payment for work, labor or materials
affecting any Property which are or may become a lien prior to, or of equal
priority with, the Liens created by the Loan Documents.
(g) No Bankruptcy Filing. No Borrower or General Partner is contemplating
either the filing of a petition by it under any state or federal bankruptcy or
insolvency laws or the liquidation of all or a major portion of its assets or
property, and no Borrower or General Partner has knowledge of any Person
contemplating the filing of any such petition against it.
(h) Full and Accurate Disclosure. No statement of fact made by any Borrower
in this Agreement 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.
(i) No Plan Assets. No Borrower is an "employee benefit plan," as defined
in Section 3(3) of ERISA, subject to Title I of ERISA, and none of the assets of
any Borrower constitutes or will constitute "plan assets" of one or more such
plans within the meaning of 29 C.F.R. Section 2510.3-101.
(j) Compliance. To Borrowers' knowledge, each Borrower and each Property
and the use thereof comply in all material respects with all applicable Legal
Requirements, including building and zoning ordinances and codes and Property
Agreements. No Borrower is in default or violation of any order, writ,
injunction, decree or demand of any Governmental Authority, the violation of
which is reasonably likely to have a Material Adverse Effect. There has not been
committed by Borrowers, or to Borrowers' knowledge, any other person in
occupancy of or involved with the operation or use of the Properties any act or
omission affording the federal government or any state or local government the
right of forfeiture as against any Property or any part thereof or any monies
paid in performance of Borrowers' obligations under any of the Loan Documents.
Borrowers hereby covenant and agree not to commit, permit or suffer to exist any
act or omission affording such right of forfeiture.
(k) Contracts. To Borrowers' knowledge, there are no contracts affecting
any Property which provide for payments of more than $75,000.00 in any year and
which are not terminable on one month's notice or less without cause and without
penalty or premium. All material contracts affecting the Properties have been
entered into at arms-length in the ordinary course of Borrowers' business and
provide for the payment of fees in amounts and upon terms comparable to market
rates existing at the time of execution.
(l) Financial Information. All financial data, including the statements of
cash flow and income and operating expense, that have been delivered to Lender
by or on behalf of Borrowers in respect of the Properties (i) are true, complete
and correct in all material respects, (ii) accurately represent the financial
condition of each Property as of the date of such reports, and (iii) have been
prepared in accordance with GAAP (or such other accounting basis as is
reasonably acceptable to Lender) consistently applied throughout the periods
covered, except as disclosed therein or as otherwise disclosed in writing to
Lender prior to the date hereof. No Borrower has any contingent liabilities,
liabilities for taxes, unusual forward or long-term commitments or unrealized or
anticipated losses from any unfavorable commitments that are known to Borrowers
and reasonably likely to have a materially adverse effect on any Property or the
operation thereof, except as referred to or reflected in said financial
statements or as otherwise disclosed in writing to Lender prior to the date
hereof. Since the date of such financial statements, there has been no change in
the financial condition, operations or business of any Borrower from that set
<PAGE>
forth in said financial statements which is reasonably likely to have a Material
Adverse Effect.
(m) Condemnation. No Condemnation or other proceeding has been commenced
or, to Borrowers' best knowledge, is contemplated with respect to all or any
portion of any Property or for the relocation of roadways providing access to
any Property which is reasonably likely to have a Material Adverse Effect.
(n) Federal Reserve Regulations. No part of the proceeds of the Loan will
be used for the purpose of purchasing or acquiring any "margin stock" within the
meaning of Regulation U of the Board of Governors of the Federal Reserve System
or for any other purpose which would be inconsistent with such Regulation U or
any other Regulations of such Board of Governors, or for any purposes prohibited
by Legal Requirements or by the terms and conditions of this Agreement or the
other Loan Documents.
(o) Utilities and Public Access. Each Property has rights of access to
public ways and is served by water, sewer, sanitary sewer and storm drain
facilities adequate to service such Property for its intended uses. All public
utilities necessary or convenient to the full use and enjoyment of each Property
are located in the public right-of-way abutting such Property (unless through
permanent insurable easements benefitting such Property), and all such utilities
are connected so as to serve the Property without passing over other property
(unless through permanent insurable easements benefitting such Property). All
roads necessary for the use of each Property for its current purposes have been
completed and dedicated to public use and accepted by all Governmental
Authorities (unless such roads are on private, permanent insurable easements
benefitting such Property).
(p) Not a Foreign Person. No Borrower is a "foreign person" within the
meaning of Section 1445(f)(3) of the Code.
(q) Separate Lots. Each Property is comprised of one (1) or more parcels
which constitutes a separate tax lot and does not constitute a portion of any
other tax lot not a part of such Property.
(r) Assessments. Except as disclosed in the Title Policies, there are no
pending or, to the knowledge of Borrowers, proposed special or other assessments
for public improvements or otherwise affecting any Property, nor are there any
contemplated improvements to any Property that may result in such special or
other assessments.
(s) [Intentionally omitted.]
(t) No Prior Assignment. There are no prior assignments of the Leases or
any portion of the Rents due and payable or to become due and payable which are
presently outstanding.
(u) Insurance. Borrowers have obtained and have delivered to Lender
insurance policies reflecting the insurance coverages, amounts and other
requirements set forth in this Agreement.
(v) Use of Property. Each Property is used exclusively as a retail factory
outlet shopping center and other appurtenant and related uses.
(w) Certificate of Occupancy; Licenses. To Borrowers' knowledge, all
certifications, permits, licenses and approvals, including certificates of
completion and occupancy permits and any applicable liquor licenses required for
<PAGE>
the legal use, occupancy and operation of the Properties (collectively, the
"Licenses"), have been obtained and are in full force and effect. Borrowers
shall keep and maintain all licenses necessary for the operation of the
Properties. The use being made of each Property is in conformity with the
certificate of occupancy issued for such Property.
(x) Flood Zone. Except as otherwise disclosed on the Surveys, none of the
Improvements on the Properties is located in an area identified by the Federal
Emergency Management Agency as an area having special flood hazards or, if they
are, Borrowers have obtained the flood insurance required hereunder.
(y) Physical Condition. To Borrower's knowledge, except as disclosed in the
engineering reports delivered to Lender in connection with the underwriting of
the Loan, each Property, including all buildings, improvements, parking
facilities, sidewalks, storm drainage systems, roofs, plumbing systems, HVAC
systems, fire protection systems, electrical systems, equipment, elevators,
exterior sidings and doors, landscaping, irrigation systems and all structural
components, is in good condition, order and repair in all material respects;
there exist no structural or other material defects or damages in any Property,
whether latent or otherwise. Borrowers have not received notice from any
insurance company or bonding company of any defects or inadequacies in the
Properties, or any part thereof, which would adversely affect the insurability
of the same or cause the imposition of extraordinary premiums or charges thereon
or of any termination or threatened termination of any policy of insurance or
bond.
(z) Appraised Value. All of the improvements which were included in
determining the appraised value of each Property lie wholly within the
boundaries and building restriction lines of such Property. Except as disclosed
in the Survey for a Property, no improvements on adjoining properties encroach
upon such Property, and no easements or other encumbrances upon any Property
encroach upon any of the improvements, so as to materially affect the value or
marketability of such Property except those which are insured against by title
insurance.
(aa) Leases. Attached hereto as Schedule 2 is a rent roll (the "Rent Roll")
for the Properties. The Rent Roll is true, correct and complete with respect to
the subject matter thereof. The only Leases affecting the Properties are those
reflected in the Rent Roll. Except as set forth in Schedule 2: (i) each Lease is
in full force and effect; (ii) the tenants under the Leases have accepted
possession of and are in occupancy of all of their respective demised premises,
have commenced the payment of rent under such Leases; (iii) all rents due and
payable under the Leases have been paid and no portion thereof has been paid for
any period more than thirty (30) days in advance; (iv) the fixed rent payable
under each Lease is the amount of fixed rent set forth in the Rent Roll; (v)
there are no defaults on the part of the landlord under any Lease and no event
has occurred which, with the giving of notice or passage of time, or both, would
constitute such default; (vi) to Borrowers' best knowledge, there is no present
material default by any tenant under any Lease; and (vii) Borrowers do not hold
any security deposits under the Leases. Except as set forth in Schedule 2 or as
disclosed in tenant estoppel certificates delivered to Lender pursuant to
Section 3.1(j): (viii) there are no offsets, claims or defenses to the
enforcement of any Lease; (ix) there is no claim or basis for a claim by the
tenant under any Lease for an adjustment to the rent; and (x) no tenant has made
any claim against the landlord under the Leases which remains outstanding. None
of the Leases contains any option to purchase or right of first refusal to
purchase any Property or any part thereof which remains in effect as of the date
hereof. The Leases have not been assigned or pledged except to Lender, and no
other person whatsoever has any interest therein except the tenants thereunder.
(bb) Survey. The survey for each Property delivered to Lender in connection
with this Agreement does not fail to reflect any material matter affecting such
Property or the title thereto that would normally be set forth in such type of
survey.
<PAGE>
(cc) Filing and Recording Taxes. All transfer taxes, deed stamps,
intangible taxes or other amounts in the nature of transfer taxes required to be
paid by any Person under applicable Legal Requirements currently in effect in
connection with the transfer of the Properties to Borrowers have been paid. All
mortgage, mortgage recording, stamp, intangible or other similar tax required to
be paid by any Person under applicable Legal Requirements currently in effect in
connection with the execution, delivery, recordation, filing, registration,
perfection or enforcement of any of the Loan Documents, including the Mortgages,
have been paid and, under current Legal Requirements, each Mortgage is
enforceable against the Borrower party thereto in accordance with its respective
terms by Lender (or any subsequent holder thereof), except as such
enforceability may be limited by insolvency, bankruptcy, moratorium or other
laws affecting creditor's remedies in general and principles of equity.
(dd) Single-Purpose. Each Borrower hereby represents and warrants to, and
covenants with, Lender that, as of the date hereof and until such time as the
Debt shall be paid in full:
(i) Such Borrower does not and will not own any asset or property other
than (A) the Property owned by it, and (B) incidental personal property related
to or arising from the ownership or operation of such Property.
(ii) Such Borrower will not engage in any business other than the
ownership, development, management and operation of the Property owned by it and
will conduct and operate its business as presently conducted and operated.
(iii) Such Borrower will not enter into any contract or agreement with any
of its Affiliates or constituent parties, any guarantor of the Debt or any part
thereof or any Affiliate of any constituent party or Guarantor, except upon
terms and conditions that are no less favorable than those that would be
available on an arms-length basis with third parties other than any such party.
(iv) Such Borrower has not incurred, and such Borrower will not incur, any
indebtedness, secured or unsecured, direct or indirect, absolute or contingent
(including guaranteeing any obligation), other than the Permitted Indebtedness.
No indebtedness other than the Debt may be secured (subordinate or pari passu)
by the Properties.
(v) Such Borrower has not made and will not make any loans or advances to
any third party (including any Affiliate or constituent party, any Guarantor or
any Affiliate of any constituent party or Guarantor).
(vi) Such Borrower is and will remain solvent and will pay its debts and
liabilities (including employment and overhead expenses) from its assets as the
same shall become due.
(vii) Such Borrower has done or caused to be done and will do all things
necessary to observe corporate, partnership, or limited liability company
formalities, as the case may be, and preserve its existence.
(viii) Such Borrower will not, and will not permit any constituent party or
Guarantor to, amend, modify or otherwise change the partnership certificate,
partnership agreement, articles of incorporation and bylaws, operating
agreement, trust or other organizational documents of such Borrower or such
constituent party or Guarantor in a manner which would adversely affect such
Borrower's existence as a single purpose entity.
<PAGE>
(ix) Such Borrower will maintain books and records and bank accounts
separate from those of its Affiliates and any constituent party and such
Borrower will file its own tax returns.
(x) Such Borrower will be, and at all times will hold itself out to the
public as, a legal entity separate and distinct from any other entity (including
any Affiliate, any constituent party, any Guarantor or any Affiliate of any
constituent party or Guarantor), shall conduct business in its own name and
shall maintain and utilize separate stationery, invoices and checks.
(xi) Such Borrower will maintain adequate capital for the normal
obligations reasonably foreseeable in a business of its size and character and
in light of its contemplated business operations.
(xii) Neither such Borrower nor any constituent party will seek the
dissolution or winding up, in whole or in part, of such Borrower.
(xiii) Such Borrower will not commingle its funds and other assets with
those of any Affiliate or constituent party, any Guarantor, or any Affiliate of
any constituent party or Guarantor, or any other person.
(xiv) Such Borrower has and will maintain its assets in such a manner that
it will not be costly or difficult to segregate, ascertain or identify its
individual assets from those of any Affiliate or constituent party, any
Guarantor, or any Affiliate of any constituent party or Guarantor, or any other
person.
(xv) Such Borrower does not and will not hold itself out to be responsible
for the debts or obligations of any other person.
(xvi) Each Borrower which is a limited liability company shall at all times
have one member, and each Borrower which is a limited partnership shall at all
times have a general partner (such member or general partner being referred to
herein as the "SPE") which is a "single purpose entity" and which shall at all
times comply with each of the representations, warranties, and covenants
contained in this Section 4.1 as if such representation, warranty or covenant
was made directly by such SPE.
(xvii) The charter of each SPE shall at all times have at least one duly
appointed member of its board of directors (an "Independent Director")
reasonably satisfactory to Lender who shall not have been at the time of such
individual's appointment, and may not have been at any time during the preceding
five years (i) a shareholder of, or an officer or employee of, any Borrower or
any of its shareholders, subsidiaries or affiliates, (ii) a customer of, or
supplier to, any 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
such SPE. 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.
(xviii) The board of directors of each SPE shall not take any action which,
under the terms of any certificate of incorporation, by-laws or any voting trust
agreement with respect to any common stock, requires the vote of the board of
directors of the SPE unless at the time of such action there shall be at least
one member who is an Independent Director.
(xix) Such Borrower shall conduct its business so that the assumptions made
with respect to such Borrower in that certain opinion letter dated as of the
Closing Date delivered by Borrowers' counsel in connection with the Loan shall
be true and correct in all respects.
(ee) Investment Company Act. No Borrower is (i) an "investment company" or
a company "controlled" by an "investment company," within the meaning of the
Investment Company Act of 1940, as amended; (ii) 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 (iii) subject to any other
federal or state law or regulation which purports to restrict or regulate its
ability to borrow money.
(ff) Fraudulent Transfer. No Borrower has entered into the Loan or any Loan
Document with the actual intent to hinder, delay, or defraud any creditor. Each
Borrower and each General Partner (i) is and has at all times been Solvent and
will remain Solvent immediately upon the consummation of the transactions
contemplated by the Loan Documents, (ii) is free from bankruptcy, reorganization
or arrangement proceedings or a general assignment for the benefit of creditors
and (iii) is not contemplating the filing of a petition under any state or
federal bankruptcy or insolvency laws or the liquidation of all or a major
portion of such Person's assets or property and no Borrower has any knowledge of
any Person contemplating the filing of any such petition against it or any
General Partner. No Borrower intends to, or believes that it will, incur debts
and liabilities (including 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 such Borrower).
(gg) Management Agreement. Each of the Properties is self-managed by the
Borrower which owns the same and there are currently no management agreements
affecting the Properties. If at any time a Borrower elects to retain a Manager
to manage its Property, such manager and the Management Agreement between such
Borrower and the Manager shall be subject to the consent of Lender, not to be
unreasonably withheld or delayed, and all fees due under the Management
Agreement (which shall in no event exceed 4% of gross revenues), and the terms
and provisions of the Management Agreement, shall be subordinate to the
Mortgages and the Manager shall attorn to Lender. If at any time Lender consents
to the appointment of a new Manager, such new Manager and Borrower shall, as a
condition of Lender's consent, execute a Manager's Consent and Subordination of
Management Agreement in a form reasonably required by Lender.
<PAGE>
Section IV.2 Survival of Representations. Borrowers agree that all of the
representations and warranties of Borrowers set forth in Section 4.1 and
elsewhere in this Agreement and in the other Loan Documents shall survive for so
long as the Debt or any portion thereof remains owing to Lender under this
Agreement or any of the other Loan Documents by Borrowers. All representations,
warranties, covenants and agreements made in this Agreement or in the other Loan
Documents by Borrowers shall be deemed to have been relied upon by Lender
notwithstanding any investigation heretofore or hereafter made by Lender or on
its behalf.
V. AFFIRMATIVE COVENANTS
Section V.1 Borrower Covenants. From the date hereof and until payment and
performance in full of all obligations of Borrowers under the Loan Documents or
the earlier release of the Liens of the Mortgages (and all related obligations)
in accordance with the terms of this Agreement and the other Loan Documents, or
with respect to a particular Borrower, until such Borrower's Property shall be
released pursuant to Section 2.4 hereof, Borrowers hereby covenant and agree
with Lender that:
(a) Existence; Compliance with Legal Requirements: Insurance. Each Borrower
shall (i) do or cause to be done all things necessary to preserve, renew and
keep in full force and effect its existence, rights, licenses, permits and
franchises, (ii) comply with all Legal Requirements and Property Agreements
applicable to it and the Properties and (iii) at all times maintain, preserve
and protect all franchises and trade names, in each case to the extent failure
to do so would result in a Material Adverse Effect. Each Borrower shall preserve
all the remainder of its property used or useful in the conduct of its business
and shall keep the Properties in good working order and repair, and from time to
time make, or cause to be made, all reasonably necessary repairs, renewals,
replacements, betterments and improvements thereto, all as more fully provided
in the Mortgages. Borrowers shall keep the Properties insured at all times to
such extent and against such risks, and maintain liability and such other
insurance, as is more fully provided in this Agreement.
(b) Taxes and Other Charges. Borrowers shall pay all Taxes and Other
Charges now or hereafter levied or assessed or imposed against the Properties or
any part thereof as the same become due and payable. Borrowers will deliver to
Lender receipts for payment or other evidence satisfactory to Lender that the
Taxes and Other Charges have been so paid or are not then delinquent no later
than ten (10) days prior to the date on which the Taxes and/or Other Charges
would otherwise be delinquent if not paid (provided, however, that Borrowers are
not required to furnish such receipts for payment of Taxes in the event that
such Taxes have been paid by Lender pursuant to Section 7.3 hereof). Borrowers
shall not suffer and shall promptly cause to be paid and discharged any lien or
charge whatsoever which may be or become a lien or charge against any Property,
and shall promptly pay for all utility services provided to the Properties.
Borrowers, at their own expense, may contest by appropriate legal proceeding,
promptly initiated and conducted in good faith and with due diligence, the
amount or validity or application in whole or in part of any Taxes or Other
Charges, provided that (i) no Event of Default has occurred and remains uncured,
(ii) such proceeding shall suspend the collection of the Taxes or Other Charges
from the applicable Property or Properties, (iii) such proceeding shall be
permitted under and be conducted in accordance with the provisions of any other
instrument to which Borrowers are subject and shall not constitute a default
thereunder, (iv) neither any Property nor any part thereof or interest therein
will be in danger of being sold, forfeited, terminated, canceled or lost, (v)
Borrowers shall have furnished such security as may be required in the
proceeding, or as may be requested by Lender, to insure the payment of any such
Taxes or Other Charges, together with all interest and penalties thereon; and
(vi) Borrowers shall promptly upon final determination thereof pay the amount of
any such Taxes or Other Charges, together with all costs, interest and penalties
which may be payable in connection therewith. Prior written notice of any such
contest must be given to Lender if the contested Taxes or Other Charges have not
been paid prior to initiation of the contest. Lender may pay over any such cash
<PAGE>
deposit or part thereof held by Lender to the claimant entitled thereto at any
time when, in the reasonable judgment of Lender, the entitlement of such
claimant is established.
(c) Litigation. Borrowers shall give prompt written notice to Lender of any
litigation or governmental proceedings pending or threatened against any
Borrower or any Property which might have a Material Adverse Effect.
(d) Premises. Borrowers shall permit agents, representatives and employees
of Lender to inspect the Properties or any part thereof at reasonable hours upon
reasonable advance notice.
(e) Notice of Default. Borrowers shall promptly advise Lender of any
material adverse change in the condition, financial or otherwise, of any
Borrower or of the occurrence of any Default or Event of Default of which any
Borrower has knowledge.
(f) Cooperate in Legal Proceedings. Borrowers shall cooperate fully with
Lender with respect to any proceedings before any court, board or other
Governmental Authority which may in any way affect the rights of Lender
hereunder or any rights obtained by Lender under any of the other Loan Documents
and, in connection therewith, permit Lender, at its election, to participate in
any such proceedings. The foregoing shall not be construed to require Borrowers
to incur expenses in cooperating in any proceeding which arises out of the gross
negligence or wilful misconduct of Lender.
(g) Perform Loan Documents. Borrowers shall observe, perform and satisfy
all the terms, provisions, covenants and conditions of, and shall pay when due
all costs, fees and expenses to the extent required under the Loan Documents
executed and delivered by, or applicable to, Borrowers.
(h) Insurance Benefits. Borrowers shall cooperate with Lender in obtaining
for Lender the benefits of any Insurance Proceeds lawfully or equitably payable
in connection with the Properties, and Lender shall be reimbursed for any
expenses incurred in connection therewith (including attorneys' fees and
disbursements, and the expense of an appraisal on behalf of Lender in case of a
fire or other casualty affecting any Property or any part thereof) out of such
Insurance Proceeds.
(i) Further Assurances. Borrowers shall, at Borrowers' sole cost and
expense:
(A) execute and deliver to Lender such documents, instruments,
certificates, assignments and other writings, and do such other acts, reasonably
necessary or desirable, to evidence, preserve and/or protect the collateral at
any time securing or intended to secure their obligations under the Loan
Documents, as Lender may reasonably require; and
(B) do and execute all and such further lawful and reasonable acts,
conveyances and assurances for the better and more effective carrying out of the
intents and purposes of this Agreement and the other Loan Documents, as Lender
shall reasonably require from time to time.
(j) Supplemental Mortgage Affidavits. As of the date hereof, Borrowers
represent that they have paid all state, county and municipal recording and all
other taxes imposed upon the execution and recordation of the Mortgages. If at
any time Lender determines, based on applicable law, that Lender is not being
afforded the agreed upon amount of security available from each Property as a
direct or indirect result of applicable taxes not having been paid with respect
to such Property, Borrowers agree that the appropriate Borrower or Borrowers
will, on demand, pay any additional taxes.
<PAGE>
(k) Financial Reporting.
(i) Each Borrower will keep and maintain or will cause to be kept and
maintained on a Fiscal Year basis, in accordance with GAAP (or such other
accounting basis reasonably acceptable to Lender) consistently applied, proper
and accurate books, records and accounts reflecting (A) all of the financial
affairs of such Borrower and (B) all items of income and expense in connection
with the operation of the Property owned by such Borrower or in connection with
any services, equipment or furnishings provided in connection with the operation
thereof, whether such income or expense may be realized by such Borrower or by
any other Person whatsoever, excepting lessees unrelated to and unaffiliated
with such Borrower who have leased from such Borrower portions of such Property
for the purpose of occupying the same. Lender shall have the right from time to
time at all times during normal business hours upon reasonable notice to examine
such books, records and accounts at the office of such Borrower or other Person
maintaining such books, records and accounts and to make such copies or extracts
thereof as Lender shall desire. After the occurrence of an Event of Default,
Borrowers shall pay any costs and expenses incurred by Lender to examine any
Borrower's accounting records with respect to any Property, as Lender shall
determine to be necessary or appropriate in the protection of Lender's interest.
(ii) Each Borrower shall furnish Lender annually, within ninety (90) days
following the end of each Fiscal Year of such Borrower, with a complete copy of
such Borrower's financial statement audited by an independent certified public
accountant that is reasonably acceptable to Lender (in accordance with GAAP
consistently applied) for such Fiscal Year and containing a statement of
revenues and expenses, a statement of assets and liabilities and a statement of
such Borrower's equity. Such audited financial statement may be prepared on a
combined basis with the other Properties. Together with such Borrower's annual
financial statements, such Borrower shall supplement the combined financial
statement with information on a property-by-property basis that was used in the
preparation of the combined statement and shall furnish an Officer's Certificate
certifying as of the date thereof (i) that the annual financial statements
accurately represent the results of operation and financial condition of such
Borrower and the applicable Property (or, in the case of a combined financial
statement, the results of operation and financial condition of the Borrowers and
the Properties) all in accordance with GAAP consistently applied, and (ii)
whether there exists an event or circumstance which constitutes, or which upon
notice or lapse of time or both would constitute, a Default under the Note or
any other Loan Document executed and delivered by any Borrower, and if such
event or circumstance exists, the nature thereof, the period of time it has
existed and the action then being taken to remedy such event or circumstance.
(iii) Each Borrower shall furnish Lender monthly, within thirty (30) days
following the end of each month, with a true, complete and correct cash flow
statement with respect to the Property owned by such Borrower showing (i) all
cash receipts of any kind whatsoever and all cash payments and disbursements,
and (ii) year-to-date summaries of such cash receipts, payments and
disbursements together with rent rolls and occupancy reports, each dated as of
the last day of such month, and a certification of the Manager stating that such
items are true, complete and correct.
(iv) Each Borrower shall furnish Lender monthly, within thirty (30) days
following the end of each month, with a certification of the Manager stating
that all Operating Expenses with respect to the Properties which had accrued as
of the last day of the month preceding the delivery of the cash flow statement
referred to in clause (iii) above have been fully paid or otherwise reserved or
provided for by the Manager (any such certification or any certification
furnished by a Manager pursuant to clause (iii) above, a "Manager
Certification").
<PAGE>
(v) Each Borrower shall furnish Lender quarterly, (i) within thirty (30)
days following the end of each fiscal quarter of such Borrower, with a true,
complete and correct rent roll for the Property owned by such Borrower,
including a list of which tenants are in default under their respective Leases,
dated as of the last day of the fiscal quarter of such Borrower, identifying
each tenant, the monthly rent and additional rent, if any, payable by such
tenant, the expiration date of such tenant's Lease (which shall include any
landlord termination options), the security deposit, if any, held by such
Borrower under the Lease, the space covered by the Lease, and the arrearages for
such tenant, if any, and (ii) within forty-five (45) days following the end of
each fiscal quarter of such Borrower, with a statement of the sales of tenants
under Leases to the extent that such Borrower has received such information
prior to the date of submission of the rent roll to Lender pursuant to this
paragraph (v), and such rent roll and sales statement, as applicable, shall be
accompanied by an Officer's Certificate, dated as of the date of the delivery of
such rent roll or sales statement, as applicable, certifying that such rent roll
or sales statement, as applicable, is true, correct and complete in all material
respects as of its date.
(vi) Each Borrower shall furnish to Lender, within fifteen (15) Business
Days after Lender's request therefor, such further detailed information with
respect to the operation of any Property and the financial affairs of such
Borrower as may be reasonably requested by Lender.
(vii) Each Borrower shall cause the Manager to furnish to Lender, within
thirty (30) days after the end of each month, a schedule of tenant security
deposits showing any activity in the Security Deposit Account for such month,
together with a certification of the Manager as to the balance in such Security
Deposit Account and that such tenant security deposits are being held in
accordance with all Legal Requirements.
(viii) Each Borrower shall furnish Lender annually, within ninety (90) days
after the end of each Fiscal Year, with a report setting forth (i) the Net
Operating Income for such Fiscal Year, (ii) the average occupancy rate of the
applicable Property during such Fiscal Year, (iii) the capital repairs,
replacements and improvements performed at such Property during such Fiscal Year
and the aggregate Capital Expenses made in connection therewith, together with
(iv) an Officer's Certificate containing a review of the operations of such
Property for such Fiscal Year.
(ix) Each Borrower shall furnish Lender promptly upon transmission thereof,
with copies of all financial statements, proxy statements, notices and reports
of the REIT as the REIT shall send to its public shareholders and copies of all
registration statements (without exhibits) and all reports which it files with
the Securities and Exchange Commission (or any governmental body or agency
succeeding to the functions of the Securities and Exchange Commission).
(l) Business and Operations. Each Borrower will continue to engage in the
businesses presently conducted by it as and to the extent the same are necessary
for the ownership, maintenance, management and operation of the Property owned
by it. Each Borrower will qualify to do business and will remain in good
standing under the laws of each jurisdiction as and to the extent the same are
required for the ownership, maintenance, management and operation of such
Property in each case to the extent failure so to do would have a Material
Adverse Effect.
(m) Title to the Property. Borrowers will warrant and defend (i) the title
to the Properties and every part thereof, subject only to Liens permitted under
the Loan Documents (including Permitted Encumbrances), and (ii) the validity and
priority of the Liens of the Mortgages, subject only to Liens permitted under
the Loan Documents (including Permitted Encumbrances), in each case against the
claims of all Persons whomsoever. Borrowers shall reimburse Lender for any
losses, costs, damages or expenses (including reasonable attorneys' fees and
<PAGE>
court costs) incurred by Lender if an interest in any Property, other than as
permitted hereunder, is claimed by another Person.
(n) Costs of Enforcement. In the event (i) that any Mortgage is foreclosed
in whole or in part or is put into the hands of an attorney for collection,
suit, action or foreclosure due to the occurrence of a Default or Event of
Default, (ii) of the foreclosure of any mortgage prior to or subsequent to the
Mortgage encumbering any Property in which proceeding Lender is made a party, or
(iii) of the bankruptcy, insolvency, rehabilitation or other similar proceeding
in respect of any Borrower or an assignment by any Borrower for the benefit of
its creditors, Borrowers, their successors or assigns, shall be chargeable with
and agree to pay all costs of collection and defense, including reasonable
attorneys' fees in connection therewith and in connection with any appellate
proceeding or post-judgment action involved therein, which shall be due and
payable together with all required service or use taxes.
(o) Estoppel Statement.
(i) After request by Lender, Borrowers shall within twenty (20) days
furnish Lender with a statement, duly acknowledged and certified, setting forth
(A) the unpaid principal amount of the Note, (B) the Interest Rate of the Note,
(C) the date installments of interest and/or principal were last paid, (D) any
offsets or defenses to the payment of the Debt, if any, and (E) that the Note,
this Agreement, the Mortgages and the other Loan Documents are valid, legal and
binding obligations and have not been modified or if modified, giving
particulars of such modification.
(ii) After request by Borrowers, Lender shall within twenty (20) days
furnish Borrowers with a statement, duly acknowledged and certified, setting
forth (A) the unpaid principal amount of the Note, (B) the Interest Rate of the
Note, (C) the date installments of interest and/or principal were last paid, and
(D) that the Note, this Agreement, the Mortgages and the other Loan Documents
have not been modified or if modified, giving particulars of such modification.
(p) Loan Proceeds. Each Borrower shall use the proceeds of the Loan
received by it on the Closing Date only for the purposes set forth in
Section 2.1.4.
(q) Performance by Borrowers. Borrowers shall in a timely manner observe,
perform and fulfill each and every covenant, term and provision of each Loan
Document executed and delivered by, or applicable to, Borrowers, and shall not
enter into or otherwise suffer or permit any amendment, waiver, supplement,
termination or other modification of any Loan Document executed and delivered
by, or applicable to, Borrowers without the prior written consent of Lender.
(r) Annual Budget. Borrowers shall prepare and submit (or shall cause
Manager to prepare and submit) to Lender, within thirty (30) days after the
occurrence of a Cash Trap Event and thereafter at least 45 days prior to the end
of each Fiscal Year during the existence of a Cash Trap Event, for approval by
Lender, which approval shall not be unreasonably withheld or delayed, a proposed
pro forma budget for each Property during the then current (in the case of the
budget submitted after a Cash Trap Event) or succeeding Fiscal Year (the "Annual
Budget") and, promptly after preparation thereof, any subsequent revisions to
such Annual Budget. Lender's failure to approve or disapprove any Annual Budget
within thirty (30) days after Lender's receipt thereof shall be deemed to
constitute Lender's approval thereof. The Annual Budget shall consist of (a) an
operating expense budget (the "Operating Budget") showing, on a month-by-month
basis, in reasonable detail, each line item of the Borrowers' anticipated income
and Operating Expenses (on a cash and accrual basis), including amounts required
<PAGE>
to establish, maintain and/or increase reserves, (b) a Capital Expense Budget
(the "Capital Budget") showing, on a month-by-month basis, in reasonable detail,
each line item of anticipated Capital Expenses.
(s) Confirmation of Representations. Borrowers shall deliver to Lender
within ten (10) days of the request of Lender, which request may be given not
less than ten (10) days nor more than thirty (30) days prior to the anticipated
date of Securitization, an Officer's Certificate updating all of the
representations and warranties contained in this Agreement and the other Loan
Documents and certifying that all of the representations and warranties
contained in this Agreement and the other Loan Documents, as updated pursuant to
such Officer's Certificate, are true, accurate and complete as of the date of
such Officer's Certificate, and noting any exceptions.
(t) No Joint Assessment. Borrowers shall not suffer, permit or initiate the
joint assessment of any Property (i) with any other real property constituting a
tax lot separate from such Property, and (ii) with any portion of such Property
which may be deemed to constitute personal property, or any other procedure
whereby the lien of any taxes which may be levied against such personal property
shall be assessed or levied or charged to such Property.
(u) Leasing Matters. Borrowers shall not enter into, modify, amend or renew
any Lease except in accordance with the Prudent Manager Standard, and shall not
enter into, modify, amend or renew any one or more Leases with a tenant and/or
its affiliates if the same is effected as part of a single transaction or a
series of substantially integrated transactions related to 50,000 leasable
square feet or more in the aggregate of any or all of the Properties, in each
case without Lender's consent, not to be unreasonably withheld or delayed.
Without limiting the generality of the foregoing, it shall not be unreasonable
for Lender to withhold its consent to any such Lease, amendment or renewal which
does not provide for the payment of market rents or is not in compliance with
the Prudent Manager Standard. All Leases shall provide for rental rates, terms
and conditions which constitute good and prudent business practice and are
consistent with the Prudent Manager Standard and shall be arms-length
transactions. All Leases shall provide that they are subordinate to the
Mortgages and that the lessees thereunder attorn to Lender. Borrowers shall
deliver copies of all Leases, amendments, modifications and renewals to Lender.
Borrowers (i) shall observe and perform the obligations imposed upon the lessor
under the Leases; (ii) shall, consistent with the Prudent Manager Standard,
enforce the terms, covenants and conditions contained in the Leases upon the
part of the lessee thereunder to be observed or performed; (iii) shall not
collect any of the rents more than one (1) month in advance (other than security
deposits); (iv) shall not execute any other assignment of lessor's interest in
the Leases or the Rents (except as contemplated by the Loan Documents); and (v)
shall execute and deliver at the request of Lender all such further assurances,
confirmations and assignments in connection with the Leases as Lender shall from
time to time reasonably require.
(v) Principal Place of Business. No Borrower shall change its principal
place of business set forth on the first page of this Agreement without first
giving Lender thirty (30) days prior written notice.
(w) Management Agreement. Borrowers shall cause the Properties to be
operated in accordance with the Prudent Manager Standard. At any time when a
Management Agreement is in existence, the Properties shall be operated pursuant
to the Management Agreement and each Borrower shall:
(i) promptly perform and/or observe all of the covenants and agreements
required to be performed and observed by it under the Management Agreement and
do all things necessary to preserve and to keep unimpaired its material rights
thereunder;
<PAGE>
(ii) promptly notify Lender of any default under the Management Agreement
of which it is aware;
(iii) promptly deliver to Lender a copy of each financial statement,
business plan, capital expenditures plan, property improvement plan and any
other notice, report and estimate received by it under the Management Agreement;
and
(iv) promptly enforce the performance and observance of all of the material
covenants and agreements required to be performed and/or observed by the Manager
under the Management Agreement.
VI. NEGATIVE COVENANTS
Section VI.1 Borrowers' Negative Covenants. From the date hereof until
payment and performance in full of all obligations of Borrowers under the Loan
Documents or the earlier release of the Lien of the Mortgages in accordance with
the terms of this Agreement and the other Loan Documents or, with respect to a
particular Borrower, until such Borrower's Property shall be released pursuant
to Section 2.4 hereof, each Borrower covenants and agrees with Lender that it
will not do, directly or indirectly, any of the following:
(a) Operation of Property. No Borrower shall, without Lender's prior
consent: (i) surrender, terminate or cancel the Management Agreement or
otherwise replace the Manager of the Property owned by it or enter into any
other management agreements with respect to such Property (except pursuant to
Section 9.5), (ii) reduce or consent to the reduction of the term of the
Management Agreement; (iii) increase or consent to the increase of the amount of
any charges under the Management Agreement; or (iv) otherwise modify, change,
supplement, alter or amend, or waive or release any of its rights and remedies
under the Management Agreement in any material respect.
(b) Liens. No Borrower shall, without the prior written consent of Lender,
create, incur, assume or suffer to exist any Lien on any portion of its Property
or permit any such action to be taken, except (i) Permitted Encumbrances, (ii)
Liens created by or permitted pursuant to the Loan Documents and (iii) Liens for
Taxes or Other Charges not yet due. Without limiting the foregoing, Borrowers,
at their own expense, may contest by appropriate legal proceeding, promptly
initiated and conducted in good faith and with due diligence, any Lien (other
than a Lien relating to non-payment of Taxes or Other Charges, the contest of
which shall be governed by Section 5.1(b) hereof) provided that (i) no Event of
Default has occurred and remains uncured, (ii) such proceeding shall suspend the
collection of, or any realization upon the contested Lien or amount from the
applicable Property or Properties, (iii) neither any Property nor any part
thereof or interest therein will be in danger of being sold, forfeited,
terminated, canceled or lost, (iv) such contest shall not affect the ownership,
use or occupancy of any Property, (v) such contest shall not subject Lender or
any Borrower to the risk of civil or criminal liability (other than the civil
liability of the applicable Borrower for the amount in question), (vi) such Lien
is subordinate to the lien of the applicable Mortgage or the title insurance
policy insuring the lien of such Mortgage affirmatively insures, to Lender's
reasonable satisfaction, against any loss, cost or damage which Lender may
suffer as a result of the existence or enforcement of such Lien, (vii) Borrowers
shall have furnished such security as may be required in the proceeding to
insure the payment of any such Lien, together with all interest and penalties
thereon; and (viii) Borrowers shall promptly upon final determination thereof
pay the amount of any such Lien, together with all costs, interest and penalties
which may be payable in connection therewith. Lender agrees that it will join in
and subordinate the Liens of the Mortgages to any easement, license or
restrictive covenant (i) which arises after the date hereof and (ii) that
<PAGE>
Lender, in Lender's reasonable discretion, deems to constitute a Permitted
Encumbrance.
(c) Dissolution. No Borrower shall dissolve, terminate, liquidate, merge
with or consolidate into another Person.
(d) Change In Business. No Borrower shall enter into any line of business
other than the ownership and operation of the Property owned by it, or make any
material change in the scope or nature of its business objectives, purposes or
operations, or undertake or participate in activities other than the continuance
of its present business.
(e) Debt Cancellation. No Borrower shall cancel or otherwise forgive or
release any claim or debt owed to such Borrower by any Person, except for
adequate consideration or in the ordinary course of such Borrower's business in
its reasonable judgment and consistent with the Prudent Manager Standard.
(f) Affiliate Transactions. No Borrower shall enter into, or be a party to,
any transaction with an Affiliate of any Borrower or any of the partners or
members of any Borrower on terms which are no less favorable to such Borrower
than would be obtained in a comparable arm's-length transaction with an
unrelated third party.
(g) Zoning. No Borrower shall initiate or consent to any zoning
reclassification of any portion of any Property or seek any variance under any
existing zoning ordinance or use or permit the use of any portion of any
Property in any manner that could result in such use becoming a non-conforming
use under any zoning ordinance or any other applicable land use law, rule or
regulation, without the prior consent of Lender, which shall not be unreasonably
withheld or delayed.
(h) Assets. No Borrower shall purchase or own any properties other than the
Property owned by it (as shown on Schedule 5), other than a Replacement Property
or Additional Premises which is encumbered by a Mortgage pursuant hereto.
(i) Debt. No Borrower shall create, incur or assume any debt (including
subordinate debt) other than the Debt and other than Permitted Indebtedness. In
addition, no person owning any direct interest in any Borrower shall pledge,
transfer or otherwise dispose of its interest in such Borrower to secure any
financing for the benefit of such person, any Borrower or any Property.
(j) Transfers. No Borrower shall, without the prior written consent of
Lender, suffer or permit the sale, assignment or transfer (collectively,
"Transfer") of (i) all or any part of any Property other than (A) in connection
with a Special Transfer, (B) as otherwise expressly permitted under Sections
2.4.3 or 2.4.4 hereunder or (C) a Transfer of an interest which constitutes a
Permitted Encumbrance, (ii) any direct interest in any Borrower or (iii) any
direct or indirect interest in any partner or member of any Borrower; provided,
however, that the restrictions provided herein shall not apply to any Transfer
of any securities of the REIT or the limited partnership interests in PRLP or,
as to any Borrower that is a limited partnership, Transfers of limited
partnership interests in Borrower so long as PRLP and SPE collectively own at
least 50.1% of the total partnership interests in such Borrower or, as to any
Borrower that is a limited liability company, Transfers of membership interests
so long as PRLP and SPE collectively own at least 50.1% of the total membership
interests of such Borrower. No Transfer requiring consent by Lender pursuant to
clause (ii) or (iii) above shall be permitted unless Lender shall have received
evidence in writing from the applicable Rating Agencies to the effect that such
a Transfer will not result in a qualification, withdrawal or downgrading of the
ratings in effect immediately prior to such Transfer for the Securities issued
<PAGE>
in connection with the Securitization which are then outstanding. On or before
the completion of any such permitted Transfer, Borrowers will pay all reasonable
expenses of Lender incurred in connection therewith.
VII. CASUALTY; CONDEMNATION; ESCROWS
Section VII.1 Insurance; Casualty and Condemnation
VII.1.1 Insurance.
(a) Each Borrower shall, at its expense, maintain the following insurance
coverages with respect to the Property owned by such Borrower during the Term:
(i) Insurance against loss or damage by fire, casualty and other hazards
included in an "all-risk" extended coverage endorsement or its equivalent, with
such endorsements as Lender may from time to time reasonably require and which
are customarily required by institutional lenders of similar properties
similarly situated, covering each Property in an amount not less than the
greater of (A) 100% of the insurable replacement value of the Property
(exclusive of the land and footings and foundations) and (B) such other amount
as is necessary to prevent any reduction in such policy by reason of and to
prevent any Borrower, Lender or any other insured thereunder from being deemed
to be a co-insurer. Not less frequently than once every three years, such
Borrower, at its option, shall either (A) have the Appraisal updated or obtain a
new appraisal of the Property, (B) have a valuation of the Property made by or
for its insurance carrier conducted by an appraiser experienced in valuing
properties of similar type to that of the Property which are in the geographical
area in which the Property is located or (C) provide such other evidence as
will, in Lender's sole judgment, enable Lender to determine whether there shall
have been an increase in the insurable value of the Property and such Borrower
shall deliver such updated Appraisal, new appraisal, insurance valuation or
other evidence acceptable to Lender, as the case may be and, if such updated
Appraisal, new appraisal, insurance valuation, or other evidence acceptable to
Lender reflects an increase in the insurable value of the Property, the amount
of insurance required hereunder shall be increased accordingly and such Borrower
shall deliver evidence satisfactory to Lender that such policy has been so
increased.
(ii) Commercial comprehensive general liability insurance against claims
for personal and bodily injury and/or death to one or more persons or property
damage, occurring on, in or about the Property (including the adjoining streets,
sidewalks and passageways therein) in such amounts as Lender may from time to
time reasonably require (but in no event shall Lender's requirements be
increased more frequently than once during each twelve (12) month period) and
which are customarily required by institutional lenders for similar properties
similarly situated, but not less than $10,000,000.00.
(iii) Business interruption, rent loss or other similar insurance (A) with
loss payable to Lender, (B) covering all risks required to be covered by the
insurance provided for in Section 7.1.1(a)(i), (C) containing an extended period
of indemnity endorsement which provides that after the physical loss to the
Property has been repaired, the continued loss of rental income shall be insured
until six (6) months after completion of such repairs notwithstanding that the
policy may expire prior to the end of such period, and (D) in an amount not less
than 100% of the actual fixed or base rent plus percentage rent based on the
preceding twelve (12) month period. The amount of such insurance shall be
determined upon the execution of this Agreement, and not more frequently than
once each calendar year thereafter based on such Borrower's reasonable estimate
of projected fixed or base rent plus percentage rent from the Property for the
next succeeding twelve (12) months. In the event the Property shall be damaged
or destroyed, such Borrower shall and hereby does assign to Lender all payment
of claims under the policies of such insurance, and all amounts payable
<PAGE>
thereunder, and all net amounts, shall be collected by Lender under such
policies and shall be applied in accordance with this Agreement; provided,
however, that nothing herein contained shall be deemed to relieve such Borrower
of its obligations to timely pay all amounts due under the Loan Documents,
except to the extent such amounts are actually paid out of the proceeds of such
insurance.
(iv) War risk insurance when such insurance is obtainable from the United
States of America or any agency or instrumentality thereof at reasonable rates
(for the maximum amount of insurance obtainable) and if requested by Lender, and
such insurance is then customarily required by institutional lenders of similar
properties similarly situated.
(v) Insurance against loss or damages from (A) leakage of sprinkler systems
and (B) explosion of steam boilers, air conditioning equipment, pressure vessels
or similar apparatus now or hereafter installed at the Property, in such amounts
as Lender may from time to time reasonably require and which are then
customarily required by institutional lenders of similar properties similarly
situated.
(vi) Flood insurance in an amount equal to the full insurable value of the
Property or the maximum amount available, whichever is less, if the Improvements
are located in an area designated by the Secretary of Housing and Urban
Development as being "an area of special flood hazard" under the National Flood
Insurance Program (i.e., having a one percent or greater chance of flooding),
and if flood insurance is available under the National Flood Insurance Act and
is required by Lender.
(vii) Worker's compensation insurance or other similar insurance which may
be required by Governmental Authorities or Legal Requirements.
(viii) Insurance against loss or damage from earthquakes, together with
such other insurance as may from time to time be required by Lender and which is
then customarily required by institutional lenders for similar properties
similarly situated, against other insurable hazards, including, but not limited
to, malicious mischief, vandalism or windstorm, which at the time are commonly
insured against and generally available in the case of properties similarly
situated, due regard to be given to the size and type of the Premises,
Improvements and Equipment and their location, construction and use.
(ix) If any Borrower is a partnership, such Borrower shall cause SPE to
maintain fidelity insurance in an amount equal to or greater than the annual
Operating Income of the Property for the six (6) month period immediately
preceding the date on which the premium for such insurance is due and payable.
(x) Each Borrower shall cause any Manager of the Property to maintain
fidelity insurance in an amount equal to or greater than the annual Operating
Income of the Property for the six (6) month period immediately preceding the
date on which the premium for such insurance is due and payable or such lesser
amount as Lender shall approve.
(b) All insurance required by this Section 7.1.1 shall be in the form
(other than with respect to Sections 7.1.1(a)(vi) and (vii) above when insurance
in those two sub-sections is placed with a governmental agency or
instrumentality on such agency's forms) and amount and with deductibles as, from
time to time, shall be reasonably acceptable to Lender, under valid and
enforceable policies issued by financially responsible insurers authorized to do
business in the State where the Property is located, with a claims paying
ability rating of not less than "AA" from at least two nationally recognized
<PAGE>
statistical rating agencies (one of which must be Standard & Poor's); provided,
however, with respect to insurance against damage or loss resulting from
earthquake damage, a claims paying ability rating of not less than "BBB" shall
be acceptable. Originals or certified copies of all insurance policies shall be
delivered to and held by Lender. All such policies (except policies for worker's
compensation) shall name Lender as an additional named insured, shall provide
for loss payable to Lender and shall contain (or have attached): (i) standard
"non-contributory mortgagee" endorsement or its equivalent relating, inter alia,
to recovery by Lender notwithstanding the negligent or willful acts or omissions
of any Borrower; (ii) a waiver of subrogation endorsement as to Lender; (iii) an
endorsement indicating that neither Lender nor any Borrower shall be or be
deemed to be a co-insurer with respect to any casualty risk insured by such
policies and shall provide for a deductible per loss of an amount not more than
that which is customarily maintained by owners of similar properties similarly
situated, and (iv) a provision that such policies shall not be canceled,
terminated, denied renewal or amended, including, without limitation, any
amendment reducing the scope or limits of coverage, without at least thirty (30)
days' prior written notice to Lender in each instance. Not less than thirty (30)
days prior to the expiration dates of the insurance policies obtained pursuant
to this Agreement, originals or certified copies of renewals of such policies
(or certificates evidencing such renewals) bearing notations evidencing the
payment of premiums or accompanied by other reasonable evidence of such payment
(which premiums shall not be paid by any Borrower through or by any financing
arrangement which would entitle an insurer to terminate a policy) shall be
delivered by Borrowers to Lender. Borrowers shall not carry separate insurance,
concurrent in kind or form or contributing in the event of loss, with any
insurance required under this Section 7.1.1.
(c) Borrowers shall notify Lender of the renewal premium of each insurance
policy (collectively, "Insurance Premiums") and, upon Borrowers' failure to pay
such premium in accordance with the terms of this Agreement, Lender shall be
entitled to pay, or upon Borrowers' written request, shall pay such amount on
behalf of Borrowers from the Tax and Insurance Escrow Fund to the extent of
funds deposited in such Fund. With respect to insurance policies which require
periodic payments (i.e., monthly or quarterly) of premiums, Lender shall be
entitled to pay such amounts fifteen (15) days (or such lesser number of days as
Lender shall determine) prior to the respective due dates of such installments.
(d) If any Property is damaged or destroyed, in whole or in part, by fire
or other casualty (an "Insured Casualty"), Borrowers shall give prompt notice
thereof to Lender. Following the occurrence of an Insured Casualty, Borrowers,
provided Lender does not apply any of the Insurance Proceeds resulting therefrom
to the Debt (other than Lender's expenses incurred in the adjustment and
collection of such Insurance Proceeds), shall promptly proceed to restore,
repair, replace or rebuild such Property to be of at least equal value and of
substantially the same character as prior to such damage or destruction, all to
be effected in accordance with Legal Requirements and applicable Property
Agreements. The expenses incurred by Lender in the adjustment and collection of
insurance proceeds shall become part of the Debt and be secured hereby and shall
be reimbursed by Borrowers to Lender upon demand.
VII.1.2 Casualty and Application of Proceeds
(a) In case of loss or damages covered by any of the Policies, the
following provisions shall apply:
(i) If an Insured Casualty does not exceed $100,000 and there exists no
Event of Default, Borrowers may settle and adjust any claim without the consent
of Lender; provided that such adjustment is carried out in a competent and
timely manner. In such case, Borrowers are hereby authorized to collect and
receipt for any such insurance proceeds.
(ii) If an Insured Casualty shall equal or exceed $100,000, Lender may
settle and adjust any claim (without the consent of Borrowers if there exists an
<PAGE>
Event of Default and otherwise with the consent of Borrowers, not to be
unreasonably withheld or delayed) and agree with the insurance company or
companies on the amount to be paid on the loss and the proceeds of any such
policy shall be due and payable solely to Lender and held in escrow by Lender in
accordance with the terms hereof.
(b) In the event of an Insured Casualty where the loss is in an aggregate
amount less than 75% of the reasonably estimated aggregate value of the affected
Property, and if, in the reasonable judgment of Lender, (i) the affected
Property can be restored no later than six (6) months prior to the Optional
Prepayment Date, (ii) the Debt Service Coverage Ratio after substantial
completion of the restoration shall be at least equal to the Initial DSCR, and
(iii) leases covering seventy percent (70%) or more of the total gross leasable
area of the affected Property shall remain in full force and effect (provided,
however, if the applicable Borrower shall have entered into one or more leases
or letters of intent with prospective tenants with respect to the leasing of all
or a portion of the space physically affected by such casualty which are, or, in
the case of letters of intent, which contemplate leases which will be, in form
and substance substantially similar to the Leases which are terminating and
which provide for rental and other payments thereunder, net of any rebates,
credits and other concessions granted or to be granted by the Borrower
thereunder equal to or not less than 85% of the rental and other payments due
immediately prior to the casualty under the Leases which are terminating and the
Borrower shall have delivered a copy of each such lease or letter of intent to
Lender, such leases or prospective leases shall be counted toward the 70%
threshold for purposes of this clause), then, if no Default or Event of Default
shall have occurred and be then continuing, the proceeds of insurance (after
reimbursement of any expenses incurred by Lender) shall be applied to pay or
reimburse Borrowers for the cost of restoring, repairing, replacing or
rebuilding such Property or part thereof subject to the Insured Casualty (the
"Restoration"), in the manner set forth herein. Borrowers hereby covenant and
agree to commence and diligently prosecute such Restoration; provided that (i)
Borrowers shall pay all costs of such Restoration in excess of the net proceeds
of insurance made available pursuant to the terms hereof; (B) the Restoration
shall be done in compliance with all Legal Requirements and applicable Property
Agreements; and (C) Lender shall have received evidence reasonably satisfactory
to it that, during the period of the Restoration, the sum of (I) income derived
from the affected Property, as reasonably determined by Lender, plus (II)
proceeds of rent loss insurance or business interruption insurance, if any, to
be paid, plus (III) funds otherwise readily available to Borrowers, as evidenced
to the satisfaction of Lender, will equal or exceed the sum of (y) expenses in
connection with the operation of such Property and (z) the debt service payable
with respect to the Allocated Loan Amount for such Property.
(c) The proceeds of insurance collected upon any Insured Casualty shall, at
the option of Lender in its sole discretion, except as provided above, be
applied to the payment of the Debt up to an amount equal to the Release Price
for the affected Property (with the balance to Borrower), or applied to pay or
reimburse Borrowers for the cost of any Restoration, in the manner set forth
below. Any such application to the Debt shall be on a Payment Date and without
any prepayment consideration except that if an Event of Default has occurred and
is continuing at the time the insurance proceeds are received, then Borrowers
shall pay to Lender (in addition to the Casualty Return-of-Premium Amount that
may be due) an additional amount equal to the Yield Maintenance Premium, if any,
that would be required under Section 2.3.3 hereof if a Defeasance Deposit was to
be made by Borrowers. Any such application to the Debt shall be applied to any
Casualty Return-of-Premium Amount that may be due and to those payments of
principal and interest last due under the Note but shall not postpone or reduce
any payments otherwise required pursuant to the Note other than such last due
payments.
(d) If Borrowers are entitled to reimbursement out of insurance proceeds
held by Lender, such proceeds shall be deposited by Lender into the
Casualty/Condemnation Subaccount (as described in the Cash Collateral Agreement)
<PAGE>
and disbursed from time to time from the Casualty/Condemnation Subaccount upon
Lender being furnished with (1) evidence reasonably satisfactory to it of the
estimated cost of completion of the Restoration, (2) funds or, at Lender's
option, assurances reasonably satisfactory to Lender that such funds are
available, sufficient in addition to the proceeds of insurance to complete the
proposed Restoration, (3) such architect's certificates, waivers of lien,
contractor's sworn statements, title insurance endorsements, bonds, plats of
survey and such other evidences of cost, payment and performance as Lender may
reasonably require and approve, and (4) all plans and specifications for such
Restoration, such plans and specifications to be approved by Lender prior to
commencement of any work, such approval not to be unreasonably withheld or
delayed. In addition, no payment made prior to the final completion of the
Restoration shall exceed ninety percent (90%) of the value of the work performed
from time to time; funds other than proceeds of insurance which are required to
be deposited with Lender due to a shortfall of insurance proceeds shall be
disbursed prior to disbursement of such proceeds; and at all times, the
undisbursed balance of such proceeds remaining in the hands of Lender, together
with funds deposited for that purpose or irrevocably committed to the
satisfaction of Lender by or on behalf of Borrowers for that purpose, shall be
at least sufficient in the reasonable judgment of Lender to pay for the cost of
completion of the Restoration, free and clear of all liens or claims for lien.
Any surplus which may remain out of insurance proceeds held by Lender after
payment of such costs of Restoration shall be paid to Borrowers.
VII.1.3 Condemnation
(a) Borrowers shall promptly give Lender written notice of the actual or
threatened commencement of any condemnation or eminent domain proceeding
affecting a Property (a "Condemnation") and shall deliver to Lender copies of
any and all papers served in connection with such Condemnation. Following the
occurrence of a Condemnation, Borrowers, so long as Lender makes the entire
Award (less Lender's costs incurred in connection with the Condemnation and
collection of the Award) available to Borrower pursuant to Section 7.1.3(c)
regardless of whether the amount of the Award is sufficient, shall promptly
proceed to restore, repair, replace or rebuild the affected Property to the
extent practicable to be a complete unit and of substantially the same character
as prior to such Condemnation, all to be effected in accordance with Legal
Requirements and applicable Property Agreements.
(b) Lender is hereby irrevocably appointed as Borrowers' attorney-in-fact,
coupled with an interest, with exclusive power to collect, receive and retain
any award or payment in respect of a Condemnation (an "Award") and to make any
compromise or settlement in connection with such Condemnation, subject to
Borrowers' approval (not to be unreasonably withheld or delayed) except after
the occurrence of an Event of Default, in which cash such approval shall not be
required, and the provisions of this Section; provided, however, that Borrowers
may participate in any such proceedings and shall, unless an Event of Default
exists, be authorized and entitled to compromise or settle any such proceeding
with respect to Condemnation Proceeds in an amount less than five percent (5%)
of the Allocated Loan Amount. Notwithstanding any Condemnation by any public or
quasi-public authority (including any transfer made in lieu of or in
anticipation of such a Condemnation), Borrowers shall continue to pay the Debt
at the time and in the manner provided for in the Note, in this Agreement and
the other Loan Documents and the Debt shall not be reduced unless and until any
Award shall have been actually received and applied by Lender to expenses of
collecting the Award and to discharge of the Debt. Lender shall not be limited
to the interest paid on the Award by the condemning authority but shall be
entitled to receive out of the Award interest at the rate or rates provided in
the Note. Borrowers shall cause any Award that is payable to any Borrower to be
paid directly to Lender.
(c) In the event of any Condemnation where the Award is in an aggregate
amount less than $1,000,000, and if, in the reasonable judgment of Lender, the
<PAGE>
affected Property can be restored, under then current economic conditions,
applicable zoning laws, building regulations and other applicable Legal
Requirements and Property Agreements, no later than six (6) months prior to the
Optional Prepayment Date to a complete, rentable facility of the same sort as
existed prior to the condemnation, and after such restoration the Debt Service
Coverage Ratio (determined based on the projected Net Operating Income and the
Allocated Loan Amount of the affected Property) will be at least equal to the
Initial DSCR, then, if no Default or Event of Default shall have occurred and be
then continuing, the proceeds of the Award (after reimbursement of any expenses
incurred by Lender) shall be applied to pay or reimburse Borrowers for the cost
of restoring, repairing, replacing or rebuilding the Property or part thereof
subject to Condemnation (the "Condemnation Restoration") in the manner set forth
below. Borrowers hereby covenant and agree to commence and diligently to
prosecute such Condemnation Restoration; provided that (i) Borrowers shall pay
all costs (and if required by Lender, Borrowers shall deposit the total thereof
with Lender in advance) of such Condemnation Restoration in excess of the Award
made available pursuant to the terms hereof; (ii) the Condemnation Restoration
shall be done in compliance with all Legal Requirements and Property Agreements;
and (iii) Lender shall have received evidence reasonably satisfactory to it
that, during the period of the Condemnation Restoration, the sum of (A) income
derived from the affected Property, as reasonably determined by Lender, plus (B)
proceeds of rent loss insurance or business interruption insurance, if any, to
be paid, plus (C) funds otherwise readily available to Borrowers, as evidenced
to the satisfaction of Lender, will equal or exceed the sum of (I) expenses in
connection with the operation of such Property and (II) the debt service payable
with respect to the Allocated Loan Amount for such Property.
(d) The Award collected upon any Condemnation shall, at the option of
Lender in its sole discretion, except as provided above, be applied to the
payment of the Debt up to an amount equal to the Release Price for the affected
Property (with the balance thereof to be paid to Borrowers) or applied to
reimburse Borrowers for the cost of the Condemnation Restoration in the manner
set forth below. Any such application to the Debt shall be on a Payment Date and
without any prepayment consideration except that if an Event of Default has
occurred and is continuing at the time the Award is received, then Borrowers
shall pay to Lender (in addition to any Condemnation Return-of-Premium Amount
that may be due) an additional amount equal to the Yield Maintenance Premium, if
any, that would be required under Section 2.3.3 hereof if a Defeasance Deposit
was to be made by Borrowers. Any such application to the Debt shall be applied
to any Condemnation Return-of-Premium Amount that may be due and to those
payments of principal and interest last due under the Note but shall not
postpone or reduce any payments otherwise required pursuant to the Note other
than such last due payments. If the affected Property is sold, through
foreclosure or otherwise, prior to the receipt by Lender of such Award, Lender
shall have the right, whether or not a deficiency judgment on the Note shall be
recoverable or shall have been sought, recovered or denied, to receive all or a
portion of said Award sufficient to pay the Debt.
(e) In the event Borrowers are entitled to reimbursement out of the Award
received by Lender, such proceeds shall be disbursed from time to time upon
Lender being furnished with (1) evidence satisfactory to it of the estimated
cost of completion of the Condemnation Restoration, (2) funds or, at Lender's
option, assurances reasonably satisfactory to Lender that such funds are
available, sufficient in addition to the proceeds of the Award to complete the
Condemnation Restoration, (3) such architect's certificates, waivers of lien,
contractor's sworn statements, title insurance endorsements, bonds, plats of
survey and such other evidences of costs, payment and performance as Lender may
reasonably require and approve; and (4) all plans and specifications for such
Condemnation Restoration, such plans and specifications to be approved by Lender
prior to commencement of work, such approval not to be unreasonably withheld or
delayed. In addition, no payment made prior to the final completion of the
restoration, repair, replacement and rebuilding shall exceed ninety percent
(90%) of the value of the work performed from time to time; (5) funds other than
proceeds of the Award shall be disbursed prior to disbursement of such proceeds;
and (6) at all times, the undisbursed balance of such proceeds remaining in the
hands of Lender, together with funds deposited for that purpose or irrevocably
committed to the satisfaction of Lender by or on behalf of Borrowers for that
<PAGE>
purpose, shall be at least sufficient in the reasonable judgment of Lender to
pay for the costs of completion of the Condemnation Restoration free and clear
of all liens or claims for lien. Any surplus which may remain out of the Award
received by Lender after payment of such costs of restoration, repair,
replacement or rebuilding shall, in the sole and absolute discretion of Lender,
be retained by Lender and applied to payment of the Debt.
Section VII.2 Required Repair; Required Repair Funds
VII.2.1 Required Repairs; Deposits. Borrowers shall perform the repairs at
the Properties set forth on Schedule 3 annexed hereto (the "Required Repairs").
Borrowers shall complete each of the Required Repairs on or before the deadline
for same set forth on Schedule 3. On the Closing Date, Borrowers shall deposit
with Lender the amount set forth on Schedule 3 hereto to perform the Required
Repairs for the Properties. Amounts so deposited with Lender (the "Required
Repair Fund") shall be held by Lender in an account (the "Required Repair
Account") in Lender's name at a financial institution selected by Lender in its
sole discretion and shall be invested in Permitted Investments. Interest earned
on the amounts in the Required Repair Fund shall be deposited in the Required
Repair Fund and treated in the same manner as other funds therein.
VII.2.2 Grant of Security Interest. Borrowers hereby pledge, assign and
grant a security interest to Lender, as security for payment of all sums due in
respect of the Loan and the performance of all other terms, conditions and
covenants of the Loan Documents and this Agreement on Borrowers' part to be paid
and performed, all of Borrowers' right, title and interest in and to the
Required Repair Fund and the Required Repair Account. Borrowers shall not,
without obtaining the prior written consent of Lender, further pledge, assign or
grant any security interest in the Required Repair Fund or the Required Repair
Account or permit any lien or encumbrance to attach thereto, or any levy to be
made thereon, or any UCC-l Financing Statements, except those naming Lender as
the secured party, to be filed with respect thereto. This Agreement is, among
other things intended by the parties to be a security agreement for purposes of
the Illinois Uniform Commercial Code.
VII.2.3 Release of Required Repair Funds. Lender shall disburse to
Borrowers all Required Repair Funds in the Required Repair Account upon
satisfaction by Borrowers of each of the following conditions: (a) Borrowers
shall submit a written request for payment to Lender at least thirty (30) days
prior to the date on which Borrowers request such payment be made (except in the
case of an emergency repair which requires immediate attention, in which event
Borrowers may submit such payment request within ten (10) days), (b) on the date
such request is received by Lender and on the date such payment is to be made,
no Event of Default shall exist and remain uncured, (c) Lender shall have
received an Officer's Certificate from Borrowers certifying that all Required
Repairs at the Properties for which disbursement has been requested have been
completed (i) in a good and workmanlike manner, and (ii) in accordance with all
applicable Legal Requirements and applicable Property Agreements, such
certificate to be accompanied by a copy of each license, permit or other
approval required by any Governmental Authority with respect to the Required
Repair, (d) Lender shall have received an Officer's Certificate from Borrowers
(i) identifying each Person that supplied materials or labor in connection with
the Required Repairs for which disbursement has been requested and (ii) stating
that each such Person has been paid in full or will be paid in full with the
funds disbursed, such certificate to be accompanied by a copy of appropriate
lien waivers or other evidence of payment satisfactory to Lender, (e) at
Lender's option, a title search for the applicable Property indicating that such
Property is free from all liens, claims and other encumbrances arising from the
Required Repair or not previously approved by Lender, and (f) Lender shall have
received such other evidence as Lender shall reasonably request that the
Required Repairs at the Properties have been completed and paid for. Lender
shall be required to make only one disbursement from the Required Repair Account
<PAGE>
during a month and such disbursement shall be made only upon satisfaction of
each condition contained in this Section 7.2.3. Upon completion of all Required
Repairs in accordance with the terms hereof, Lender shall disburse to Borrowers
any amounts then remaining in the Required Repair Account.
VII.2.4 Failure to Perform Required Repairs. It shall be a default under
this Agreement if (a) Borrowers do not complete the Required Repairs at the
Properties by the required deadline for each repair as set forth on Schedule 3
(other than as a result of events or circumstances beyond Borrowers' reasonable
control). Upon the acceleration of the Debt, Lender, at its option, may withdraw
all Required Repair Funds from the Required Repair Account and Lender may apply
such funds either to completion of the Required Repairs at the Properties or
toward payment of the Debt (including any Event of Default Return-of-Premium
Amount) in such order, proportion and priority as Lender may determine in its
sole discretion. Lender's right to withdraw and apply Required Repair Funds
shall be in addition to all other rights and remedies provided to Lender under
this Agreement and the other Loan Documents.
Section VII.3 Tax and Insurance Escrow Fund
VII.3.1 Tax and Insurance Excrow Fund. Borrowers shall pay to Lender, with
respect to each Property, (a) on each Payment Date commencing August 11, 1998,
(i) one-twelfth of the Taxes that Lender estimates will be payable during the
next ensuing twelve (12) months in order to accumulate with Lender sufficient
funds to pay all such Taxes at least thirty (30) days prior to their respective
due dates, (ii) one-twelfth of the Insurance Premiums that Lender estimates will
be payable for the renewal of the coverage afforded by the Policies upon the
expiration thereof in order to accumulate with Lender sufficient funds to pay
all such Insurance Premiums at least thirty (30) days prior to the expiration of
the Policies and (iii) one-twelfth of the amount of rent under any ground lease
of a Property that Lender estimates will be payable during the next ensuing
twelve (12) months in order to accumulate with Lender sufficient funds to pay
all such ground rents at least thirty (30) days prior to their respective due
dates and (b) on the Closing Date, an amount which, when combined with the
monthly deposits described in (a) above, shall be sufficient to pay the next
installment of Taxes, the next required payment of Insurance Premiums on the due
date therefor and the next required ground rent payment under each ground lease
of a Property on the due date therefor (said amounts in (a), (b) and (c) above
hereinafter called the "Tax and Insurance Escrow Fund"). The Tax and Insurance
Escrow Fund, and the payments of interest or principal or both, payable pursuant
to the Note, shall be added together and shall be paid as an aggregate sum by
Borrowers to Lender. Lender will apply the Tax and Insurance Escrow Fund to
payments of Taxes, ground lease rents, and Insurance Premiums required to be
made by Borrowers pursuant to Section 5.1 hereof, or to reimburse Borrowers for
such amounts upon presentation of evidence of payment and an Officer's
Certificate in form and substance reasonably satisfactory to Lender; subject,
however, to Borrowers' right to contest Taxes in accordance with Section 5.1(b)
hereof. In making any payment relating to the Tax and Insurance Escrow Fund,
Lender may do so according to any direction of the Borrowers or, after an Event
of Default, any bill, statement or estimate procured from the appropriate public
office (with respect to Taxes) or insurer or agent (with respect to Insurance
Premiums), without inquiry into the accuracy of such bill, statement or estimate
or into the validity of any tax, assessment, sale, forfeiture, tax lien or title
or claim thereof. If the amount of the Tax and Insurance Escrow Fund shall
exceed the amounts due for Taxes and Insurance Premiums pursuant to Section 5.1
hereof, Lender shall, credit such excess against future payments to be made to
the Tax and Insurance Escrow Fund or, at Borrower's option, provided there
exists no Event of Default, return any excess to Borrower. In allocating such
excess, Lender may deal with the Person shown on the records of Lender to be the
owner of the relevant Property. If at any time Lender determines that the Tax
and Insurance Escrow Fund is not or will not be sufficient to pay the items set
forth in (a) and (b) above, Lender shall notify Borrowers of such determination
and Borrowers shall increase their monthly payments to Lender by the amount that
Lender estimates is sufficient to make up the deficiency at least thirty (30)
<PAGE>
days prior to delinquency of the Taxes and/or expiration of the Policies, as the
case may be.
VII.3.2 Grant of Security Interest. Borrowers hereby pledge, assign and
grant a security interest to Lender, as security for payment of all sums due
under the Loan and the performance of all other terms, conditions and provisions
of the Loan Documents and this Agreement on Borrowers' part to be paid and
performed, of all Borrowers' right, title and interest in and to the Tax and
Insurance Escrow Fund. Borrowers shall not, without obtaining the prior written
consent of Lender, further pledge, assign or grant any security interest in the
Tax and Insurance Escrow Fund, or permit any lien or encumbrance to attach
thereto, or any levy to be made thereon, or any UCC-1 Financing Statements,
except those naming Lender as the secured party, to be filed with respect
thereto. This Agreement is, among other things, intended by the parties to be a
security agreement for purposes of the Illinois Uniform Commercial Code.
VII.3.3 Application of Tax and Insurance Escrow Fund. Upon the acceleration
of the Debt, Lender may apply any sums then present in the Tax and Insurance
Escrow Fund to the payment of the following items in any order in its sole
discretion: (a) Taxes and Other Charges; (b) Insurance Premiums; (c) interest on
the unpaid principal balance of the Note; (d) amortization of the unpaid
principal balance of the Note; (e) any Event of Default Return-of-Premium
Amount; or (f) all other sums payable pursuant to this Agreement and the other
Loan Documents. The Tax and Insurance Escrow Fund shall not constitute a trust
fund and may be commingled with other monies held by Lender. Sums in the Tax and
Insurance Escrow Fund shall be held by Lender in an account in Lender's name at
a financial institution selected by Lender in its sole discretion and shall be
invested in Permitted Investments. Earnings or interest, if any, thereon shall
be retained as part of such funds and refunded or applied in accordance with
this Section 7.3. Lender shall not be liable for any loss sustained on the
investment of any funds constituting the Tax and Insurance Escrow Fund.
Section VII.4 Capital Reserve Fund
VII.4.1 Capital Reserve Fund. Borrowers shall pay to Lender on each Payment
Date commencing August 11, 1998 an amount with respect to each Property equal to
one-twelfth (1/12th) of the product obtained by multiplying (i) the dollars per
square foot capital expenditure requirement for such Property (as shown on
Schedule 3 under the heading "Reserved/Underwritten Annual CapEx ($sf), NACC
Actual" by (ii) the aggregate amount of square feet of rentable space in such
Property (said amounts hereinafter called the "Capital Reserve Fund"). Lender
will apply the Capital Reserve Fund to payment of Capital Expenses pursuant to
the terms hereof. If the amount of the Capital Reserve Fund shall exceed the
amounts due for Capital Expenses pursuant to the terms hereof, Lender shall, if
future Capital Reserve Fund payments are then required, credit such excess
against such future payments or, at Borrowers option, provided there exists no
Event of Default, return any excess to Borrowers; provided, however, if the Loan
shall have been accelerated, then Lender may credit such excess against the Debt
in such priority and proportions as Lender in its sole and absolute discretion
shall deem proper.
VII.4.2 Grant of Security Interest. Borrowers hereby pledge and assign to
Lender, and grant to Lender a security interest in all Borrowers' right, title
and interest in and to the Capital Reserve Fund, as security for payment of all
sums due under the Loan and the performance of all other terms, conditions and
provisions of the Loan Documents and this Agreement on Borrowers' part to be
paid and performed. Borrowers shall not, without obtaining the prior written
consent of Lender, further pledge, assign or grant any security interest in the
Capital Reserve Fund, or permit any lien or encumbrance to attach thereto, or
any levy to be made thereon, or any UCC-1 Financing Statements, except those
naming Lender as the secured party, to be filed with respect thereto. This
<PAGE>
Agreement is, among other things, intended by the parties to be a security
agreement for purposes of the [Illinois] Uniform Commercial Code.
VII.4.3 Application of Capital Reserve Fund. Upon the acceleration of the
Debt Lender may apply any sums then present in the Capital Reserve Fund to the
payment of the following items in any order in its sole discretion: (a) Capital
Expenses; (b) interest on the unpaid principal balance of the Note; (c)
amortization of the unpaid principal balance of the Note; (d) any Event of
Default Return-of-Premium Amount then due; or (e) all other sums payable
pursuant to this Agreement and the other Loan Documents. The Capital Reserve
Fund shall not constitute a trust fund and may be commingled with other monies
held by Lender. Sums in the Capital Reserve Fund shall be held by Lender in an
account in Lender's name at a financial institution selected by Lender in its
sole discretion and shall be invested in Permitted Investments. Earnings or
interest, if any, thereon shall be retained as part of such funds and applied in
accordance with this Section 7.4. Lender shall not be liable for any loss
sustained on the investment of any funds constituting the Capital Reserve Fund.
VII.4.4 Payment of Capital Expenses. Funds held in the Capital Reserve Fund
may be used for Capital Expenses. From time to time, Borrowers may send a
request for disbursement of funds in the Capital Reserve Fund, but not more than
one (1) time per month and, to the extent there are sufficient funds available
in the Capital Reserve Fund, such disbursements shall be made by Lender so long
as (A) such expenditure is for a Capital Expense or, during a Cash Trap Event,
an Approved Capital Expense; and (B) the request for disbursement is accompanied
by (1) an Officer's Certificate certifying (v) the amount of funds to be
disbursed, (w) that such funds will be used to pay or reimburse Borrowers for
Capital Expenses and a description thereof, (x) that the same has not been the
subject of a previous disbursement, (y) that all outstanding trade payables
(other than those to be paid from the requested disbursement or those otherwise
permitted to be outstanding under Section 6.1(i) hereof) have been paid in full,
and (z) that all previous disbursements have been used to pay the previously
identified Capital Expenses, and (2) reasonably detailed documentation as to the
amount, necessity and purpose therefor.
Section VII.5 Intentionally Omitted
Section VII.6 Payment of Approved Operating Expenses, Approved Capital
Expenses and Approved Leasing Expenses. Funds held in the Cash Collateral
Account may be used for Approved Operating Expenses, Approved Capital Expenses
and Approved Leasing Expenses (collectively, "Approved Expenses"). Borrowers may
from time to time send a request for disbursement of funds in the Cash
Collateral Account for payment of Approved Expenses, but not more than one (1)
time per month. To the extent there are funds available in the Cash Collateral
Account in excess of the amounts required to fund the Tax and Insurance Escrow
Fund, the Capital Reserve Fund and to pay the Monthly Debt Service Payment
Amount due in respect of the Loan on the next Payment Date, such disbursements
for Approved Expenses shall be made by the Lender so long as (A) such
expenditure is for an Approved Expense, provided, however, that Approved Capital
Expenses shall be funded from the Cash Collateral Account only to the extent
there are no funds available therefor in the Capital Reserve Fund; and (B) the
request for disbursement is accompanied by (1) an Officer's Certificate
certifying (v) the amount of funds to be disbursed, (w) that such funds will be
used to pay Approved Expenses and a description thereof, (x) that all
outstanding trade payables (other than those to be paid from the requested
disbursement or those otherwise permitted to be outstanding under Section 6.1(i)
hereof) have been paid in full, (y) that the same has not been the subject of a
previous disbursement, and (z) that all previous disbursements have been or will
be used to pay the previously identified Approved Expenses, and (2) reasonably
detailed documentation as to the amount, necessity and purpose therefor. Subject
to satisfaction of the preceding conditions, if Lender receives from Borrowers a
valid request for a disbursement for payment of Approved Expenses for the then
Current Month at least five (5) Business Days prior to the Payment Date
occurring in such Current Month, then the disbursement in respect of such
Approved Expenses shall be made to Borrowers on such Payment Date. If Borrowers
shall fail to validly request a disbursement for payment of Approved Expenses
<PAGE>
for the then Current Month at least five (5) Business Days prior to the Payment
Date in such Current Month, then Lender shall retain in the Cash Collateral
Account an amount equal to the anticipated Approved Expenses,for the then
Current Month as set forth in the approved Operating Budget for such month, and
Lender shall, subject to satisfaction of the preceding conditions, disburse same
to Borrowers five (5) Business Days after Lender receives a valid request
therefor. Amounts disbursed to Borrowers under this Section 7.5 shall be used by
Borrowers to pay current Approved Expenses and for no other purpose. Borrowers
shall furnish Lender with copies of bills, statements, invoices, receipts or
other evidence as Lender may reasonably request in connection with a request for
disbursement.
VIII. DEFAULTS
Section VIII.1 Event of Default
(a) Each of the following events shall constitute an event of default
hereunder (each, an "Event of Default"):
(i) if any installment of principal or interest is not paid when due under
the Note, or if any other portion of the Debt is not paid within five (5) days
after written notice from Lender;
(ii) if any of the Taxes or Other Charges are not paid prior to
delinquency, subject to Borrowers' right to contest Taxes in accordance with
Section 5.1(b) hereof;
(iii) if the Policies are not kept in full force and effect;
(iv) if, without Lender's prior written consent, (A) any Borrower transfers
or encumbers all or any portion of a Property other than in connection with a
Special Transfer or (B) any direct or indirect interest in any Borrower is
transferred or assigned except as expressly permitted under Section 6.1(j)
hereof;
(v) if any representation or warranty made by any Borrower herein or in any
other Loan Document, or made by any Borrower in any report, certificate,
financial statement or other instrument, agreement or document furnished by a
Borrower to Lender, its consultants, attorneys or agents in connection with this
Agreement or any other Loan Document, shall be false or misleading in any
material respect as of the date the representation or warranty was made;
(vi) if any Borrower shall make an assignment for the benefit of creditors,
or if any Borrower shall generally not be paying its debts as they become due;
(vii) if a receiver, liquidator or trustee shall be appointed for any
Borrower or if any Borrower shall be adjudicated a bankrupt or insolvent, or if
any petition for bankruptcy, reorganization or arrangement pursuant to federal
bankruptcy law, or any similar federal or state law, shall be filed by or
against, consented to, or acquiesced in by, such Borrower, or if any proceeding
for the dissolution or liquidation of a Borrower shall be instituted; and if
such appointment, adjudication, petition or proceeding was involuntary and not
consented to by such Borrower, the same is not discharged, stayed or dismissed
within sixty (60) days;
(viii) if any Borrower attempts to assign its respective rights under this
Agreement in contravention of the Loan Documents or any of the other Loan
Documents or any interest herein or therein;
<PAGE>
(ix) if any Borrower breaches any of its covenants contained in
Sections 6.1(c), (g), (h), (i) or (j) or any covenant contained in
Section 4.1(dd) hereof;
(x) if an Event of Default as defined or described in any of the other Loan
Documents occurs, whether as to a Borrower or a Property;
(xi) if Borrowers shall be in default of their obligations to make deposits
into the Required Repair Fund or the Tax and Insurance Escrow Fund or the
Capital Reserve Fund; or
(xiii) if Borrowers shall continue to be in Default under any of the other
terms, covenants or (xiii) if Borrowers shall continue to be in Default under
any of the other terms, covenants or conditions of this Agreement not specified
in subsections (i) to (xi) above, for ten (10) days after notice to Borrowers
from Lender, in the case of any Default which can be cured by the payment of a
sum of money, or for thirty (30) days after notice from Lender in the case of
any other Default; provided, however, that if such non-monetary Default is
susceptible of cure but cannot reasonably be cured within such 30-day period and
provided further that Borrowers shall have commenced to cure such Default within
such 30-day period and thereafter diligently and expeditiously proceed to cure
the same, such 30-day period shall be extended for an additional period of time
as is reasonably necessary for Borrowers in the exercise of due diligence to
cure such Default, such additional period not to exceed ninety (90) days.
(b) Upon the occurrence of an Event of Default (other than an Event of
Default described in clauses (vi), (vii) or (viii) above) and at any time
thereafter Lender may, in addition to any other rights or remedies available to
it pursuant to this Agreement and the other Loan Documents or at law or in
equity, take such action, without notice or demand, that Lender deems advisable
to protect and enforce its rights against Borrowers and in and to the
Properties, including declaring the Debt to be immediately due and payable, and
Lender may enforce or avail itself of any or all rights or remedies provided in
the Loan Documents against Borrowers and the Properties, including all rights or
remedies available at law or in equity; and upon any Event of Default described
in clauses (vi), (vii) or (viii) above, the Debt and all other obligations of
Borrowers hereunder and under the other Loan Documents shall immediately and
automatically become due and payable, without notice or demand, and Borrowers
hereby expressly waive any such notice or demand, anything contained herein or
in any other Loan Document to the contrary notwithstanding.
Section VIII.2 Remedies.
(a) Upon the occurrence of an Event of Default, all or any one or more of
the rights, powers, privileges and other remedies available to Lender against
Borrowers under this Agreement or any of the other Loan Documents executed and
delivered by, or applicable to, Borrowers or at law or in equity may be
exercised by Lender at any time and from time to time, whether or not all or any
of the Debt shall be declared due and payable, and whether or not Lender shall
have commenced any foreclosure proceeding or other action for the enforcement of
its rights and remedies under any of the Loan Documents with respect to the
Properties. Any such actions taken by Lender shall be cumulative and concurrent
and may be pursued independently, singly, successively, together or otherwise,
at such time and in such order as Lender may determine in its sole discretion,
to the fullest extent permitted by law, without impairing or otherwise affecting
the other rights and remedies of Lender permitted by law, equity or contract or
as set forth herein or in the other Loan Documents. Without limiting the
generality of the foregoing, Borrowers agree that if an Event of Default is
continuing (i) Lender is not subject to any "one action" or "election of
remedies" law or rule, and (ii) all liens and other rights, remedies or
privileges provided to Lender shall remain in full force and effect until Lender
has exhausted all of its remedies against the Properties and the Mortgages have
been foreclosed, sold and/or otherwise realized upon in satisfaction of the Debt
or the Debt has been paid in full.
<PAGE>
(b) Following the acceleration of all or a portion of the principal balance
of the Loan, Lender shall have the right from time to time to partially
foreclose any Mortgage or Mortgages in any manner and for any amounts secured by
the Mortgages then due and payable as determined by Lender in its sole
discretion including, without limitation, the following circumstances: (i) in
the event Borrowers default in the payment of one or more scheduled payments of
principal and interest, Lender may foreclose any Mortgage or Mortgages to
recover such delinquent payments, or (ii) in the event Lender elects to
accelerate less than the entire outstanding principal balance of the Loan,
Lender may foreclose any Mortgage or Mortgages to recover so much of the
principal balance of the Loan (plus any Return-of-Premium Amount) as Lender may
accelerate. Notwithstanding one or more partial foreclosures, the Properties
shall remain subject to the Mortgages to secure payment of sums secured by the
Mortgages and not previously recovered.
(c) Following the acceleration of all or a portion of the principal balance
of the Loan, Lender shall have the right from time to time to sever the Note and
the other Loan Documents into one or more separate notes, mortgages and other
security documents in such denominations as Lender shall determine in its sole
discretion for purposes of evidencing and enforcing its rights and remedies
provided hereunder. Borrowers shall execute and deliver to Lender from time to
time, promptly after the request of Lender, a severance agreement and such other
documents as Lender shall request in order to effect the severance described in
the preceding sentence, all in form and substance reasonably satisfactory to
Lender. Each Borrower hereby absolutely and irrevocably appoints Lender as its
true and lawful attorney, coupled with an interest, in its name and stead to
make and execute all documents necessary or desirable to effect the aforesaid
severance, each Borrower ratifying all that its said attorney shall do by virtue
thereof.
Section VIII.3 Remedies Cumulative. The rights, powers and remedies of
Lender under this Agreement shall be cumulative and not exclusive of any other
right, power or remedy which Lender may have against Borrowers pursuant to this
Agreement or the other Loan Documents, or existing at law or in equity or
otherwise. Lender's rights, powers and remedies may be pursued singly,
concurrently or otherwise, at such time and in such order as Lender may
determine in Lender's sole discretion. No delay or omission to exercise any
remedy, right or power accruing upon an Event of Default shall impair any such
remedy, right or power or shall be construed as a waiver thereof, but any such
remedy, right or power may be exercised from time to time and as often as may be
deemed expedient. A waiver of one Default or Event of Default with respect to
Borrowers shall not be construed to be a waiver of any subsequent Default or
Event of Default by Borrowers or to impair any remedy, right or power consequent
thereon.
X. SPECIAL PROVISIONS
Section IX.1 Sale of Note and Securitizaiton. Lender shall have the right
to transfer, assign or sell participations in the Note and the other Loan
Documents and any interest therein, provided, however, that no such transfer,
assignment or sale shall materially increase, decrease or otherwise affect
either Borrowers' or Lender's obligations under this Loan Agreement or the other
Loan Documents, except as described in the Securitization Indemnification
Agreement.
Section IX.2 Securitization Indemnification. Borrowers and Lender have
entered into a Securitization Indemnification Agreement of even date herewith, a
copy of which is attached hereto as Exhibit B, which shall be a "Loan Document"
hereunder.
Section IX.3 Intentionally Omitted
<PAGE>
Section IX. 4 Exculpation. Notwithstanding any provision herein or in any
of the other Loan Documents to the contrary, except as set forth in this Section
9.4, Lender shall not enforce the liability and obligation of any Borrower to
perform and observe the obligations contained in this Agreement, the Note, the
Mortgages or the other Loan Documents by an action or proceeding wherein a money
judgment shall be sought against any Borrower or any judgment shall be sought
against any director, officer, employee, partner, member or stockholder of any
Borrower, or its general partners (all of the foregoing, collectively,
"Principals"). Lender hereby agrees that it shall not sue for, seek or demand
any deficiency judgment against any Borrower or any judgment, including a
judgment for specific performance, against its Principals or any one or more of
them in any such action or proceeding, under or by reason of or under or in
connection with this Agreement, the Note, the Mortgages or the other Loan
Documents except to the extent necessary or appropriate to proceed against or
execute or foreclose on any or all of the collateral granted to Lender under the
Loan Documents. The provisions of this Section 9.4 shall not, however, (a)
impair the validity of the indebtedness evidenced by the Note or in any way
affect or impair the lien of the Mortgages or any of the other Loan Documents,
or the right of Lender to foreclose the Mortgages or otherwise realize upon any
collateral securing the Note following an Event of Default; (b) impair the right
of Lender to name any Borrower or any other Person as a party defendant in any
action or suit for judicial foreclosure and sale or otherwise under the
Mortgages to the extent necessary to realize upon any collateral securing the
Note; (c) impair the right of Lender to obtain the appointment of a receiver;
(d) impair the enforcement of the Assignment of Leases; (e) impair the right of
Lender to bring suit with respect to, or any Borrower's personal liability for,
fraud or intentional misrepresentation by any Borrower or any other Person in
connection with this Agreement, the Note, the Mortgages or any other Loan
Document; (f) impair the right of Lender to bring suit with respect to, or any
Borrower's personal liability for, any Borrower's misappropriation of tenant
security deposits or Rents; (g) impair the right of Lender to obtain, or any
Borrower's personal liability for any Borrower's misapplication or
misappropriation of insurance proceeds or condemnation awards due to Lender
under the Mortgages or the other Loan Documents; (h) impair the right of Lender
to enforce, or any Borrower's personal liability for, the breach of any
provision in that certain Environmental and Hazardous Substance Indemnification
Agreement of even date herewith given by Borrowers to Lender concerning
environmental laws, hazardous substances and asbestos and any indemnification of
Lender with respect thereto in such document, whether before or after payment in
full of the principal amount of the Note; (i) prevent or in any way hinder
Lender from exercising, or constitute a defense, or counterclaim or other basis
for relief in respect of the exercise of, any other remedy against the
collateral securing the Note as provided in the Loan Documents or as prescribed
by law or in equity in case of Default; (j) prevent or in any way hinder Lender
from exercising, or constitute a defense, a counterclaim, or other basis for
relief in respect of the exercise of its remedies in respect of any judgments or
other sums due from any Borrower to Lender other than under the Loan Documents;
(k) impair the right of Lender to bring suit with respect to, or any Borrower's
personal liability for, any Borrower's misappropriation, during the continuance
of an Event of Default, from any Property of any items of personalty or any
fixtures or any other misappropriation with respect to any Property during the
continuance of an Event of Default; (l) impair the right of Lender to bring suit
with respect to, or any Borrower's personal liability for, losses, damages or
liabilities suffered by Lender arising from any acts or omissions by any
Borrower that resulted in waste, provided, however, that waste shall not be
deemed to include the non-payment of Taxes, Other Charges, mechanic's liens,
materialmen's liens or any other liens arising from work performed on, or
materials delivered to, the Properties, or (m) impair the right of Lender to
bring suit with respect to, or any personal liability of any Borrower or any
other Person for, any obligation of any Borrower or other Person under the
Securitization Indemnification Agreement described in Section 9.2.
Section IX.5 Termination of Manager. If (i) Borrowers shall not achieve,
and within thirty (30) days of the end of each calendar quarter (the "DSCR
Determination Date") provide evidence to Lender of the achievement of, a Debt
<PAGE>
Service Coverage Ratio for the Properties for such calendar quarter of at least
1.15 to 1.0 (the "Manager Termination Ratio") and Lender determines in its
reasonable discretion that a reputable independent property manager can manage
the Properties at competitive rates more efficiently and with better results
than Borrowers or Manager, or (ii) there exists an Event of Default, Lender
shall have the right to remove the Manager (or Borrowers as self-managers),
terminate the Management Agreement, if any (unless there exists no Event of
Default and Borrowers shall defease a portion of the Loan to a level such that
the Debt Service Coverage Ratio on the undefeased portion of the Loan is
restored to a level of not less than the Manager Termination Ratio), and replace
the Manager (or Borrowers as self-managers) with a manager approved by Lender on
terms and conditions satisfactory to Lender. In the event that Borrowers do not
propose a replacement manager to Lender for its approval within fifteen (15)
business days after the Lender's request that Borrowers do so, Lender may
propose two or more such property managers for Borrowers' consideration. If
Borrowers then fail to select and retain one of such property managers within
fifteen (15) business days thereafter, Lender shall have the right to select a
property manager for the Properties, and to enter into a management agreement
with such manager in the name of Borrowers. Each Borrower hereby appoints Lender
its attorney-in-fact, which appointment is coupled with an interest, for the
purpose of entering into such management agreement. The management agreement
entered into between Borrowers and any Manager shall be in form and substance
reasonably acceptable to Lender. All calculations of Debt Service Coverage Ratio
shall be subject to verification by Lender.
Section IX.6 Retention of Servicer. Lender reserves the right to retain the
Servicer to act as its agent hereunder with such powers as are specifically
delegated to the Servicer by Lender, whether pursuant to the terms of this
Agreement, the Pooling and Servicing Agreement or the Cash Collateral Account
Agreement or otherwise, together with such other powers as are reasonably
incidental thereto. Borrowers shall pay any reasonable fees and expenses of the
Servicer in connection with a Defeasance of the Note, release of a Property,
assumption or modification of the Loan or enforcement of the Loan Documents.
X. MISCELLANEOUS
Section X.1 Survival. This Agreement and all covenants, agreements,
representations and warranties made herein and in the certificates delivered
pursuant hereto shall survive the making by Lender of the Loan and the execution
and delivery to Lender of the Note, and shall continue in full force and effect
so long as all or any of the Debt is outstanding and unpaid (but the accuracy
thereof shall be determined as of the Closing Date). Whenever in this Agreement
any of the parties hereto is referred to, such reference shall be deemed to
include the legal representatives, successors and assigns of such party. All
covenants, promises and agreements in this Agreement contained, by or on behalf
of either party, shall inure to the benefit of the respective legal
representatives, successors and assigns of the other.
Section X.2 Lender's Discretion. Whenever pursuant to this Agreement,
Lender exercises any right given to it to approve or disapprove, or any
arrangement or term is to be satisfactory to Lender, the decision of Lender to
approve or disapprove or to decide whether arrangements or terms are
satisfactory or not satisfactory shall (except as is otherwise specifically
herein provided) be in the sole discretion of Lender and shall be final and
conclusive.
Section X.3 Governing Law
<PAGE>
(a) THIS AGREEMENT WAS NEGOTIATED IN THE STATE OF ILLINOIS, AND MADE BY
LENDER AND ACCEPTED BY BORROWERS IN THE STATE OF ILLINOIS, AND THE PROCEEDS OF
THE NOTE DELIVERED PURSUANT HERETO WERE DISBURSED FROM THE STATE OF ILLINOIS,
WHICH STATE THE PARTIES AGREE HAS A SUBSTANTIAL RELATIONSHIP TO THE PARTIES AND
TO THE UNDERLYING TRANSACTION EMBODIED HEREBY, AND IN ALL RESPECTS, INCLUDING
MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS AGREEMENT AND THE
OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE INTERNAL LAWS OF THE STATE OF ILLINOIS (WITHOUT REGARD TO CONFLICTS OF
LAW PROVISIONS) APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE AND ANY
APPLICABLE LAW OF THE UNITED STATES OF AMERICA, EXCEPT THAT AT ALL TIMES THE
PROVISIONS FOR THE CREATION, PERFECTION, AND ENFORCEMENT OF THE LIENS AND
SECURITY INTERESTS CREATED PURSUANT HERETO AND PURSUANT TO THE OTHER LOAN
DOCUMENTS SHALL BE GOVERNED BY AND CONSTRUED ACCORDING TO THE LAW OF THE STATE
IN WHICH THE APPLICABLE PROPERTY IS LOCATED, IT BEING UNDERSTOOD THAT, TO THE
FULLEST EXTENT PERMITTED BY THE LAW OF SUCH STATE, THE LAW OF THE STATE OF
ILLINOIS SHALL GOVERN THE VALIDITY AND THE ENFORCEABILITY OF ALL LOAN DOCUMENTS
AND ALL OF THE INDEBTEDNESS OR OBLIGATIONS ARISING HEREUNDER OR THEREUNDER. TO
THE FULLEST EXTENT PERMITTED BY LAW, EACH BORROWER AND LENDER HEREBY
UNCONDITIONALLY AND IRREVOCABLY WAIVES ANY CLAIM TO ASSERT THAT THE LAW OF ANY
OTHER JURISDICTION GOVERNS THIS AGREEMENT AND THE NOTE.
(b) ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST LENDER OR BORROWERS
ARISING OUT OF OR RELATING TO THIS AGREEMENT SHALL BE INSTITUTED IN ANY FEDERAL
OR STATE COURT IN CHICAGO, ILLINOIS, AND EACH BORROWER WAIVES ANY OBJECTION
WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH SUIT,
ACTION OR PROCEEDING, AND EACH BORROWER HEREBY IRREVOCABLY SUBMITS TO THE
JURISDICTION OF ANY SUCH COURT IN ANY SUIT, ACTION OR PROCEEDING. EACH BORROWER
DOES HEREBY DESIGNATE AND APPOINT MILES A. CRAWFORD, HUNTLEY FACTORY SHOPS,
11300 FACTORY SHOPS BLVD., HUNTLEY, ILLINOIS 60142, AS ITS AUTHORIZED AGENT TO
ACCEPT AND ACKNOWLEDGE ON ITS BEHALF SERVICE OF ANY AND ALL PROCESS WHICH MAY BE
SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING IN ANY FEDERAL OR STATE COURT IN
CHICAGO, ILLINOIS, AND AGREES THAT SERVICE OF PROCESS UPON SAID AGENT AT SAID
ADDRESS AND WRITTEN NOTICE OF SAID SERVICE OF SUCH BORROWER MAILED OR DELIVERED
TO SUCH BORROWER IN THE MANNER PROVIDED HEREIN SHALL BE DEEMED IN EVERY RESPECT
EFFECTIVE SERVICE OF PROCESS UPON SUCH BORROWER, IN ANY SUCH SUIT, ACTION OR
PROCEEDING IN THE STATE OF ILLINOIS. EACH BORROWER (I) SHALL GIVE PROMPT NOTICE
TO LENDER OF ANY CHANGED ADDRESS OF ITS AUTHORIZED AGENT HEREUNDER, (II) MAY AT
ANY TIME AND FROM TIME TO TIME DESIGNATE A SUBSTITUTE AUTHORIZED AGENT WITH AN
OFFICE IN CHICAGO, ILLINOIS (WHICH OFFICE SHALL BE DESIGNATED AS THE ADDRESS FOR
SERVICE OF PROCESS), AND (III) SHALL PROMPTLY DESIGNATE SUCH A SUBSTITUTE IF ITS
AUTHORIZED AGENT CEASES TO HAVE AN OFFICE IN CHICAGO, ILLINOIS OR IS DISSOLVED
WITHOUT LEAVING A SUCCESSOR.
Section X.4 Modification, Waiver in Writing. No modification, amendment,
extension, discharge, termination or waiver of any provision of this Agreement,
or of the Note, or of any other Loan Document, nor consent to any departure by
either party therefrom, shall in any event be effective unless the same shall be
<PAGE>
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 Borrowers, shall entitle Borrowers to any other or
future notice or demand in the same, similar or other circumstances.
Section X.4 Modification, Waiver in Writing. Neither any failure nor any
delay on the part of Lender in insisting upon strict performance of any term,
condition, covenant or agreement, or exercising any right, power, remedy or
privilege hereunder, or under the Note or under any other Loan Document, or any
other instrument given as security therefor, shall operate as or constitute a
waiver thereof, nor shall a single or partial exercise thereof preclude any
other future exercise, or the exercise of any other right, power, remedy or
privilege. In particular, and not by way of limitation, by accepting payment
after the due date of any amount payable under this Agreement, the Note or any
other Loan Document, Lender shall not be deemed to have waived any right either
to require prompt payment when due of all other amounts due under this
Agreement, the Note or the other Loan Documents, or to declare a default for
failure to effect prompt payment of any such other amount.
<PAGE>
Section X.5 Delay Not a Waiver. All notices, consents, approvals and
requests required or permitted hereunder or under any other Loan Document shall
be given in writing and shall be effective for all purposes if hand delivered or
sent by (a) certified or registered United States mail, postage prepaid, or (b)
expedited prepaid delivery service, either commercial or United States Postal
Service, with proof of attempted delivery, addressed as follows (or at such
other address and person as shall be designated from time to time by any party
hereto, as the case may be, in a written notice to the other parties hereto in
the manner provided for in this Section):
If to Lender:
Nomura Asset Capital Corporation
Two World Financial Center
Building B
New York, New York 10281
Attention: Barry Funt
with a copy to:
Nomura Asset Capital Corporation
600 East Los Colinas Blvd.
Suite 300
Irving, Texas 75039
Attention: Legal Department
with a copy to:
Nomura Asset Capital Corporation
311 South Wacker Drive
Suite 6100
Chicago, Illinois 60601
Attention: David Murdoch
<PAGE>
If to Borrowers:
c/o Prime Retail, L.P.
100 East Pratt Street, 19th Floor
Baltimore, Maryland 21202
Attention: Steven S. Gothelf
with copies to:
c/o Prime Retail, L.P.
100 East Pratt Street, 19th Floor
Baltimore, Maryland 21202
Attention: C. Alan Schroeder
Winston & Strawn
35 West Wacker Drive
Chicago, Illinois 60601
Attention: James D. Burton
A notice shall be deemed to have been given: in the case of hand delivery,
at the time of delivery; in the case of registered or certified mail, when
delivered or the first attempted delivery on a Business Day; or in the case of
expedited prepaid delivery, upon the first attempted delivery on a Business Day.
Section X.7 Trial by Jury. EACH BORROWER AND LENDER HEREBY AGREE NOT TO
ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVE ANY RIGHT
TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER
EXIST WITH REGARD TO THE LOAN DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM OR OTHER
ACTION ARISING IN CONNECTION THEREWITH. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS
GIVEN KNOWINGLY AND VOLUNTARILY BY EACH BORROWER AND LENDER, AND IS INTENDED TO
ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A
TRIAL BY JURY WOULD OTHERWISE ACCRUE. EACH PARTY IS HEREBY AUTHORIZED TO FILE A
COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER
BY THE OTHER PARTY.
Section X.8 Headings. The Article and/or Section headings and the Table of
Contents in this Agreement are included herein for convenience of reference only
and shall not constitute a part of this Agreement for any other purpose.
Section X.9 Severability. Wherever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement 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 remainder of such
provision or the remaining provisions of this Agreement.
Section X.10 Preferences. To the extent Borrowers make a payment or
payments to Lender, which payment or proceeds or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside
or required to be repaid to a trustee, receiver 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 proceeds received, the obligations hereunder or
part thereof intended to be satisfied shall be revived and continue in full
<PAGE>
force and effect, as if such payment or proceeds had not been received by
Lender.
Section X.11 Waiver of Notice. Borrowers shall not be entitled to any
notices of any nature whatsoever from Lender except with respect to matters for
which this Agreement or the other Loan Documents specifically and expressly
provide for the giving of notice by Lender to Borrowers and except with respect
to matters for which Borrowers are not, pursuant to applicable Legal
Requirements, permitted to waive the giving of notice. Borrowers hereby
expressly waive the right to receive any notice from Lender with respect to any
matter for which this Agreement or the other Loan Documents do not specifically
and expressly provide for the giving of notice by Lender to Borrowers.
Section X.12 Remedies of Borrowers. In the event that a claim or
adjudication is made that Lender or its agents, including Servicer, have acted
unreasonably or unreasonably delayed acting in any case where by law or under
this Agreement or the other Loan Documents, Lender or such agent, as the case
may be, has an obligation to act reasonably or promptly, Borrowers agree that
neither Lender nor its agents, including Servicer, shall be liable for any
monetary damages, and Borrowers' sole remedies shall be limited to commencing an
action seeking injunctive relief or declaratory judgment.
Section X.13 Expenses; Indemnity
(a) Borrowers covenant and agree to reimburse Lender (or the holder of the
Loan, as applicable) upon receipt of written notice from such holder for all
reasonable costs and expenses (including reasonable attorneys' fees and
disbursements but excluding Lender's administrative overhead) incurred by Lender
in connection with (i) the preparation, negotiation, execution and delivery of
this Agreement and the other Loan Documents and the consummation of the
transactions contemplated hereby and thereby and all the costs of furnishing all
opinions by counsel for Borrowers (including any opinions requested by Lender as
to any legal matters arising under this Agreement or the other Loan Documents
with respect to the Properties); (ii) Borrowers' ongoing performance of and
compliance with Borrowers' respective agreements and covenants contained in this
Agreement and the other Loan Documents on its part to be performed or complied
with after the Closing Date, including confirming compliance with environmental
and insurance requirements; (iii) Lender's ongoing performance and compliance
with all agreements and conditions contained in this Agreement and the other
Loan Documents on its part to be performed or complied with after the Closing
Date; (iv) the negotiation, preparation, execution, delivery and administration
of any consents, amendments, waivers or other modifications to this Agreement
and the other Loan Documents and any other documents or matters requested by
Lender; (v) the filing and recording fees and expenses, title insurance and
reasonable fees and expenses of counsel for providing to Lender all required
legal opinions, and other similar expenses incurred in creating and perfecting
the Liens in favor of Lender pursuant to this Agreement and the other Loan
Documents; (vi) enforcing or preserving any rights, in response to third party
claims or the prosecuting or defending of any action or proceeding or other
litigation, in each case against, under or affecting Borrowers, this Agreement,
the other Loan Documents, the Properties, or any other security given for the
Loan; and (vii) enforcing any obligations of or collecting any payments due from
Borrowers under this Agreement, the other Loan Documents or with respect to the
Properties or in connection with any refinancing or restructuring of the credit
arrangements provided under this Agreement in the nature of a "work-out" or of
any insolvency or bankruptcy proceedings; provided, however, that Borrowers
shall not be liable for the payment of any such costs and expenses to the extent
the same arise by reason of the gross negligence, illegal acts, fraud or willful
misconduct of Lender. Any costs and expenses due and payable to Lender hereunder
which are not paid by Borrowers within ten (10) days after demand may be paid
from any amounts in the Cash Collateral Account, with notice thereof to
Borrowers.
<PAGE>
(b) Borrowers shall indemnify and hold harmless Lender from and against any
and all other liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, claims, costs, expenses and disbursements of any kind or
nature whatsoever (including the reasonable fees and disbursements of counsel
for Lender in connection with any investigative, administrative or judicial
proceeding commenced or threatened, whether or not Lender shall be designated a
party thereto), that may be imposed on, incurred by, or asserted against Lender
in any manner relating to or arising out of (i) any breach by any Borrower of
its obligations under, or any material misrepresentation by any Borrower
contained in this Agreement or the other Loan Documents, or (ii) the use or
intended use of the proceeds of the Loan (collectively, the "Indemnified
Liabilities"); provided, however, that Borrowers shall not have any obligation
to Lender hereunder to the extent that such Indemnified Liabilities arise from
the gross negligence, illegal acts, fraud or willful misconduct of Lender. To
the extent that the undertaking to indemnify and hold harmless set forth in the
preceding sentence may be unenforceable because it violates any law or public
policy, Borrowers shall contribute the maximum portion that they are permitted
to pay and satisfy under applicable law to the payment and satisfaction of all
Indemnified Liabilities incurred by Lender.
Section X.14 Exhibits Incorporated. The Exhibits and Schedules annexed
hereto are hereby incorporated herein as a part of this Agreement with the same
effect as if set forth in the body hereof.
Section X.15 Offsets, Counterclaims and Defenses. Any assignee of Lender's
interest in and to this Agreement, the Note and the other Loan Documents shall
take the same free and clear of all offsets, counterclaims or defenses which are
unrelated to such documents which Borrowers may otherwise have against any
assignor of such documents, and no such unrelated counterclaim or defense shall
be interposed or asserted by Borrowers in any action or proceeding brought by
any such assignee upon such documents and any such right to interpose or assert
any such unrelated offset, counterclaim or defense in any such action or
proceeding is hereby expressly waived by Borrowers.
Section X.16 No Joint Venture or Partnership. Borrowers and Lender intend
that the relationships created hereunder and under the other Loan Documents be
solely that of borrower and lender. Nothing herein or therein is intended to
create a joint venture, partnership, tenancy-in-common, or joint tenancy
relationship between Borrowers and Lender nor to grant Lender any interest in
the Properties other than that of mortgagee or lender.
Section X.17 Publicity. (a) All promotional news releases, publicity or
advertising by Borrowers or their respective Affiliates through any media
intended to reach the general public shall not refer to the Loan Documents or
the financing evidenced by the Loan Documents, or to Lender or to Nomura
Securities International, Inc. ("Nomura") or to NACC without the prior written
approval of Lender or Nomura or NACC, as applicable, in each instance, such
approval not to be unreasonably withheld or delayed. Subject to Section 10.17(c)
hereof, Lender shall be authorized to provide information relating to the
Properties, the Loan and matters relating thereto to rating agencies,
underwriters, potential securities investors, auditors, regulatory authorities
and to any parties which may be entitled to such information by operation of law
and Borrowers and their Affiliates shall be authorized to provide such
information to auditors, regulatory authorities and to any parties which may be
entitled by law to such information.
(b) No promotional news releases, publicity or advertising by Lender or its
Affiliates through any media intended to reach the general public shall refer to
PRLP or any of its Affiliates without the prior written approval of PRLP, such
approval not to be unreasonably withheld or delayed.
(c) Lender shall keep, and shall use good faith efforts to cause the Rating
Agencies to keep, rent rolls, per square foot sales figures and information
<PAGE>
provided pursuant to Section 5.1(k) which any Borrower, in its reasonable
discretion, deems in writing to be proprietary in nature (collectively, the
"Confidential Information") confidential, provided, however, that nothing herein
shall be deemed to prohibit (x) the Rating Agencies from including summary
statements, conclusions or analysis based on the Confidential Information in
reports they prepare and distribute with respect to the Loan or (y) distribution
of the Confidential Information to the Rating Agencies, underwriters, auditors,
regulatory authorities or any Parties which may be entitled by law to such
information, or (z) distribution of the Confidential Information as provided
below. Information provided by Borrowers to Lender will be available to any
holders of any certificates issued in connection with a Securitization;
provided, however, as long as the Debt Service Coverage Ratio equals or exceeds
1.25 and no Event of Default has occurred, the Confidential Information will be
available only to any private holder of such certificates that signs a
confidentiality agreement. In addition, Confidential Information provided by
Borrower to Lender will be available to potential holders of non-investment
grade certificates if such potential holders sign a confidentiality agreement.
If the Debt Service Coverage Ratio is less than 1.25 or an Event of Default has
occurred, no separate confidentiality agreement will be required with respect to
holders of certificates issued in connection with the Securitization but the
first page of any such Confidential Information shall contain a legend stating
that the Confidential Information contains economic, commercial and financial
information which is confidential and/or proprietary in nature to Borrower and
its affiliates and that the recipients of the Confidential Information (i) shall
not disclose the contents of the Confidential Information to any third party and
(ii) shall use the Confidential Information solely in connection with their
ownership of any certificates issued in connection with a Securitization. If,
however, Borrowers deposit with Lender U.S. Obligations the payment from which
will increase the Debt Service Coverage Ratio to 1.25 when recalculated with an
adjustment to Operating Income to include as income the payments to be made from
the U.S. Obligations for the next succeeding twelve (12) month period the
requirement for a separate confidentiality agreement shall be reinstated..
Section X.18 Waiver of Marshalling of Assets. To the fullest extent
Borrowers may legally do so, Borrowers waive all rights to a marshalling of the
assets of Borrowers, Borrowers' partners and/or members, and others with
interests in Borrowers, and of Borrowers' properties, or to a sale in inverse
order of alienation in the event of foreclosure of the interests hereby created,
and agrees not to assert any right under any laws pertaining to the marshalling
of assets, the sale in inverse order of alienation, homestead exemption, the
administration of estates of decedents, or any other matters whatsoever to
defeat, reduce or affect the right of Lender under the Loan Documents to a sale
of the Properties for the collection of the related indebtedness without any
prior or different resort for collection, of the right of Lender or any deed of
trust trustee to the payment of the related indebtedness out of the net proceeds
of the Properties in preference to every other claimant whatsoever.
Section X.19 Waiver of Counterclaim. Borrowers hereby waive the right to
assert a counterclaim, other than a compulsory counterclaim, in any action or
proceeding brought against it by Lender or its agents, including Servicer.
Section X.20 Conflict; Construction of Documents. In the event of any
conflict between the provisions of this Agreement and any of the other Loan
Documents, the provisions of this Agreement shall control. The parties hereto
acknowledge that they were represented by counsel in connection with the
negotiation and drafting of the Loan Documents and that such Loan Documents
shall not be subject to the principle of construing their meaning against the
party which drafted same.
Section X.21 Brokers and Financial Advisors. Borrowers hereby represent
that they have dealt with no financial advisors, brokers, underwriters,
placement agents, agents or finders in connection with the transactions
contemplated by this Agreement. Borrowers and Lender hereby agree to indemnify
<PAGE>
and hold the other harmless from and against any and all claims, liabilities,
costs and expenses of any kind in any way relating to or arising from a claim by
any Person that such Person acted on behalf of the indemnifying party in
connection with the transactions contemplated herein. The provisions of this
Section 10.21 shall survive the expiration and termination of this Agreement and
the repayment of the Debt.
Section X.22 No Third Party Beneficiaries. This Agreement and the other
Loan Documents are solely for the benefit of Lender and Borrowers and nothing
contained in this Agreement or the other Loan Documents shall be deemed to
confer upon anyone other than Lender and Borrowers any right to insist upon or
to enforce the performance or observance of any of the obligations contained
herein or therein. All conditions to the obligations of Lender to make the Loan
hereunder are imposed solely and exclusively for the benefit of Lender and no
other Person shall have standing to require satisfaction of such conditions in
accordance with their terms or be entitled to assume that Lender will refuse to
make the Loan in the absence of strict compliance with any or all thereof and no
other Person shall under any circumstances be deemed to be a beneficiary of such
conditions, any or all of which may be freely waived in whole or in part by
Lender if, in Lender's sole discretion, Lender deems it advisable or desirable
to do so.
Section X.23 Prior Agreements. This Agreement and the other Loan Documents
contain the entire agreement of the parties hereto and thereto in respect of the
transactions contemplated hereby and thereby, and all prior agreements among or
between such parties, whether oral or written, are superseded by the terms of
this Agreement and the other Loan Documents.
Section 10.24 Contribution Among Borrowers
(a) Contribution. To provide for just and equitable contribution among
Borrowers, if any payment is made by a Borrower (a "Funding Borrower") hereunder
or under the Note or any other Loan Document in respect of the Debt such Funding
Borrower shall be entitled to a contribution from other Borrowers for all
payments, damages and expenses incurred by such Funding Borrower under or in
connection with such Debt, such contributions to be made in the manner and to
the extent set forth below. Any amount payable as a contribution under this
Agreement shall be determined as of the date on which the related payment is
made by a Funding Borrower.
(b) Calculation of Contributions. Each Borrower shall be liable for
contribution to each Funding Borrower in respect of all payments, damages and
expenses incurred by such Funding Borrower hereunder or under the Note or any
other Loan Document in an aggregate amount, subject to Section 10.24(c) hereof,
equal to (i) the ratio of (x) the Property Worth of the Property owned by such
Borrower to (y) the Property Worth of the Properties owned by all Borrowers,
multiplied by (ii) the aggregate amount of such payments, damages and expenses
incurred by such Funding Borrower under or in connection with the Obligations.
(c) Rights to Contribution Subordinated. Each Borrower agrees that all of
its rights to receive contribution under this Section 10.24 (whether for
payments, damages, expenses or otherwise) and all of its rights, if any, to be
subrogated to any of the rights of Lender shall be subordinated in right of
payment (in liquidation or otherwise) to the prior payment in full in cash of
all of the Debt (whether for principal, interest, premium or otherwise). If any
amount shall at any time be paid to a Borrower on account of such rights of
contribution or subrogation, or in contravention of the provisions of this
Section 10.24(c) at any time, such amount shall be held in trust, segregated
from the other assets of such Borrower, for the benefit of the Lender and shall
promptly be paid to the Lender. The foregoing shall constitute a continuing
offer to, and agreement with, all persons that from time to time may become
holders of, or continue to hold, Debt under this Agreement, and the provisions
of the foregoing sentence are made for the benefit of such holders and such
holders, as third party beneficiaries hereunder, are entitled to enforce such
provisions.
<PAGE>
(d) Joint and Several/Continuing Obligations.
(i) Notwithstanding anything to the contrary set forth in this Agreement or
any of the other Loan Documents, the Borrowers shall be jointly and severally
liable for all of the Obligations.
(ii) Each Borrower's obligations under Section 10.24(a) above shall remain
outstanding until all Debt of all Borrowers have been paid in full.
(iii) No payment or payments with respect to the obligations of any
Borrower hereunder made by any other Borrower or any other Person or received or
collected by the Lender from such other Borrower or such other Person by virtue
of any action or proceeding or any setoff or appropriation or application, at
any time or from time to time, in reduction of or in payment of the Debt or any
release of security hereunder shall be deemed to modify, reduce, release or
otherwise affect the primary liability of such Borrower in respect thereof.
(iv) If any amount shall be at any time be paid to a Borrower on account of
such rights of contribution or subrogation, in contravention of the provisions
of this Section 10.24 at any time, such amount shall be held in trust,
segregated from the other assets of such Borrower, for the benefit of the Lender
and shall promptly be paid to the Lender.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Loan Agreement to
be duly executed by their duly authorized representatives, all as of the day and
year first above written.
BORROWERS:
OUTLET VILLAGE OF KITTERY LIMITED
PARTNERSHIP, a Delaware limited partnership
By: Prime Retail, L.P., a Delaware
limited partnership, its managing
partner
By: Prime Retail, Inc., a
Maryland corporation,
its general partner
By: /s/ Steven S. Gothelf
Name: Steven S. Gothelf
Title: Senior Vice President
THE PRIME OUTLETS AT GILROY LIMITED
PARTNERSHIP, a Delaware limited partnership
By: Prime Retail, L.P., a Delaware
limited partnership, its managing
partner
By: Prime Retail, Inc., a
Maryland corporation,
its general partner
By: /s/ Steven S. Gothelf
Name: Steven S. Gothelf
Title: Senior Vice President
THE PRIME OUTLETS AT MICHIGAN CITY LIMITED
PARTNERSHIP, a Delaware limited partnership
By: Prime Retail, L.P., a Delaware
limited partnership, its managing
partner
By: Prime Retail, Inc., a
Maryland corporation, its
general partner
By: /s/ Steven S. Gothelf
Name: Steven S. Gothelf
Title: Senior Vice President
<PAGE>
FINGER LAKES OUTLET CENTER, L.L.C., a
Delaware limited liability company
By: Prime Retail, L.P., a Delaware
limited partnership, its managing
member
By: Prime Retail, Inc., a
Maryland corporation, its
general partner
By: /s/ Steven S. Gothelf
Name: Steven S. Gothelf
Title: Senior Vice President
LENDER:
NOMURA ASSET CAPITAL CORPORATION
By: /s/ John M. Burke
Name: John M. Burke
Title: Director
<PAGE>
Schedule 1
Matters Regarding Representations
1. Section 4.1e(v). Except for ground lessor rights under the ground
leases for the Gilroy Leased Property and the Kittery Property.
<PAGE>
Schedule 2
Rent Roll
See the Certificate Regarding Rent Roll delivered to Lender by Borrower
dated as of the date hereof.
<PAGE>
Schedule 3
Required Repairs
<PAGE>
Schedule 4
Mortgages
1. The first priority Fee and Leasehold Deed of Trust, Assignment of
Leases and Rents and Security Agreement executed and delivered by
Gilroy Borrower as security for the Loan and encumbering the Gilroy
Leased Property (the "Gilroy Leasehold Mortgage").
2. The first priority Deed of Trust, Assignment of Leases and Rents and
Security Agreement executed and delivered by Gilroy Borrower as
security for the Loan and encumbering the Gilroy Fee Property (the
"Gilroy Fee Mortgage")
3. The first priority Mortgage, Assignment of Leases and Rents and
Security Agreement executed and delivered by Michigan City Borrower as
security for the Loan and encumbering the Michigan City Property (the
"Michigan City Mortgage").
4. The first priority Mortgage, Assignment of Leases and Rents and
Security Agreement executed and delivered by Finger Lakes Borrower as
security for the Loan and encumbering the Finger Lakes Property (the
"Finger Lakes Mortgage").
5. The first priority Mortgage, Assignment of Leases and Rents and
Security Agreement executed and delivered by Kittery Borrower as
security for the Loan and encumbering the Kittery Property (the
"Kittery Mortgage").
<PAGE>
Schedule 5
Description of Properties
"Gilroy Leased Property" shall mean that certain parcel of real property
and improvements thereon owned as to a portion and leased as to a portion by
Gilroy Borrower, encumbered by the Gilroy Leasehold Mortgage together with all
rights pertaining to such property and improvements, as more particularly
described in the Granting Clauses of the Gilroy Leasehold Mortgage and referred
to therein as the "Property", which constitutes a portion of the property known
as the Pacific West Outlet Center in Gilroy, California
"Gilroy Fee Property" shall mean that certain parcel of real property and
improvements thereon owned by Gilroy Borrower, encumbered by the Gilroy Fee
Mortgage together with all rights pertaining to such property and improvements,
as more particularly described in the Granting Clauses of the Gilroy Fee
Mortgage and referred to therein as the "Property", which constitutes a portion
of the property known as the Pacific West Outlet Center in Gilroy, California.
"Michigan City Property" shall mean that certain parcel of real property
and improvements thereon owned by Michigan City Borrower and encumbered by the
Michigan City Mortgage, together with all rights pertaining to such property and
improvements, as more particularly described in the Granting Clauses of the
Michigan City Mortgage and referred to therein as the "Property" and known as
the Lighthouse Point Outlet Center in Michigan City, Indiana.
"Finger Lakes Property" shall mean that certain parcel of real property and
improvements thereon leased by Finger Lakes Borrower and encumbered by the
Finger Lakes Mortgage, together with all rights pertaining to such property and
improvements, as more particularly described in the Granting Clauses of the
Finger Lakes Mortgage and referred to therein as the "Property" and known as the
Finger Lakes Outlet Center in Finger Lakes, New York.
"Kittery Property" shall mean that certain parcel of real property and
improvements thereon owned as to a portion and leased as to a portion by Kittery
Borrower and encumbered by the Kittery Mortgage, together with all rights
pertaining to such property and improvements, as more particularly described in
the Granting Clauses of the Kittery Mortgage and referred to therein as the
"Property" or the "Mortgaged Property," and known as Kittery Outlet Center,
Manufacturer's Mall and Tidewater Mall in Kittery, Maine.
<PAGE>
Schedule 6
Allocated Loan and Premium Amounts
<TABLE>
<CAPTION>
Property Allocated Loan Amount Allocated Premium Amount
<S> <C> <C>
Gilroy Leased Property $ 36,942,743.00 $ 3,643,477.00
Gilroy Fee Property $ 31,003,685.00 $ 3,057,738.00
Michigan City Property $ 46,884,727.00 $ 4,624,006.00
Finger Lakes Property $ 37,761,536.00 $ 3,724,231.00
Kittery Property $ 11,248,476.00 $ 1,109,381.00
</TABLE>
<PAGE>
Schedule 7
Fee and Leasehold Descriptions
<TABLE>
<CAPTION>
------------------------------------- ------------------------------------------------------ --------------------
Property Borrower Fee or Leasehold
------------------------------------- ------------------------------------------------------ --------------------
------------------------------------- ------------------------------------------------------ --------------------
<S> <C> <C>
Kittery Outlet Village Outlet Village of Kittery Limited Partnership Leasehold
(a portion of the Kittery Property)
------------------------------------- ------------------------------------------------------ --------------------
------------------------------------- ------------------------------------------------------ --------------------
Tidewater Outlet Mall Outlet Village of Kittery Limited Partnership Fee
(a portion of the Kittery Property)
------------------------------------- ------------------------------------------------------ --------------------
------------------------------------- ------------------------------------------------------ --------------------
Manufacturer's Outlet Mall Outlet Village of Kittery Limited Partnership Fee
(a portion of the Kittery Property)
------------------------------------- ------------------------------------------------------ --------------------
------------------------------------- ------------------------------------------------------ --------------------
Gilroy Leased Property The Prime Outlets at Gilroy Limited Partnership Leasehold, fee and
an undivided
one-half fee
interest as to
Phases III and IV
------------------------------------- ------------------------------------------------------ --------------------
------------------------------------- ------------------------------------------------------ --------------------
Gilroy Fee Property The Prime Outlets at Gilroy Limited Partnership Fee as to Phases
I, II and V
------------------------------------- ------------------------------------------------------ --------------------
------------------------------------- ------------------------------------------------------ --------------------
Michigan City Property The Prime Outlets at Michigan City Limited Fee
Partnership
------------------------------------- ------------------------------------------------------ --------------------
------------------------------------- ------------------------------------------------------ --------------------
Finger Lakes Property Finger Lakes Outlet Center, L.L.C. Leasehold (plus
subordination of
Landlord's fee
interest)
------------------------------------- ------------------------------------------------------ --------------------
</TABLE>
<PAGE>
EXHIBIT A
Form of Note
<PAGE>
EXHIBIT B
Form of Securitization Indemnification Agreement
EXHIBIT 10.2
[___________________________________]
(Mortgagor)
for the benefit of
NOMURA ASSET CAPITAL CORPORATION
(Mortgagee)
_______________________________________________
MORTGAGE, ASSIGNMENT OF LEASES
AND RENTS AND SECURITY AGREEMENT
_______________________________________________
Dated: As of June __, 1998
Property Location:
______________________________
______________________________
DOCUMENT PREPARED BY AND WHEN RECORDED, RETURN TO:
Sonnenschein Nath & Rosenthal
8000 Sears Tower
Chicago, IL 60606
Attention: Todd Stennes
<PAGE>
THIS MORTGAGE, ASSIGNMENT OF LEASES AND RENTS AND SECURITY AGREEMENT (the
"Mortgage"), made as of June __, 1998, by [________________________________] a
_______________________________________, having an address c/o [Prime Retail,
L.P., 100 East Pratt Street, 19th Floor, Baltimore, Maryland 21202][Horizon
Group Properties, Inc., 5000 Hakes Drive, Norton Shores, Michigan 49441]
("Mortgagor"), for the benefit of Nomura Asset Capital Corporation, a Delaware
corporation (together with its successors and assigns, shall hereafter be
referred to as "Mortgagee"), having its principal place of business at Two World
Financial Center, Building B, New York, New York 10281.
W I T N E S S E T H:
WHEREAS:
A. Mortgagor is the owner of a fee simple title to that certain parcel of
real property (the "Premises") described in Exhibit A attached hereto, and the
buildings, structures, fixtures, additions, enlargements, extensions,
modifications, repairs, replacements and other improvements now or hereafter
located thereon (the "Improvements");
B. Mortgagee, Mortgagor and certain other entities affiliated with
Mortgagor (such affiliated entities and Mortgagor each being referred to
individually as a "Borrower" and collectively as the "Borrowers") have entered
into a certain Loan Agreement dated as of the date hereof (as amended, modified,
restated, consolidated or supplemented from time to time, the "Loan Agreement")
pursuant to which Mortgagee has agreed to make a secured mortgage loan to the
Borrowers. Capitalized terms used herein and not herein defined shall have the
meanings assigned to such terms in the Loan Agreement.
C. Pursuant to the Loan Agreement, Mortgagee is making a loan to Borrowers
in the aggregate original principal amount of
_____________________________________ (_______________) (the "Loan") and
Borrowers have executed the Note in the principal amount of __________________
(as the same may be amended, modified, restated, severed, consolidated, renewed,
replaced, or supplemented from time to time, the "Note"). The Note is secured
by, inter alia, this Mortgage and the other Loan Documents (as hereinafter
defined).
D. To induce Mortgagee to make the Loan and to secure payment of the Note,
together with interest thereon, Mortgagor has agreed to the execution and
delivery of this Mortgage.
NOW, THEREFORE, in consideration of the mutual promises herein contained
and other good and valuable consideration, the receipt and legal sufficiency
whereof are hereby acknowledged, and as an inducement to Mortgagee to enter into
the Loan Agreement, and to secure the payment of all sums which may or shall
become due hereunder or under the Note or any of the other documents executed
and delivered by a Borrower or an Affiliate of a Borrower evidencing or securing
the Loan (such other documents, including, without limitation, the Loan
Agreement; that certain Assignment of Leases and Rents of even date herewith
given by Mortgagor to Mortgagee with respect to the Premises (as such assignment
may be amended from time to time, the "Assignment of Leases"); that certain
Assignment of Agreements, Licenses, Permits and Contracts of even date herewith
given by Mortgagor to Mortgagee with respect to the Premises (as such assignment
may be amended from time to time, the "Assignment of Agreements"); and this
Mortgage (as any of the same may, from time to time, be modified, amended or
supplemented) being hereinafter collectively referred to as the "Loan
Documents"), and including (i) the payment of interest and other amounts which
would accrue and become due but for the filing of a petition in bankruptcy
(whether or not a claim is allowed against Mortgagor for such interest or other
amounts in any such bankruptcy proceeding) or the operation of the automatic
stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. Section 362(a) and
(ii) the costs and expenses of enforcing any provision of the Note, this
Mortgage or any of the other Loan Documents (all such sums being hereinafter
collectively referred to as the "Debt"), and in order to charge with such
performance and with such payments the Premises and the Improvements and other
property hereinafter described and the rents, revenues, issues, income and
profits thereof, Mortgagor has given, granted, mortgaged,
<PAGE>
bargained, sold, alienated, enfeoffed, conveyed, confirmed, warranted,
pledged, assigned, and hypothecated and by these presents does hereby
irrevocably, give, mortgage, alien, enfeoff, confirm, warrant, pledge, assign,
hypothecate, GRANT, MORTGAGE, BARGAIN, SELL, AND CONVEY UNTO MORTGAGEE, the
Premises and Improvements.
TOGETHER WITH: all right, title, interest and estate of Mortgagor now
owned, or hereafter acquired, in and to the following property, rights,
interests and estates (the Premises, the Improvements, and the property, rights,
interests and estates hereinafter described are collectively referred to herein
as the "Property"):
(a) all easements, rights-of-way, strips and gores of land, streets, ways,
alleys, passages, sewer rights, water, water courses, water rights and powers,
air rights and development rights, all rights to oil, gas, minerals, coal and
other substances of any kind or character, and all estates, rights, titles,
interests, privileges, liberties, tenements, hereditaments and appurtenances of
any nature whatsoever, in any way belonging, relating or pertaining to the
Premises and the Improvements and the reversion and reversions, remainder and
remainders, and all land lying in the bed of any street, road, highway, alley or
avenue, opened, vacated or proposed, in front of or adjoining the Premises, to
the center line thereof and all the estates, rights, titles, interests, dower
and rights of dower, curtesy and rights of curtesy, property, possession, claim
and demand whatsoever, both at law and in equity, of Mortgagor of, in and to the
Premises and the Improvements and every part and parcel thereof, with the
appurtenances thereto;
(b) all machinery, furniture, furnishings, equipment, computer software and
hardware, fixtures (including, without limitation, all heating, air
conditioning, plumbing, lighting, communications and elevator fixtures),
inventory and articles of personal property and accessions thereof and renewals,
replacements thereof and substitutions therefor, if any, and other property of
every kind and nature, whether tangible or intangible, whatsoever owned by
Mortgagor, or in which Mortgagor has or shall have an interest, now or hereafter
located upon the Premises and the Improvements, or appurtenant thereto, and
usable in connection with the present or future operation and occupancy of the
Premises and the Improvements and all building equipment, materials and supplies
of any nature whatsoever owned by Mortgagor, or in which Mortgagor has or shall
have an interest, now or hereafter located upon the Premises and the
Improvements, or appurtenant thereto, or used in connection with the present or
future operation, enjoyment and occupancy of the Premises and the Improvements
(hereinafter collectively referred to as the "Equipment"), including any leases
of any of the foregoing, any deposits existing at any time in connection with
any of the foregoing, and the proceeds of any sale or transfer of the foregoing,
and the right, title and interest of Mortgagor in and to any of the Equipment
that may be subject to any "security interests" as defined in the Uniform
Commercial Code, as adopted and enacted by the State where the Property is
located (the "Uniform Commercial Code"), superior in lien to the lien of this
Mortgage;
(c) all awards or payments, including interest thereon, that may heretofore
and hereafter be made with respect to the Premises and the Improvements, whether
from the exercise of the right of eminent domain or condemnation (including,
without limitation, any transfer made in lieu of or in anticipation of the
exercise of said rights), or for a change of grade, or for any other injury to
or decrease in the value of the Premises and Improvements;
(d) all leases and other agreements or arrangements heretofore or hereafter
entered into pursuant to which any person is granted a possessory interest in,
or right to use or occupy all or any portion of any space in the Premises and
the Improvements, including any extensions, renewals, modifications or
amendments thereof (hereinafter collectively referred to as the "Leases") and
all rents, rent equivalents, moneys payable as damages or in lieu of rent or
rent equivalents, royalties (including, without limitation, all oil and gas or
other mineral royalties and bonuses), income, receivables, receipts, revenues,
deposits (including, without limitation, security, utility and other deposits),
accounts, cash, issues, profits, charges for services rendered, and other
consideration of whatever form or nature received by or paid to or for the
account of or benefit of Mortgagor or its agents or employees from any and all
sources arising from or attributable to the Premises and the Improvements,
including, without limitation, all receivables, customer obligations,
installment payment obligations and other obligations now existing or hereafter
arising or created out of the sale, lease, sublease, license, concession or
other grant of the right of the use and occupancy of property and proceeds, if
<PAGE>
any, from business interruption or other loss of income insurance
(hereinafter collectively referred to as the "Rents"), together with all
proceeds from the sale or other disposition of the Leases and the right to
receive and apply the Rents to the payment of the Debt;
(e) all proceeds (other than those payable to Mortgagor under any liability
insurance policy of Mortgagor) of and any unearned premiums on any insurance
policies covering the Property, including, without limitation, the right to
receive and apply the proceeds of any insurance, judgments, or settlements made
in lieu thereof, for damage to the Property;
(f) the right, in the name and on behalf of Mortgagor, to appear in and
defend any action or proceeding brought with respect to the Property and to
commence any action or proceeding to protect the interest of Mortgagee in the
Property;
(g) all accounts (including, without limitation, reserve accounts, escrows,
documents, instruments, chattel paper, claims, deposits and general intangibles,
as the foregoing terms are defined in the Uniform Commercial Code, and all
franchises, trade names, trademarks, symbols, service marks, books, records,
plans, specifications, designs, drawings, surveys, title insurance policies,
permits, consents, licenses, management agreements, contract rights (including,
without limitation, any contract with any architect or engineer or with any
other provider of goods or services for or in connection with any construction,
repair, or other work upon the Property), approvals, actions, refunds of real
estate taxes and assessments (and any other governmental impositions related to
the Property), and causes of action that now or hereafter relate to, are derived
from or are used in connection with the Property, or the use, operation,
maintenance, occupancy or enjoyment thereof or the conduct of any business or
activities thereon (hereinafter collectively referred to as the "Intangibles");
and
(h) all proceeds, products, offspring, rents and profits from any of the
foregoing, including, without limitation, those from sale, exchange, transfer,
collection, loss, damage, disposition, substitution or replacement of any of the
foregoing.
Without limiting the generality of any of the foregoing, in the event that
a proceeding under Title 11 of the United States Code (the "Bankruptcy Code") is
commenced by or against Mortgagor, pursuant to Section 552(b)(2) of the
Bankruptcy Code, the security interest granted by this Mortgage shall
automatically extend to all Rents acquired by the Mortgagor after the
commencement of the case and shall constitute cash collateral under Section
363(a) of the Bankruptcy Code.
TO HAVE AND TO HOLD the above granted and described Property unto and to
the use and benefit of Mortgagee and its successors and assigns, forever to
secure Mortgagee (i) the repayment of the Debt; and (ii) any and all extensions,
modifications and renewals of the Note, or any part thereof, however changed in
form, manner or amount.
PROVIDED, HOWEVER, these presents are upon the express condition that, if
the Borrowers shall well and truly pay to Mortgagee or defease the Debt at the
time and in the manner provided in the Note, the Loan Agreement and the other
Loan Documents and shall well and truly abide by and comply with each and every
covenant and condition set forth herein, in the Note, the Loan Agreement and in
the other Loan Documents in all material respects in a timely manner, these
presents and the estate hereby granted shall cease, terminate and be void;
AND Mortgagor represents and warrants to and covenants and agrees with
Mortgagee as follows:
GENERAL PROVISIONS
1. Payment of Debt and Incorporation of Covenants, Conditions and
Agreements.
<PAGE>
Mortgagor shall pay the Debt at the time and in the manner provided in the
Note, the Loan Agreement and this Mortgage. All the covenants, conditions and
agreements contained in the Note, the Loan Agreement, or the other Loan
Documents are hereby made a part of this Mortgage to the same extent and with
the same force as if fully set forth herein.
2. Intentionally Omitted.
3. Insurance. (a) Mortgagor, at its sole cost and expense, for the mutual
benefit of Mortgagor and Mortgagee, shall keep the Property insured and obtain
and maintain during the entire term of this Mortgage policies of insurance
against loss or damage by fire and lightning and against loss or damage by all
other risks and hazards as required and in accordance with the terms and
provisions of Section 7.1 of the Loan Agreement.
(b) If the Property shall be damaged or destroyed, in whole or in part, by
fire or other casualty (a "Casualty"), Mortgagor shall give prompt notice
thereof to Mortgagee. All amounts to be paid in connection with a Casualty under
such policies shall be governed by the terms and provisions of the Loan
Agreement.
4. Payment of Taxes, Etc. Mortgagor shall pay all real estate and personal
property taxes, assessments, fees or payments in lieu of real estate taxes,
water rates and sewer rents, now or hereafter levied or assessed or imposed
against the Property or any part thereof (the "Taxes") and all ground rents,
maintenance charges, impositions other than taxes, and other charges, including,
without limitation, vault charges and license fees for the use of vaults, chutes
and similar areas adjoining the Premises, now or hereafter levied or assessed or
imposed against the Property or any part thereof (the "Other Charges") as the
same become due and payable, in each case subject to Mortgagor's right to
contest the amount or validity or application in whole or in part any taxes or
other charges in accordance with Section 5.1(b) of the Loan Agreement.
5. Condemnation. Mortgagor shall promptly give Mortgagee written notice of
the actual or threatened commencement of any condemnation or eminent domain
proceeding with respect to the Property (a "Condemnation") and shall deliver to
Mortgagee copies of any and all papers served in connection with such
Condemnation. All amounts to be paid in connection with a Condemnation shall be
governed by the terms and provisions of the Loan Agreement.
6. Assignment of Leases and Rents. Mortgagor does hereby absolutely and
unconditionally assign to Mortgagee, all of Mortgagor's right, title and
interest in all current and future Leases and Rents, it being intended by
Mortgagor that this assignment constitutes a present, absolute assignment and
not an assignment for additional security only. Such assignment to Mortgagee
shall not be construed to bind Mortgagee to the performance of any of the
covenants, conditions or provisions contained in any such Lease or otherwise
impose any obligation upon Mortgagee. Mortgagor agrees to execute and deliver to
Mortgagee such additional instruments, in form and substance satisfactory to
Mortgagee, as may hereafter be requested by Mortgagee to further evidence and
confirm such assignment. Nevertheless, subject to the terms of this paragraph,
Mortgagee grants to Mortgagor a revocable license to operate and manage the
Property and to collect the Rents. Mortgagor shall cause all Rents to be
deposited into the Collection Account in accordance with the terms of the Loan
Agreement. Upon the occurrence and continuance of an Event of Default (as
hereinafter defined), without the need for notice or demand, the license granted
to Mortgagor herein shall automatically be revoked, and Mortgagee shall
immediately be entitled to possession of all Rents, whether or not Mortgagee
enters upon or takes control of the Property. Mortgagee is hereby granted and
assigned by Mortgagor the right, at its option, upon revocation of the license
granted herein, to enter upon the Property in person, by agent or by
court-appointed receiver to collect the Rents. Any Rents collected after the
revocation of the license shall be applied in accordance with Section 2.6 of the
Loan Agreement.
7. Maintenance of Property. (a) Mortgagor shall not (i) desert or abandon
the Property, (ii) change the use of the Property or cause or permit the use or
occupancy of any part of the Property to be discontinued if such discontinuance
or use change would violate any zoning or other law, ordinance or regulation;
<PAGE>
(iii) consent to or seek any lowering of the zoning classification, or
greater zoning restriction affecting the Property; or (iv) take any steps
whatsoever to convert the Property, or any portion thereof, to a condominium or
cooperative form of ownership.
(b) Mortgagor shall, at its expense, (i) take good care of the Property
including grounds generally, and utility systems and sidewalks, roads, alleys,
and curbs therein, and shall keep the same in good, safe and insurable condition
and in compliance with all applicable Legal Requirements, (ii) promptly make all
repairs to the Property, above grade and below grade, interior and exterior,
structural and nonstructural, ordinary and extraordinary, unforeseen and
foreseen, and maintain the Property in a manner appropriate for the facility and
(iii) not commit or suffer to be committed any waste of the Property or do or
suffer to be done anything which will materially increase the risk of fire or
other hazard to the Property or materially impair the value thereof. Mortgagor
shall keep the sidewalks, vaults, gutters and curbs comprising, or adjacent to,
the Property, clean and free from dirt, snow, ice, rubbish and obstructions. All
repairs made by Mortgagor shall be made with first-class materials, in a good
and workmanlike manner, shall be equal or better in quality and class to the
original work and shall comply with all applicable Legal Requirements and
insurance requirements. To the extent any of the above obligations are
obligations of tenants under Leases or other Persons under Property Agreements,
Mortgagor may fulfill its obligations hereunder by causing such tenants or other
Persons, as the case may be, to perform their obligations thereunder. As used
herein, the terms "repair" and "repairs" shall be deemed to include all
necessary replacements.
(c) Mortgagor shall not demolish, remove, construct, or, except as
otherwise expressly provided herein, restore, or alter the Property or any
portion thereof nor consent to or permit any such demolition, removal,
construction, restoration, addition or alteration (each a "Renovation") which
would, for a period in excess of one year and in Mortgagor's best judgment at
the time of such demolition, removal, construction, restoration or alteration,
diminish the value of the Property or materially diminish the Total GLA without
Mortgagee's prior written consent in each instance, which consent shall not be
unreasonably withheld or delayed, provided, however, that for any Renovation
which would temporarily diminish the value of the Property or temporarily would
materially diminish the Total GLA, Mortgagor shall be permitted to perform same
provided (a) no Event of Default has occurred and is continuing at the time of
the proposed Renovation, (b) Mortgagor shall have entered into one or more
Leases with respect to the leasing of all or a portion of the space demised
under the Leases which were terminated in connection with the Renovation (the
"Affected Leases") which are in form and substance substantially similar to the
Affected Leases and which provide for rental and other payments thereunder, net
of any rebates, credits and other concessions granted by Mortgagor thereunder,
equal to not less than eighty-five percent (85%) of the Rent due under the
Affected Leases and Mortgagor shall have delivered a copy of such lease or
leases to Mortgagee, (c) Mortgagor shall have delivered to Mortgagee cash
collateral or an unconditional, irrevocable, clean sight draft letter of credit
in form and substance, and issued by a bank, acceptable to Mortgagee, in an
amount equal to the Rent that would have been payable pursuant to the Affected
Leases during (I) the anticipated term of the Renovation, as reasonably
determined by Mortgagee, plus (II) an additional six (6) month period (which
cash collateral or letter of credit are hereinafter referred to as the
"Renovation Funds") and (d) all Renovations shall be performed in compliance
with Legal Requirements. Mortgagor hereby grants to Mortgagee a security
interest in all of Mortgagor's right, title and interest in the Renovation Funds
and irrevocably authorizes Mortgagee, following an Event of Default, to apply
any or all of the Renovation Funds to cure any Event of Default or, following
the acceleration of the Debt in accordance with Article VIII hereof, toward the
payment of the Debt, as Mortgagee shall, in its sole discretion, determine, but
without obligation to do so. Following (X) delivery to Mortgagee of copies of
any and all final certificates of occupancy or other certificates, licenses and
permits required for the ownership, occupancy and operation of the Property as
so renovated and (Z) commencement of the payment of Rent payable under the lease
or leases which replaced the Affected Leases without rebate, credit or other
concession granted by Mortgagor thereunder, Mortgagee shall return the balance
of the Renovation Funds not applied in accordance with the immediately preceding
sentence, if any, to Mortgagor.
<PAGE>
(d) Mortgagor represents and warrants to Mortgagee that (i) there are no
fixtures, machinery, apparatus, tools, equipment or articles of personal
property attached or appurtenant to, or located on, or used in connection with
the management, operation or maintenance of the Property, except for the
Equipment and equipment leased by Mortgagor for the management, operation or
maintenance of the Property in accordance with the Loan Documents; (ii) the
Equipment and the leased equipment constitutes all of the fixtures, machinery,
apparatus, tools, equipment and articles of personal property necessary to the
proper operation and maintenance of the Property; and (iii) all of the Equipment
is free and clear of all liens, except for the lien of this Mortgage and the
Permitted Encumbrances. All rights, title and interest of Mortgagor in and to
all extensions, improvements, betterment, renewals, appurtenances to, the
Property hereafter acquired by, or released to, Mortgagor or constructed,
assembled or placed by Mortgagor in the Property, and all changes and
substitutions of the security constituted thereby, shall be and, in each such
case, without any further mortgage, conveyance, assignment or other act by
Mortgagee or Mortgagor, shall become subject to the lien and security interest
of this Mortgage as fully and completely, and with the same effect, as though
now owned by Mortgagor and specifically described in this Mortgage, but at any
and all times Mortgagor shall execute and deliver to Mortgagee any documents
Mortgagee may reasonably deem necessary or appropriate for the purpose of
specifically subjecting the same to the lien and security interest of this
Mortgage.
(e) Notwithstanding the provisions of this Mortgage to the contrary,
Mortgagor shall have the right, at any time and from time to time, to remove and
dispose of Equipment which may have become obsolete or unfit for use or which is
no longer useful in the management, operation or maintenance of the Property.
Mortgagor shall promptly replace any such Equipment so disposed of or removed
with other Equipment of equal value and utility, free of any security interest
or superior title, liens or claims; except that, if by reason of technological
or other developments, replacement of the Equipment so removed or disposed of is
not necessary or desirable for the proper management, operation or maintenance
of the Property, Mortgagor shall not be required to replace the same. All such
replacements or additional equipment shall ne deemed to constitute "Equipment"
and shall be covered by the security interest herein granted.
8. Transfer or Encumbrance of the Property. (a) Except as permitted under
the terms and provisions of the Loan Agreement, Mortgagor shall not, without the
prior written consent of Mortgagee, sell, convey, alienate, mortgage, encumber,
pledge or otherwise transfer the Property or any part thereof, or permit the
Property or any part thereof to be sold, conveyed, alienated, mortgaged,
encumbered, pledged or otherwise transferred other than in connection with a
release of the Property pursuant to Section 2.4 of the Loan Agreement.
(b) Mortgagee shall not be required to demonstrate any actual impairment of
its security or any increased risk of default hereunder in order to declare the
Debt immediately due and payable upon Mortgagor's sale, conveyance, alienation,
mortgage, encumbrance, pledge or transfer of the Property without Mortgagee's
consent in instances where Mortgagee's consent is required. This provision shall
apply to every such sale, conveyance, alienation, mortgage, encumbrance, pledge
or transfer of the Property regardless of whether voluntary or not, or whether
or not Mortgagee has consented to any previous sale, conveyance, alienation,
mortgage, encumbrance, pledge or transfer of the Property.
(c) Mortgagee's consent to one sale, conveyance, alienation, mortgage,
encumbrance, pledge or transfer of the Property shall not be deemed to be a
waiver of Mortgagee's right to require such consent to any future occurrence of
same. Any sale, conveyance, alienation, mortgage, encumbrance, pledge or
transfer of the Property made in contravention of this paragraph shall be null
and void and of no force and effect.
(d) Mortgagor agrees to bear and shall pay or reimburse Mortgagee promptly
following demand for all reasonable expenses (including, without limitation,
reasonable attorneys' fees and disbursements, title search costs and title
insurance endorsement premiums) incurred by Mortgagee in connection with the
review, approval and documentation of any such sale, conveyance, alienation,
mortgage, encumbrance, pledge or transfer which requires Mortgagee's consent
under the Loan Documents.
9. Changes in Laws Regarding Taxation. If any law is enacted or adopted or
amended after the date of this Mortgage which deducts the Debt from the value of
the Property for the purpose of taxation or
<PAGE>
which imposes a tax, either directly or indirectly, on the Debt or Mortgagee's
interest in the Property, Mortgagor will pay such tax, with interest and
penalties thereon, if any. In the event Mortgagee is advised by counsel chosen
by it that the payment of such tax or interest and penalties by Mortgagor would
be unlawful or taxable to Mortgagee or unenforceable or provide the basis for a
defense of usury, then in any such event, Mortgagee shall have the option, by
written notice of not less than ninety (90) days, to declare the Debt
immediately due and payable.
10. No Credits on Account of the Debt. Mortgagor will not claim or demand
or be entitled to any credit or credits against the outstanding balance of the
Debt on account of Taxes or Other Charges assessed against the Property, or any
part thereof, and no deduction shall otherwise be made or claimed from the
assessed value of the Property, or any part thereof, by Mortgagor for real
estate tax purposes by reason of this Mortgage or the Debt. In the event such
claim, credit or deduction shall be required by law, Mortgagee shall have the
option, by written notice of not less than ninety (90) days, to declare the Debt
immediately due and payable.
11. Documentary Stamps. If at any time the United States of America, any
State thereof or any subdivision of any such State shall require revenue or
other stamps to be affixed to the Note or this Mortgage, or impose any other tax
or charge on the same, Mortgagor will pay for the same, with interest and
penalties thereon, if any.
12. Controlling Agreement. It is expressly stipulated and agreed to be the
intent of Mortgagor and Mortgagee at all times to comply with applicable state
law or applicable United States federal law (to the extent that it permits
Mortgagee to contract for, charge, take, reserve, or receive a greater amount of
interest than under state law) and that this Paragraph 12 shall control every
other covenant and agreement in this Mortgage and the other Loan Documents. If
the applicable law (state or federal) is ever judicially interpreted so as to
render usurious any amount called for under the Note or under any of the other
Loan Documents, or contracted for, charged, taken, reserved, or received with
respect to the Debt, or if Mortgagee's exercise of the option to accelerate the
maturity of the Note, or if any prepayment by Mortgagor results in Mortgagor
having paid any interest in excess of that permitted by applicable law, then it
is Mortgagor's and Mortgagee's express intent that all excess amounts
theretofore collected by Mortgagee shall be credited on the principal balance of
the Note and all other Debt (or, if the Note and all other Debt have been or
would thereby be paid in full, refunded to Mortgagor), and the provisions of the
Note, this Mortgage and the other Loan Documents immediately be deemed reformed
and the amounts thereafter collectible hereunder and thereunder reduced, without
the necessity of the execution of any new documents, so as to comply with the
applicable law, but so as to permit the recovery of the fullest amount otherwise
called for hereunder or thereunder. All sums paid or agreed to be paid to
Mortgagee for the use, forbearance, or detention of the Debt shall, to the
extent permitted by applicable law, be amortized, prorated, allocated, and
spread throughout the full stated term of the Debt until payment in full so that
the rate or amount of interest on account of the Debt does not exceed the
maximum lawful rate from time to time in effect and applicable to the Debt for
so long as the Debt is outstanding. Notwithstanding anything to the contrary
contained herein or in any of the other Loan Documents, it is not the intention
of Mortgagee to accelerate the maturity of any interest that has not accrued at
the time of such acceleration or to collect unearned interest at the time of
such acceleration.
13. Intentionally Omitted.
14. Further Acts, Etc. Upon foreclosure, the appointment of a receiver or
any other relevant action, Mortgagor will, at the cost of Mortgagor and without
expense to Mortgagee, cooperate fully and completely to effect the assignment or
transfer of any license, permit, agreement or any other right necessary or
useful to the operation of the Property. Mortgagor grants to Mortgagee an
irrevocable power of attorney coupled with an interest for the purpose of
exercising and perfecting any and all rights and remedies available to Mortgagee
at law and in equity, including, without limitation, such rights and remedies
available to Mortgagee pursuant to this paragraph.
<PAGE>
15. Recording of Mortgage, Etc. Mortgagor forthwith upon the execution and
delivery of this Mortgage and thereafter, from time to time, will cause this
Mortgage, and any security instrument creating a lien or security interest or
evidencing the lien hereof upon the Property and each instrument of further
assurance to be filed, registered or recorded in such manner and in such places
as may be required by any present or future law in order to publish notice of
and fully to protect the lien or security interest hereof upon, and the interest
of Mortgagee in, the Property. Mortgagor will pay all filing, registration or
recording fees, and all expenses incident to the preparation, execution and
acknowledgment of this Mortgage, any mortgage supplemental hereto, any security
instrument with respect to the Property and any instrument of further assurance,
and all federal, state, county and municipal, taxes, duties, imposts,
assessments and charges arising out of or in connection with the execution and
delivery of this Mortgage, any mortgage supplemental hereto, any security
instrument with respect to the Property or any instrument of further assurance,
except where prohibited by law so to do. Mortgagor shall hold harmless and
indemnify Mortgagee, its successors and assigns, against any liability incurred
by reason of the imposition of any tax on the making and recording of this
Mortgage.
16. Reporting Requirements. Mortgagor agrees to give prompt notice to
Mortgagee of the insolvency or bankruptcy filing of Mortgagor.
17. Events of Default. Each of the following events shall constitute an
event of default hereunder (each an "Event of Default"):
(a) if any portion of the Debt is not paid when due;
(b) if any of the Taxes or Other Charges are not paid prior to delinquency,
subject to Mortgagor's right to contest same in accordance with Section 5.1(b)
of the Loan Agreement;
(c) if the Policies are not kept in full force and effect;
(d) if, without Mortgagee's prior written consent, except as permitted
under the terms and provisions of the Loan Agreement, (A) Mortgagor transfers or
encumbers any portion of the Property or (B) any direct or indirect interest in
Mortgagor is transferred or assigned except as expressly permitted under
Section 6.1(j) of the Loan Agreement;
(e) if any representation or warranty of Mortgagor made herein or in any
other Loan Document or in any certificate, report, financial statement or other
instrument, agreement or document furnished by Mortgagor to Mortgagee in
connection with this Mortgage or any other Loan Document shall have been false
or misleading in any material respect as of the date the representation or
warranty was made;
(f) if Mortgagor shall make an assignment for the benefit of creditors, or
if Mortgagor shall generally not be paying its debts as they become due;
(g) if a receiver, liquidator or trustee of Mortgagor shall be appointed or
if Mortgagor shall be adjudicated a bankrupt or insolvent, or if any petition
for bankruptcy, reorganization or arrangement pursuant to federal bankruptcy
law, or any similar federal or state law, shall be filed by or against,
consented to, or acquiesced in by, Mortgagor or if any proceeding for the
dissolution or liquidation of Mortgagor shall be instituted; provided, however,
if such appointment, adjudication, petition or proceeding was involuntary and
not consented to by Mortgagor, upon the same not being discharged, stayed or
dismissed within sixty (60) days;
(h) if Mortgagor shall be in default beyond any notice or grace period, if
any, under any other mortgage or security agreement covering any part of the
Property whether it be superior or junior in lien to this Mortgage;
(i) if the Property becomes subject to any mechanic's, materialman's or
other lien and such lien is not discharged (by payment, bonding, or otherwise)
for ten (10) days, except a lien for real estate taxes and assessments not then
due and payable and liens contested in accordance with the Loan Agreement;
<PAGE>
(j) except as permitted in this Mortgage, if Mortgagor performs or permits
the performance of any material demolition or removal of any of the Improvements
without the prior consent of Mortgagee;
(k) if any Borrower shall default under any term, covenant, or provision of
the Note, the Loan Agreement, or any of the other Loan Documents, and such
default shall continue beyond any applicable cure periods contained in such
documents;
(l) if Mortgagor fails to cure a default under any other term, covenant or
provision of this Mortgage within ten (10) days after notice to Mortgagor, in
the case of any default which can be cured by the payment of a sum of money, or
for thirty (30) days after notice in the case of any other default; provided,
however, that if such non-monetary default is susceptible of cure but cannot
reasonably be cured within such 30-day period and provided further that
Mortgagor shall have commenced to cure such Default within such 30-day period
and thereafter diligently and expeditiously proceed to cure the same, such
30-day period shall be extended for an additional period of time as is
reasonably necessary for Mortgagor in the exercise of due diligence to cure such
default, such additional period not to exceed ninety (90) days;
(m) if an Event of Default as defined or described in any of the other Loan
Documents occurs, whether as to a Borrower or a Property.
18. Intentionally Omitted.
19. Right To Cure Defaults. Upon the occurrence and during the continuance
of any Event of Default, Mortgagee may, but without any obligation to do so and
without notice to or demand on Mortgagor and without releasing Mortgagor from
any obligation hereunder, make or do the same in such manner and to such extent
as Mortgagee may deem necessary to protect the security hereof. Mortgagee is
authorized to enter upon the Property for such purposes or appear in, defend, or
bring any action or proceeding to protect its interest in the Property or to
foreclose this Mortgage or collect the Debt, and the cost and expense thereof
(including reasonable attorneys' fees and disbursements to the extent permitted
by law), with interest thereon at the Default Rate for the period after notice
from Mortgagee that such cost or expense was incurred to the date of payment to
Mortgagee, shall constitute a portion of the Debt, shall be secured by this
Mortgage and the other Loan Documents and shall be due and payable to Mortgagee
upon demand.
20. Remedies. (a) Upon the occurrence of any Event of Default, Mortgagee
may take such action, without notice or demand, as Mortgagee deems advisable to
protect and enforce Mortgagee's rights against Mortgagor and in and to the
Property by Mortgagee, including, without limitation, the following actions,
each of which may be pursued concurrently or otherwise, at such time and in such
order as Mortgagee may determine, in its sole discretion, without impairing or
otherwise affecting the other rights and remedies of Mortgagee:
(i) declare the entire Debt to be immediately due and payable;
(ii) institute a proceeding or proceedings, judicial or nonjudicial, by
advertisement or otherwise, for the complete foreclosure of this Mortgage in
which case the Property or any interest therein may be sold for cash or upon
credit in one or more parcels or in several interests or portions and in any
order or manner;
(iii) with or without entry, to the extent permitted and pursuant to the
procedures provided by applicable law, institute proceedings for the partial
foreclosure of this Mortgage for the portion of the Debt then due and payable,
subject to the continuing lien of this Mortgage for the balance of the Debt not
then due;
<PAGE>
(iv) sell or cause to be sold for cash or upon credit the Property or any
part thereof and all estate, claim, demand, right, title and interest of
Mortgagor therein and rights of redemption thereof, pursuant to the power of
sale or otherwise, at one or more sales, as an entirety or in parcels, at such
time and place, upon such terms and after such notice thereof as may be required
or permitted by law. Subject to requirements and limits imposed by law,
Mortgagee may, from time to time postpone sale of all or any portion of the
Property by public announcement at such time and place of sale, and from time to
time may postpone the sale by public announcement at the time and place fixed by
the preceding postponement. The power of sale under this Mortgage shall not be
exhausted by any one or more sales (or attempts to sell) as to all or any
portion of the Property remaining unsold, but shall continue unimpaired until
all of the Property has been sold by exercise of the power of sale in this
Mortgage and all of the Debt has been paid and discharged in full. Any person,
including Mortgagor or Mortgagee may purchase at the sale;
(v) institute an action, suit or proceeding in equity for the specific
performance of any covenant, condition or agreement contained herein, or in any
of the other Loan Documents;
(vi) to the extent permitted by applicable law, recover judgment on the
Note either before, during or after any proceedings for the enforcement of this
Mortgage;
(vii) apply for the appointment of a trustee, receiver, liquidator or
conservator of the Property, without notice and without regard for the adequacy
of the security for the Debt and without regard for the solvency of the
Mortgagor or of any person, firm or other entity liable for the payment of the
Debt;
(viii) enforce Mortgagee's interest in the Leases and Rents and enter into
or upon the Property, either personally or by its agents, nominees or attorneys
and dispossess Mortgagor and its agents and servants therefrom, and thereupon
Mortgagee may (A) use, operate, manage, control, insure, maintain, repair,
restore and otherwise deal with all and every part of the Property and conduct
the business thereat; (B) complete any construction on the Property in such
manner and form as Mortgagee deems advisable; (C) make alterations, additions,
renewals, replacements and improvements to or on the Property; (D) exercise all
rights and powers of Mortgagor with respect to the Property, whether in the name
of Mortgagor or otherwise, including, without limitation, the right to make,
cancel, enforce or modify Leases, obtain and evict tenants, and demand, sue for,
collect and receive all Rents; and (E) apply the receipts from the Property to
the payment of the Debt, after deducting therefrom all expenses (including
reasonable attorneys' fees and disbursements) incurred in connection with the
aforesaid operations and all amounts necessary to pay the Taxes, insurance and
other charges in connection with the Property, as well as just and reasonable
compensation for the services of Mortgagee, its counsel, agents and employees;
(ix) require Mortgagor to vacate and surrender possession to Mortgagee of
the Property or to such receiver and, in default thereof, evict Mortgagor by
summary proceedings or otherwise or require Mortgagor to pay monthly in advance
to Mortgagee, or any receiver appointed to collect the Rents, the fair and
reasonable rental value for the use and occupation of any portion of the
Property occupied by Mortgagor; or
<PAGE>
(x) pursue such other rights and remedies as may be available at law or in
equity or under the Uniform Commercial Code, including, without limitation, the
right to receive and/or establish a lock box for all Rents and proceeds from the
Intangibles and any other receivables or rights to payments of Mortgagor
relating to the Property.In the event of a sale, by foreclosure or otherwise, of
less than all of the Property, this Mortgage shall continue as a lien on the
remaining portion of the Property.
(b) The proceeds of any sale made under or by virtue of this paragraph,
together with any other sums which then may be held by Mortgagee under this
Mortgage, whether under the provisions of this paragraph or otherwise, shall be
applied by Mortgagee to the payment of the Debt in such priority and proportion
as Mortgagee in its sole discretion shall deem proper, except as otherwise
required by law.
(c) Mortgagee may adjourn from time to time any sale by it to be made under
or by virtue of this Mortgage by announcement at the time and place appointed
for such sale or for such adjourned sale or sales; and, except as otherwise
provided by any applicable provision of law, Mortgagee, without further notice
or publication, may make such sale at the time and place to which the same shall
be so adjourned.
(d) Upon the completion of any sale or sales pursuant hereto, Mortgagee or
an officer of any court empowered to do so, shall execute and deliver to the
accepted purchaser or purchasers a good and sufficient instrument, or good and
sufficient instruments, conveying, assigning and transferring all estate, right,
title and interest in and to the property and rights sold. Mortgagee is hereby
irrevocably appointed the true and lawful attorney of Mortgagor, in its name and
stead, to make all necessary conveyances, assignments, transfers and deliveries
of the Property and rights so sold and for that purpose Mortgagee may execute
all necessary instruments of conveyance, assignment and transfer, and may
substitute one or more persons with like power, Mortgagor hereby ratifying and
confirming all that its said attorney or such substitute or substitutes shall
lawfully do by virtue hereof. Any sale or sales made under or by virtue of this
paragraph, whether made under the power of sale herein granted or under or by
virtue of judicial proceedings or of a judgment or decree of foreclosure and
sale, shall operate to divest all the estate, right, title, interest, claim and
demand whatsoever, whether at law or in equity, of Mortgagor in and to the
properties and rights so sold, and shall be a perpetual bar both at law and in
equity against Mortgagor and against any and all persons claiming or who may
claim the same, or any part thereof from, through or under Mortgagor.
(e) Upon any sale made under or by virtue of this paragraph, whether made
under a power of sale or under or by virtue of judicial proceedings or of a
judgment or decree of foreclosure and sale, Mortgagee may bid for and acquire
the Property or any part thereof and in lieu of paying cash therefor may make
settlement for the purchase price by crediting upon the Debt the net sales price
after deducting therefrom the expenses of the sale and costs of the action and
any other sums which Mortgagee is authorized to deduct under this Mortgage.
(f) No recovery of any judgment by Mortgagee and no levy of an execution
under any judgment upon the Property or upon any other property of any Borrower
shall affect in any manner or to any extent the lien of this Mortgage upon the
Property or any part thereof, or any liens, rights, powers or remedies of
Mortgagee hereunder, but such liens, rights, powers and remedies of Mortgagee
shall continue unimpaired as before.
(g) Mortgagee may terminate or rescind any proceeding or other action
brought in connection with its exercise of the remedies provided in this
Paragraph 20 at any time before the conclusion thereof, as determined in
Mortgagee's sole discretion and without prejudice to Mortgagee.
<PAGE>
(h) Mortgagee may resort to any remedies and the security given by the
Note, this Mortgage or in any of the other Loan Documents in whole or in part,
and in such portions and in such order as determined by Mortgagee's sole
discretion. No such action shall in any way be considered a waiver of any
rights, benefits or remedies evidenced or provided by the Note, this Mortgage or
in any of the other Loan Documents. The failure of Mortgagee to exercise any
right, remedy or option provided in the Note, this Mortgage or any of the other
Loan Documents shall not be deemed a waiver of such right, remedy or option or
of any covenant or obligation secured by the Note, this Mortgage or any of the
other Loan Documents. No acceptance by Mortgagee of any payment after the
occurrence of any Event of Default and no payment by Mortgagee of any obligation
for which Mortgagor is liable hereunder shall be deemed to waive or cure any
Event of Default with respect to Mortgagor, or Mortgagor's liability to pay such
obligation. No sale of all or any portion of the Property, no forbearance on the
part of Mortgagee, and no extension of time for the payment of the whole or any
portion of the Debt or any other indulgence given by Mortgagee to Mortgagor,
shall operate to release or in any manner affect the interest of Mortgagee in
the remaining Property or the liability of Mortgagor to pay the Debt. No waiver
by Mortgagee shall be effective unless it is in writing and then only to the
extent specifically stated. All costs and expenses of Mortgagee in exercising
its rights and remedies under this Paragraph 20 (including reasonable attorneys'
fees and disbursements to the extent permitted by law), shall be paid by
Mortgagor immediately upon notice from Mortgagee, with interest at the Default
Rate for the period after notice from Mortgagee and such costs and expenses
shall constitute a portion of the Debt and shall be secured by this Mortgage.
(i) The interests and rights of Mortgagee under the Note, this Mortgage or
any of the other Loan Documents shall not be impaired by any indulgence,
including (i) any renewal, extension or modification which Mortgagee may grant
with respect to any of the Debt, (ii) any surrender, compromise, release,
renewal, extension, exchange or substitution which Mortgagee may grant with
respect to the Property or any portion thereof; or (iii) any release or
indulgence granted to any maker, endorser, guarantor or surety of any of the
Debt.
21. Right of Entry. In addition to any other rights or remedies granted
under this Mortgage, Mortgagee and its agents shall have the right after
reasonable prior notice to Mortgagor to enter and inspect the Property at any
reasonable time during the term of this Mortgage. The reasonable cost of such
inspections or audits shall be borne by Mortgagor should Mortgagee reasonably
determine that an Event of Default exists, including the cost of all follow up
or additional investigations or inquiries deemed reasonably necessary by
Mortgagee. The reasonable cost of such inspections, if not paid for by Mortgagor
following demand, may be added to the principal balance of the sums due under
the Note and this Mortgage and shall bear interest thereafter until paid at the
Default Rate.
22. Security Agreement. This Mortgage is both a real property deed of trust
and a "security agreement" within the meaning of the Uniform Commercial Code.
The Property includes both real and personal property and all other rights and
interests, whether tangible or intangible in nature, of Mortgagor in the
Property. Mortgagor by executing and delivering this Mortgage has granted and
hereby grants to Mortgagee, as security for the Debt, a security interest in the
Property to the full extent that the Property may be subject to the Uniform
Commercial Code (said portion of the Property so subject to the Uniform
Commercial Code being called in this paragraph the "Collateral"). Mortgagor
hereby agrees with Mortgagee to execute and deliver to Mortgagee, in form and
substance satisfactory to Mortgagee, such financing statements and such further
assurances as Mortgagee may from time to time, reasonably consider necessary to
create, perfect, and preserve Mortgagee's security interest herein granted. This
Mortgage shall also constitute a "fixture filing" for the purposes of the
Uniform Commercial Code. As such, this Mortgage covers all items of the
Collateral that are or are to become fixtures. Information concerning the
security interest herein granted may be obtained from the parties at the
addresses of the parties set forth in the first paragraph of this Mortgage. If
an Event of Default shall occur, Mortgagee, in addition to any other rights and
remedies which it may have, shall have and may exercise immediately and without
demand, any and all rights and remedies granted to a secured party upon default
under the Uniform Commercial Code, including, without limiting the generality of
the foregoing, the right to take possession of the Collateral or any part
thereof, and to take such other measures as Mortgagee may deem necessary for the
care, protection and preservation of the Collateral. Upon request or demand of
Mortgagee, Mortgagor shall at its expense assemble the Collateral and make it
available to Mortgagee at a convenient place acceptable to Mortgagee. Mortgagor
shall pay to Mortgagee on demand any and all expenses, including attorneys' fees
and
<PAGE>
disbursements, incurred or paid by Mortgagee in protecting the interest in
the Collateral and in enforcing the rights hereunder with respect to the
Collateral. Any notice of sale, disposition or other intended action by
Mortgagee with respect to the Collateral sent to Mortgagor in accordance with
the provisions hereof at least ten (10) days prior to such action, shall
constitute commercially reasonable notice to Mortgagor. The proceeds of any
disposition of the Collateral, or any part thereof, may be applied by Mortgagee
to the payment of the Debt in such priority and proportions as Mortgagee in its
sole discretion shall deem proper. In the event of any change in name, identity
or structure of any Mortgagor, such Mortgagor shall notify Mortgagee thereof and
promptly after request shall execute, file and record such Uniform Commercial
Code forms as are necessary to maintain the priority of Mortgagee's lien upon
and security interest in the Collateral, and shall pay all expenses and fees in
connection with the filing and recording thereof. If Mortgagee shall require the
filing or recording of additional Uniform Commercial Code forms or continuation
statements, Mortgagor shall, promptly after request, execute, file and record
such Uniform Commercial Code forms or continuation statements as Mortgagee shall
deem necessary, and shall pay all expenses and fees in connection with the
filing and recording thereof, it being understood and agreed, however, that no
such additional documents shall increase Mortgagor's obligations under the Note,
this Mortgage and the other Loan Documents. Mortgagor hereby irrevocably
appoints Mortgagee as its attorney-in-fact, coupled with an interest, to file
with the appropriate public office on its behalf any financing or other
statements signed only by Mortgagee, as secured party, in connection with the
Collateral covered by this Mortgage.
23. Actions and Proceedings. If Mortgagor fails to act within a reasonable
time, Mortgagee has the right to appear in and defend any action or proceeding
brought with respect to the Property and to bring any action or proceeding, in
Mortgagee's name or, if required by law, in the name and on behalf of Mortgagor,
which Mortgagee, in its reasonable discretion, decides should be brought to
protect their interest in the Property. Mortgagee shall, at its option, be
subrogated to the lien of any mortgage or other security instrument discharged
in whole or in part by the Debt, and any such subrogation rights shall
constitute additional security for the payment of the Debt.
24. Waiver of Setoff and Counterclaim. All amounts due under this Mortgage,
the Note and the other Loan Documents shall be payable without setoff,
counterclaim or any deduction whatsoever. Mortgagor hereby waives the right to
assert a setoff, counterclaim (other than a mandatory or compulsory
counterclaim) or deduction in any action or proceeding in which Mortgagee is a
participant, or arising out of or in any way connected with this Mortgage, the
Note, any of the other Loan Documents, or the Debt.
25. Recovery of Sums Required to be Paid. Mortgagee shall have the right
from time to time to take action to recover any sum or sums which constitute a
part of the Debt as the same become due, without regard to whether or not the
balance of the Debt shall be due, and without prejudice to the right of
Mortgagee thereafter to bring an action of foreclosure, or any other action, for
a default or defaults by Mortgagor existing at the time such earlier action was
commenced.
26. Marshalling and Other Matters. (a) Mortgagor hereby waives, to the
extent permitted by law, the benefit of all appraisement, valuation, stay,
extension, reinstatement and redemption laws now or hereafter in force and all
rights of marshalling in the event of any sale hereunder of the Property or any
part thereof or any interest therein. Further, Mortgagor hereby expressly waives
any and all rights of redemption from sale under any order or decree of
foreclosure of this Mortgage on behalf of Mortgagor, and on behalf of each and
every person acquiring any interest in or title to the Property subsequent to
the date of this Mortgage and on behalf of all persons to the extent permitted
by applicable law.
(b) Mortgagor acknowledges that this Mortgage secures the Debt. Mortgagor
agrees that the lien of this Mortgage shall be absolute and unconditional and
shall not in any manner be affected or impaired by any acts or omissions
whatsoever of Mortgagee and, without limiting the generality of the foregoing,
the lien hereof shall not be impaired by any acceptance by Mortgagee of any
other security for any portion of the Debt, or by any failure, neglect or
omission on the part of Mortgagee to realize upon or protect any portion of the
Debt or any collateral security therefor. The lien of this Mortgage shall not in
any manner be impaired or affected by any release (except as to the property
released), sale, pledge, surrender, compromise, settlement, renewal, extension,
indulgence, alteration, changing, modification or disposition of any portion of
the Debt or of any of the collateral security therefor.
<PAGE>
27. Intentionally Omitted.
28. Intentionally Omitted.
29. Intentionally Omitted.
30. Intentionally Omitted.
31. Indemnification. (a) In addition, and without limitation, to any other
provision of this Mortgage or any other Loan Document, Mortgagor shall protect,
indemnify and save harmless Mortgagee and its successors and assigns, and their
agents, employees, officers and directors, from and against any and all
liabilities, obligations, claims, damages, penalties, causes of action, costs
and expense (including, without limitation, reasonable attorneys' fees and
disbursements, whether incurred within or outside the judicial process), imposed
upon or incurred by or asserted against Mortgagee and its assigns, or any of
their agents, employees, officers or directors, by reason of (a) ownership of
this Mortgage, the Assignment of Lease, the Property or any part thereof or any
interest therein or receipt of any Rents; (b) any accident, injury to or death
of any person or loss of or damage to property occurring in, on or about the
Property or any part thereof or on the adjoining sidewalks, curbs, parking
areas, streets or ways; (c) any use, nonuse or condition in, on or about, or
possession, alteration, repair, operation, maintenance or management of, the
Property or any part thereof or on the adjoining sidewalks, curbs, parking
areas, or ways; (d) any failure on the part of Mortgagor to perform or comply
with any of the terms of this Mortgage or the Assignment of Lease; (e)
performance of any labor or services or the furnishing of any materials or other
property in respect of the Property or any part thereof; (f) any claim by
brokers, finders or similar Persons claiming to be entitled to a commission in
connection with any Lease or other transaction involving the Property or any
part thereof; (g) any Taxes or Other Charges including, without limitation, any
Taxes or Other Charges attributable to the execution, delivery, filing, or
recording of any Loan Document, Lease or memorandum thereof; (h) any lien or
claim arising on or against the Property or any part thereof under any Legal
Requirement or any liability asserted against Mortgagee with respect thereto; or
(i) the claims of any lessee or any Person acting through or under any lessee or
otherwise arising under or as a consequence of any Lease. Notwithstanding the
foregoing provisions of this Section 31 to the contrary, Mortgagor shall have no
obligation to indemnify Mortgagee pursuant to this Section 31 for liabilities,
obligations, claims, damages, penalties, causes of action, costs and expenses
(1) which result from Mortgagee's, and its successors' or assigns' willful
misconduct or gross negligence or, (2) which are attributable to acts or events
which occur after the payment in full of the Debt or earlier termination of this
Mortgage (except to the extent fairly attributable to acts or events or
liabilities or damages occurring or accruing prior thereto and except as may be
provided in any other Loan Document), (3) resulting from a transfer by Mortgagee
of all or any part of its interest in this Mortgage, the Note, the other Loan
Documents or the Property, other than any such transfer either required by this
Mortgage or any other Loan Document or made while an Event of Default shall have
occurred and be continuing, (4) for Mortgagee's income franchise, net revenue,
capital levy, estate, inheritance or succession taxes and (5) which arise under
or are connected to the Securities Act or any other securities laws, rules or
regulations. Mortgagee shall credit against any payments due under this Section
31 any insurance recoveries actually received by beneficiary in respect of the
related claim under or from insurance paid for by Mortgagor or assigned to
Mortgagee by Mortgagor.
(b) In the event that any action, suit or proceeding shall be brought
against Mortgagee for which Mortgagee is indemnified herein, Mortgagee shall
notify Mortgagor of the commencement thereof, and Mortgagor shall be entitled,
at its sole cost and expense, acting through counsel reasonably acceptable to
Mortgagee, to participate in, and, to the extent that Mortgagor desires to,
assume and control the defense thereof; provided, however, that Mortgagor shall
have acknowledged in writing its obligation to fully indemnify Mortgagee
hereunder in respect of such action, suit or proceeding, and, provided further,
that Mortgagor shall not be entitled to participate in the defense of any such
action, suit or proceeding if (i) in the reasonable opinion of Mortgagee,
<PAGE>
(x) such action, suit or proceeding involves any risk of imposition of
criminal liability or any risk of civil liability on Mortgagee or will involve a
risk of the sale, forfeiture or loss of, or the creation of any lien (other than
a Permitted Encumbrance) on the Property or any part thereof unless Mortgagor
shall have posted a bond or other security satisfactory to Mortgagee in respect
to such risk except with respect to any risk of imposition of criminal liability
on Mortgagee as to which Mortgagor shall not be entitled to so participate, (y)
the control of such action, suit or proceeding would involve a bona fide
conflict of interest or (z) such action, suit or proceeding involves claims,
obligations, costs or expenses which exceed an amount equal to the product of
(A) $40,000,000 and (B) a fraction, the numerator of which is (1) the aggregate
Initial Allocated Loan Amounts less (2) the aggregate Initial Allocated Loan
Amounts of all Properties which have been Released from the liens of the
Mortgages as of the date of such determination, and the denominator of which is
the aggregate Initial Allocated Loan Amounts (which amount is herein referred to
as the "Litigation Threshold"), (ii) such proceeding involves claims,
obligations, costs or expenses not fully indemnified by Mortgagor which
Mortgagor and Mortgagee have been unable to sever from the indemnified claim(s),
(iii) an Event of Default has occurred and is continuing, (iv) such action, suit
or proceeding involves matters which are unrelated to the overall transaction
contemplated by this Mortgage and the other Loan Documents and if determined
adversely could be detrimental to the interests of Mortgagee notwithstanding
indemnification by Mortgagor. Mortgagee may participate in a reasonable manner
at its own expense and with its own counsel in any proceeding conducted by
Mortgagor in accordance with the foregoing. The party controlling any such
action, suit or proceeding shall keep the other party or parties hereto fully
informed of the status of any such proceeding.
(c) In the event that, pursuant to Subsection (b)(i)(z) of this Section 31,
Mortgagor is not entitled to assume and control the defense of any such action,
suit or proceeding, Mortgagor shall be permitted to assume and control such
defense if Mortgagor either (i) delivers to Mortgagee an opinion letter from
counsel reasonably acceptable to Mortgagee or a certificate or opinion from such
other Person as shall be acceptable to Mortgagee that, in such counsel's or
other Person's opinion, there is no reasonable likelihood that (A) the claimant
would prevail on such action, suit or proceeding or (B) Mortgagee's potential,
uninsured liability would not exceed the Litigation Threshold, which opinion or
certificate shall be in form and substance satisfactory to Mortgagee or (ii)
Mortgagor executes and delivers an agreement with Mortgagee, in form and
substance satisfactory to Mortgagee, that Mortgagor's liability for fully
indemnifying Mortgagee in respect of such action, suit or proceeding shall be a
recourse obligation of Mortgagor not subject to the provisions of Section 50
hereof.
(d) Each of Mortgagor and Mortgagee shall, at Mortgagor's sole cost and
expense, make available to the other party such information and documents
reasonably requested by the other party as are necessary or advisable for the
other party to participate in any action, suit or proceeding to the extent
permitted by this Section 31. Unless an Event of Default shall have occurred and
be continuing, Mortgagee shall not enter into any settlement or other compromise
with respect to any claim which is entitled to be indemnified under this Section
31 without five (5) days' prior written notice to Mortgagor unless Mortgagee
waives its right to be indemnified under this Section 31 with respect to such
claim. Upon payment in full of any claim by Mortgagor pursuant to this Section
31, to or on behalf of Mortgagee, Mortgagor, without any further action, shall
be subrogated to any and all claims that Mortgagee may have relating thereto
(other than claims in respect of insurance policies maintained by Mortgagee at
its own expense), and Mortgagee shall execute such instruments of assignment and
conveyance, evidence of claims and payment and such other documents, instruments
and agreements as may be reasonably necessary to preserve any such claims and
otherwise cooperate with Mortgagor and give such further assurances as are
reasonably necessary or advisable to enable Mortgagor to pursue such claims
vigorously. Any amount payable to Mortgagee pursuant to this Section 31 shall be
paid by Mortgagor to the indemnified party promptly upon (i) the adverse
determination of such action, suit or proceeding against the indemnified party
if, pursuant to this Section 31, Mortgagor assumed and controlled the defense
thereof, or (ii) Mortgagor's receipt of a written demand therefor from
Mortgagee, accompanied by a written statement describing the basis for such
indemnity and the computation of the amount so payable.
<PAGE>
Any amounts payable to Mortgagee by reason of the application of this
Section 31 shall constitute a part of the Debt secured by the Mortgages and
other Loan Documents and shall become immediately due and payable and shall bear
interest at the Default Rate from the date the liability, obligation, claim,
cost or expense is sustained by the indemnified party, until paid. The
provisions of this Section 31 shall survive the termination of this Mortgage and
the other Loan Documents whether by repayment of the Debt, foreclosure or
delivery of a deed in lieu thereof, assignment or otherwise.
32. Notices. All notices, consents, approvals and requests required or
permitted hereunder or under any other Loan Document shall be given in writing
and shall be effective for all purposes if hand delivered or sent by (a)
certified or registered United States mail, postage prepaid, or (b) expedited
prepaid delivery service, either commercial or United States Postal Service,
with proof of attempted delivery, addressed as follows (or at such other address
and person as shall be designated from time to time by any party hereto, as the
case may be, in a written notice to the other parties hereto in the manner
provided for in this Section):
If to Mortgagee:
Nomura Asset Capital Corporation
Two World Financial Center
Building B
New York, New York 10281
Attention: Barry Funt
with copies to:
Nomura Asset Capital Corporation
600 East Las Colinas Boulevard
Suite 300
Irving, Texas 75039
and:
Nomura Asset Capital Corporation
311 South Wacker Drive
Suite 5400
Chicago, Illinois 60601
Attention: David Murdoch
If to Mortgagor:
c/o Prime Retail, L.P.
100 East Pratt Street, 19th Floor
Baltimore, Maryland 21202
Attention: Steven S. Gothelf
with copies to:
c/o Prime Retail, L.P.
100 East Pratt Street, 19th Floor
Baltimore, Maryland 21202
Attention: C. Alan Schroeder
and
<PAGE>
Winston & Strawn
35 West Wacker Drive
Chicago, Illinois 60601
Attention: James D. Burton
If to Mortgagor:
c/o Horizon Group Properties, Inc.
5000 Hakes Drive
Norton Shores, Michigan 49441
Attention: Chairman
with copies to:
c/o Horizon Group Properties, Inc.
5000 Hakes Drive
Norton Shores, Michigan 49441
Attention: Chief Executive
and
<PAGE>
Winston & Strawn
35 West Wacker Drive
Chicago, Illinois 60601
Attention: Wayne D. Boberg
A notice shall be deemed to have been given: in the case of hand delivery,
at the time of delivery; in the case of registered or certified mail, when
delivered or the first attempted delivery on a Business Day; or in the case of
expedited prepaid delivery, upon the first attempted delivery on a Business Day.
33. Authority. (a) Mortgagor (and the undersigned representative of
Mortgagor, if any) represent and warrant that it (or they, as the case may be)
has full power, authority and right to execute, deliver and perform its
obligations pursuant to this Mortgage, and to mortgage, give, grant, bargain,
sell, alien, enfeoff, convey, confirm, warrant, pledge, hypothecate and assign
the Property pursuant to the terms hereof and to keep and observe all of the
terms of this Mortgage on Mortgagor's part to be performed; and (b) Mortgagor
represents and warrants that Mortgagor is not a "foreign person" within the
meaning of Section 1445(f)(3) of the Internal Revenue Code of 1986, as amended
and the related Treasury Department regulations, including temporary
regulations.
34. Waiver of Notice. Mortgagor shall not be entitled to any notices of any
nature whatsoever from Mortgagee except with respect to matters for which this
Mortgage or any other Loan Document specifically and expressly provides for the
giving of notice by Mortgagee to Mortgagor and except with respect to matters
for which Mortgagee is required by applicable law to give notice. To the extent
permitted by applicable law, Mortgagor hereby expressly waives the right to
receive any notice from Mortgagee with respect to any matter for which this
Mortgage or other Loan Document does not specifically and expressly provide for
the giving of notice by Mortgagee to Mortgagor.
35. Intentionally Omitted.
36. Sole Discretion of Mortgagee. Wherever pursuant to this Mortgage,
Mortgagee exercises any right given to it to consent or not consent or approve
or disapprove, or any arrangement or term is to be satisfactory to Mortgagee,
the decision of Mortgagee to consent or not consent, to approve or disapprove or
to decide that arrangements or terms are satisfactory or not satisfactory shall
be in the sole discretion of Mortgagee and shall be final and conclusive, except
as may be otherwise expressly and specifically provided herein.
37. Non-Waiver. The failure of Mortgagee to insist upon strict performance
of any term hereof shall not be deemed to be a waiver of any term of this
Mortgage. Mortgagor shall not be relieved of Mortgagor's obligations hereunder
by reason of (a) the failure of Mortgagee to comply with any request of
Mortgagor to take any action to foreclose this Mortgage or otherwise enforce any
of the provisions hereof or of the Note, or any of the other Loan Documents, (b)
except in connection with the release of this Mortgage or the full repayment (or
complete defeasance) of the Debt, the release, regardless of consideration, any
collateral securing the Debt or of any person other than Mortgagor liable for
the Debt or any portion thereof, or (c) any agreement or stipulation by
Mortgagee extending the time of payment or otherwise modifying or supplementing
the terms of the Note, this Mortgage or any of the other Loan Documents.
Mortgagee may resort for the payment of the Debt to any other security held by
Mortgagee in such order and manner as Mortgagee, in its sole discretion, may
elect. Mortgagee may take action to recover the Debt, or any portion thereof, or
to enforce any covenant hereof without prejudice to the right of Mortgagee
thereafter to foreclose this Mortgage. The rights and remedies of Mortgagee
under this Mortgage shall be separate, distinct and cumulative and none shall be
given effect to the exclusion of the others. No act of Mortgagee shall be
construed as an election to proceed under any one provision herein to the
exclusion of any other provision. Mortgagee shall not be limited exclusively to
the rights and remedies herein stated but shall be entitled to every right and
remedy now or hereafter afforded at law or in equity except as such rights may
be expressly limited herein or in the other Loan Documents.
<PAGE>
38. No Oral Change. This Mortgage, and any provisions hereof, may not be
modified, amended, waived, extended, changed, discharged or terminated orally or
by any act or failure to act on the part of Mortgagor or Mortgagee, but only by
an agreement in writing signed by the party against whom enforcement of any
modification, amendment, waiver, extension, change, discharge or termination is
sought.
39. Liability. If Mortgagor consists of more than one person, the
obligations and liabilities of each such person hereunder shall be joint and
several. Subject to the provisions hereof requiring Mortgagee's consent to any
transfer of the Property, this Mortgage shall be binding upon and inure to the
benefit of Mortgagor and Mortgagee and their respective successors and assigns
forever.
40. Inapplicable Provisions. If any term, covenant or condition of the Note
or this Mortgage is held to be invalid, illegal or unenforceable in any respect,
the Note and this Mortgage shall be construed without such provision.
41. Headings, Etc. The headings and captions of various paragraphs of this
Mortgage are for convenience of reference only and are not to be construed as
defining or limiting, in any way, the scope or intent of the provisions hereof.
42. Duplicate Originals. This Mortgage may be executed in any number of
duplicate originals and each such duplicate original shall be deemed to be an
original.
43. Definitions. Unless the context clearly indicates a contrary intent or
unless otherwise specifically provided herein, words used in this Mortgage may
be used interchangeably in singular or plural form and the word "Mortgagor"
shall mean "each Mortgagor and any subsequent owner or owners of the Property or
any part thereof or any interest therein," the word "Mortgagee" shall mean
"Mortgagee and any subsequent holder of the Note," the word "Note" shall mean
"the Note and any other evidence of indebtedness secured by this Mortgage," the
word "person" shall include an individual, corporation, partnership, trust,
unincorporated association, government, governmental authority, and any other
entity, the words "Property" shall include any portion of the Property and any
interest therein which has not been released from the lien of this Mortgage and
the words "attorneys' fees" shall include any and all recorded attorneys' fees,
paralegal and law clerk fees, including, without limitation, fees at the
pre-trial, trial and appellate levels incurred or paid by Mortgagee in
protecting its interest in the Property and Collateral and enforcing its rights
hereunder. Whenever the context may require, any pronouns used herein shall
include the corresponding masculine, feminine or neuter forms, and the singular
form of nouns and pronouns shall include the plural and vice versa.
44. Homestead. Mortgagor hereby waives and renounces all homestead and
exemption rights provided by the Constitution and the laws of the United States
and of any state, in and to the Property as against the collection of the Debt,
or any part hereof.
45. Assignments. Mortgagee shall have the right to assign or transfer its
rights under this Mortgage provided that no such assignment or transfer shall
increase, decrease or otherwise affect Mortgagor's obligations under this
Mortgage or the other Loan Documents. Any assignee or transferee shall be
entitled to all the benefits afforded Mortgagee under this Mortgage.
46. Waiver of Jury Trial. MORTGAGOR AND, BY ITS ACCEPTANCE HEREOF,
MORTGAGEE, EACH HEREBY AGREES NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE
OF RIGHT BY JURY, AND WAIVES ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT
ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST WITH REGARD TO THE NOTE, THIS
MORTGAGE, OR THE OTHER LOAN DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM OR OTHER
ACTION ARISING IN CONNECTION THEREWITH. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS
GIVEN KNOWINGLY AND VOLUNTARILY BY MORTGAGOR AND MORTGAGEE, AND IS INTENDED TO
ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A
TRIAL BY JURY WOULD OTHERWISE ACCRUE. EACH PARTY IS HEREBY AUTHORIZED TO FILE A
COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER
BY THE OTHER PARTY.
<PAGE>
47. Miscellaneous. (a) Any consent or approval by Mortgagee in any single
instance shall not be deemed or construed to be Mortgagee's consent or approval
in any like matter arising at a subsequent date, and the failure of Mortgagee to
promptly exercise any right, power, remedy, consent or approval provided herein
or at law or in equity shall not constitute or be construed as a waiver of the
same nor shall Mortgagee be estopped from exercising such right, power, remedy,
consent or approval at a later date. Any consent or approval requested of and
granted by Mortgagee pursuant hereto shall be narrowly construed to be
applicable only to the Person and the matter identified in such consent or
approval and no third party shall claim any benefit by reason thereof, and any
such consent or approval shall not be deemed to constitute Mortgagee a venturer
or partner with Mortgagor nor shall privity of contract be presumed to have been
established with any such third party. If Mortgagee deems reasonably necessary
to retain assistance of persons, firms or corporations (including, without
limitation, attorneys, title insurance companies, appraisers, engineers and
surveyors) with respect to a request for consent or approval, Mortgagor shall
reimburse Mortgagee for all costs reasonably incurred in connection with the
employment of such persons, firms or corporations.
(b) Mortgagor covenants and agrees that during the term of this Mortgage,
unless Mortgagee shall have previously consented in writing, (i) Mortgagor will
take no action that would cause it to become an "employee benefit plan" as
defined in 29 C.F.R. Section 2510.3-101, or "assets of a governmental plan"
subject to regulation under the state statutes, and (ii) Mortgagor will not
sell, assign or transfer the Property, or any portion thereof or interest
therein, to any transferee that does not execute and deliver to Mortgagee its
written assumption of the obligations of this covenant.
(c) The Loan Documents contain the entire agreement between Mortgagor and
Mortgagee relating to or connected with the Loan. Any other agreements relating
to or connected with the Loan not expressly set forth in the Loan Documents are
null and void and superseded in their entirety by the provisions of the Loan
Documents.
48. Defeasance; Release of this Mortgage. This Mortgage will be satisfied
and discharged of record by Mortgagee in accordance with the terms and
provisions set forth in Sections 2.3 and 2.4 of the Loan Agreement.
49. No Election of Remedies. (a) Without limiting any other right or
remedy provided to Mortgagee in this Mortgage or the other Loan Documents, in
the case of an Event of Default (i) Mortgagee shall have the right to pursue all
of its rights and remedies under this Mortgage and the Loan Documents, at law
and/or in equity, in one proceeding, or separately and independently in separate
proceedings from time to time, as Mortgagee, in its sole and absolute
discretion, shall determine from time to time, (ii) Mortgagee shall not be
required to either marshall assets, sell the Property in any particular order of
alienation (and may sell the same simultaneously and together or separately), or
be subject to any "one action" or "election of remedies" law or rule with
respect to the Property, (iii) the exercise by Mortgagee of any remedies against
any one item of Property will not impede Mortgagee from subsequently or
simultaneously exercising remedies against any other item of Property, (iv) all
liens and other rights, remedies or privileges provided to Mortgagee herein
shall remain in full force and effect until Mortgagee has exhausted all of its
remedies against the Property and all Property has been foreclosed, sold and/or
otherwise realized upon in satisfaction of the Debt, and (v) Mortgagee may
resort for the payment of the Debt to any security held by Mortgagee in such
order and manner as Mortgagee, in its discretion, may elect and Mortgagee may
take action to recover the Debt, or any portion thereof, or to enforce any
covenant hereof without prejudice to the right of Mortgagee thereafter to
foreclose this Mortgage.
(b) Without notice to or consent of Mortgagor and without impairment of the
lien and rights created by this Mortgage, Mortgagee may, at any time (in its
sole and absolute discretion, but Mortgagee shall have no obligation to),
execute and deliver to Mortgagor a written instrument releasing and reconveying
all or a portion of the lien of this Mortgage as security for any or all of the
obligations of Mortgagor now existing or hereafter arising under or in respect
of the Note, the Loan Agreement and each of the other Loan Documents, whereupon
following the execution and delivery by Mortgagee to Mortgagor of any such
written instrument of release, this Mortgage shall no longer secure such
obligations of Mortgagor so released.
<PAGE>
50. Exculpation. [Notwithstanding anything herein to the contrary,
Mortgagee shall not enforce the liability and obligations contained in the Note,
the Loan Agreement, this Mortgage or the other Loan Documents except as provided
in Section 9.4 of the Loan Agreement.][THIS PARAGRAPH WILL BE DELETED FOR BRIDGE
LOAN MORTGAGES]
51. Governing Law. WITH RESPECT TO MATTERS RELATING TO THE CREATION,
PERFECTION AND PROCEDURES RELATING TO THE ENFORCEMENT (INCLUDING NON-JUDICIAL
FORECLOSURE OF LIENS) OF THIS MORTGAGE, THIS MORTGAGE SHALL BE GOVERNED BY, AND
BE CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE IN WHICH THE PROPERTY IS
LOCATED WITHOUT REGARD TO CONFLICT OF LAW PROVISIONS THEREOF. IT IS UNDERSTOOD
THAT, EXCEPT AS EXPRESSLY SET FORTH ABOVE IN THIS PARAGRAPH AND TO THE FULLEST
EXTENT PERMITTED BY THE LAW OF SUCH STATE, THE LAW OF THE STATE OF ILLINOIS
SHALL GOVERN ALL MATTERS RELATING TO THIS MORTGAGE AND THE OTHER LOAN DOCUMENTS
AND ALL OF THE INDEBTEDNESS OR OBLIGATIONS ARISING HEREUNDER OR THEREUNDER.
MORTGAGOR, AND, BY ITS ACCEPTANCE HEREOF, MORTGAGEE, EACH HEREBY SUBMITS TO
PERSONAL JURISDICTION IN THE STATE OF ILLINOIS AND THE FEDERAL COURTS OF THE
UNITED STATES OF AMERICA LOCATED IN THE STATE OF ILLINOIS (AND ANY APPELLATE
COURTS TAKING APPEALS THEREFROM) FOR THE ENFORCEMENT OF SUCH PARTY'S OBLIGATIONS
HEREUNDER AND WAIVES ANY AND ALL PERSONAL RIGHTS UNDER THE LAW OF ANY OTHER
STATE TO OBJECT TO JURISDICTION WITHIN SUCH STATE FOR THE PURPOSES OF SUCH
ACTION, SUIT, PROCEEDING OR LITIGATION TO ENFORCE SUCH OBLIGATIONS OF SUCH
PARTY. MORTGAGOR, AND, BY ITS ACCEPTANCE HEREOF, MORTGAGEE, EACH HEREBY WAIVES
AND AGREES NOT TO ASSERT, AS A DEFENSE IN ANY ACTION, SUIT OR PROCEEDING ARISING
OUT OF OR RELATING TO THIS MORTGAGE (A) THAT IT IS NOT SUBJECT TO SUCH
JURISDICTION OR THAT SUCH ACTION, SUIT OR PROCEEDING MAY NOT BE BROUGHT OR IS
NOT MAINTAINABLE IN THOSE COURTS OR THAT THIS MORTGAGE MAY NOT BE ENFORCED IN OR
BY THOSE COURTS OR THAT IT IS EXEMPT OR IMMUNE FROM EXECUTION, (B) THAT THE
ACTION, SUIT OR PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM OR (C) THAT THE
VENUE OF THE ACTION, SUIT OR PROCEEDING IS IMPROPER. IN THE EVENT ANY SUCH
ACTION, SUIT, PROCEEDING OR LITIGATION IS COMMENCED, MORTGAGOR, AND, BY ITS
ACCEPTANCE HEREOF, MORTGAGEE, EACH AGREES THAT SERVICE OF PROCESS MAY BE MADE,
AND PERSONAL JURISDICTION OVER SUCH PARTY OBTAINED, BY SERVICE OF A COPY OF THE
SUMMONS, COMPLAINT AND OTHER PLEADINGS REQUIRED TO COMMENCE SUCH LITIGATION BY
CERTIFIED MAIL, RETURN RECEIPT REQUESTED UPON SUCH PARTY AT THE APPLICABLE
ADDRESS SET FORTH IN SECTION 32 ABOVE. MORTGAGOR, AND, BY ITS ACCEPTANCE HEREOF,
MORTGAGEE, EACH HEREBY EXPRESSLY WAIVES ANY AND ALL RIGHTS TO TRIAL BY JURY IN
ANY ACTION OR PROCEEDING RELATED TO THE ENFORCEMENT OF THIS MORTGAGE.
52. Declaration of Subordination. At the option of Mortgagee, this Mortgage
shall become subject and subordinate, in whole or in part (but not with respect
to priority of entitlement to insurance proceeds or any condemnation proceeds),
to any and all leases of all or any part of the Property upon the execution by
Mortgagee and recording thereof, at any time hereafter in the appropriate
official records of the County wherein the Property are situated, of a
unilateral declaration to that effect.
53. State Specific Rider. The provisions of the State Specific Rider
attached hereto as Exhibit B are hereby incorporated herein by reference.
<PAGE>
IN WITNESS WHEREOF, Mortgagor has executed this instrument the day and year
first above written.
[_________________________], a Delaware [____________]
By: Prime Retail, L.P., a Delaware limited partnership, its
[_________]
By: Prime Retail, Inc., a Maryland corporation, its
general partner
By:________________________________
Name:
Title:
<PAGE>
STATE OF )
) ss.:
COUNTY OF )
This instrument has been acknowledged before me on this _____ day of
, 1998, by ____________, the __________ of Prime Retail, Inc., a
Maryland corporation, in its capacity as the general partner of Prime Retail,
L.P., a Delaware limited partnership, in its capacity as _______________ of
_____________________ on behalf of such entity.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal of office
this ____ day of , 1998.
_____________________________
Notary Public
[Notarial Seal]
<PAGE>
EXHIBIT A
Legal Description
<PAGE>
EXHIBIT B
Rider
EXHIBIT 10.3
LOAN AGREEMENT
LOAN AGREEMENT dated as of June 15, 1998 between BUCKEYE FACTORY SHOPS
LIMITED PARTNERSHIP, a Delaware limited partnership ("Buckeye Borrower"), LATHAM
FACTORY STORES LIMITED PARTNERSHIP, a Delaware limited partnership ("Latham
Borrower"), CAROLINA FACTORY SHOPS LIMITED PARTNERSHIP, a Delaware limited
partnership ("Carolina Borrower"), SHASTA OUTLET SHASTA LIMITED PARTNERSHIP, a
Delaware limited partnership ("Shasta Borrower"), THE PRIME OUTLETS AT CALHOUN
LIMITED PARTNERSHIP, a Delaware limited partnership ("Calhoun Borrower"), and
THE PRIME OUTLETS AT LEE LIMITED PARTNERSHIP, a Delaware limited partnership
("Lee Borrower") (collectively, the "Borrowers"), each having an address c/o
Prime Retail, L.P., 100 East Pratt Street, 19th Floor, Baltimore, Maryland
21202, and NOMURA ASSET CAPITAL CORPORATION, a corporation organized under the
laws of the State of Delaware (together with its permitted successors and
assigns, "Lender").
All capitalized terms used herein shall have the respective meanings set
forth in Section 1 hereof.
W I T N E S S E T H :
WHEREAS, Buckeye Borrower is the owner of the Buckeye Property, Latham
Borrower is the owner of the Latham Property, Carolina Borrower is the owner of
the Carolina Property, Shasta Borrower is the owner of the Shasta Property,
Calhoun Borrower is the owner of the Calhoun Property and Lee Borrower is the
owner of the Lee Property (as such terms are hereinafter defined);
WHEREAS, the Borrowers desire to obtain a loan in the maximum principal
amount of $112,000,000.00 (the "Loan"), which Loan shall be secured by, among
other things, each of the Buckeye Property, the Latham Property, the Carolina
Property, the Shasta Property, the Calhoun Property and the Lee Property;
WHEREAS, the Loan is to be guaranteed by Prime Retail, L.P.;
WHEREAS, Lender is willing to make the Loan to Borrowers, subject to and in
accordance with the terms of this Agreement and the other Loan Documents;
NOW, THEREFORE, in consideration of the making of the Loan by Lender and
the covenants, agreements, representations and warranties set forth in this
Agreement, the parties hereto hereby covenant, agree, represent and warrant as
follows:
I0 DEFINITIONS; PRINCIPLES OF CONSTRUCTION
For all purposes of this Agreement, except as otherwise expressly required
or unless the context clearly indicates a contrary intent:
"Advance" shall mean an advance of the proceeds of the Loan hereunder.
<PAGE>
"Affiliate" shall mean, as to any Person, any other Person that, directly
or indirectly, is in Control of, is Controlled by or is under common Control
with such Person or is a director or officer of such Person or of an Affiliate
of such Person.
"Allocated Loan Amount" shall mean, for each Property, the amount set forth
for such Property on Schedule 6.
"ALTA" shall mean American Land Title Association, or any successor
thereto.
"Annual Budget" shall have the meaning set forth in Section 5.1(r).
"Annualized Expansion NOI" shall mean, for any Expansion Space, the
difference between (i) Annualized Operating Income for such Expansion Property
and (ii) Annualized Operating Expenses for such Expansion Property. Annualized
Expansion NOI shall be determined in accordance with agreed-upon procedures
reasonably determined by Lender.
"Annualized Operating Expenses" shall mean, with respect to an Expansion
Space, the Operating Expenses for such Expansion Space for the period of time
during which such Expansion Space shall have been open for business, annualized,
with pro forma adjustments as reasonably determined by Lender.
"Annualized Operating Income" shall mean, with respect to an Expansion
Space, the Operating Income of such Expansion Space for the period of time
during which such Expansion Space shall have been open for business, except that
the amount of any basic rental for a tenant which has been in occupancy and
paying rent for at least three (3) months shall be annualized. Lender shall make
such adjustments to Annualized Operating Income as it deems reasonably necessary
to account for free rent periods, front-loaded rental or other matters that may
have a material impact on Annualized Operating Income in Lender's reasonable
opinion.
"Appraisal" shall have the meaning set forth in Section 3.1(n).
"Approved Capital Expenses" shall mean, with respect to a Property, Capital
Expenses incurred by a Borrower with respect to such Property which (i) are
included in the approved Capital Budget for the Current Month for such Property,
(ii) are not included in the approved Capital Budget for the Current Month, but
do not cause the total of the approved Capital Budget for such Property for the
Current Month and all prior months covered by such approved Capital Budget
(i.e., year to date) to be exceeded by more than 5%, (iii) have been approved by
the Lender or (iv) are emergency expenses necessary to protect life or property
or to comply with unanticipated life safety laws or requirements.
"Approved Leasing Expenses" shall mean, with respect to a Property,
expenses incurred in leasing space at such Property pursuant to Leases entered
into in accordance with the provisions of Section 5.1(u) and the applicable
provisions of the Mortgage encumbering such Property, including brokerage
commissions, tenant improvements and other inducements, which expenses are
approved by Lender which approval shall not be unreasonably withheld or delayed.
"Approved Operating Expenses" shall mean, with respect to a Property,
Operating Expenses incurred by a Borrower with respect to such Property which
(i) are included in the approved Operating Budget for such Property for the
Current Month, (ii) are not included in the approved Operating Budget for such
Property for the Current Month, but do not cause the total of such approved
Operating Budget for the Current Month to be exceeded by more than 5%, (iii) are
for electric, gas, oil, water, sewer or other utility service to such Property
or (iv) have been approved by the Lender, which approval shall not be
unreasonably withheld or delayed.
<PAGE>
"Assignment of Agreements" shall mean, with respect to each Property, that
certain first priority Assignment of Agreements, Licenses, Permits and Contracts
dated as of the date hereof, from the applicable Borrower, as assignor, to
Lender, as assignee, assigning to Lender as security for the Loan, to the extent
assignable under law, all of such Borrower's interest in and to the Management
Agreement, if any, and all other licenses, permits and contracts necessary for
the use and operation of such Property, as the same may be amended, restated,
replaced, supplemented or otherwise modified from time to time.
"Assignment of Leases" shall mean, with respect to each Property, that
certain first priority Assignment of Leases and Rents dated as of the date
hereof, from the applicable Borrower, as assignor, to Lender, as assignee,
assigning to Lender as security for the Loan, to the extent assignable under
law, all of such Borrower's interest in and to the Rents and Leases for such
Property, as the same may be amended, restated, replaced, supplemented or
otherwise modified from time to time.
"Available Amount" shall mean, at any time of determination, the maximum
principal amount of the Loan that would not result in (i) a loan to value ratio
in excess of 75% or (ii) a Debt Service Coverage Ratio of less than 1.25.
"Award" shall have the meaning set forth in Section 7.1.3.
"Borrowers" shall mean Buckeye Borrower, Latham Borrower, Carolina
Borrower, Calhoun Borrower, Lee Borrower and any New Borrower, or any one or
more of them, as the context may require, together with their permitted
successors and assigns, but shall not include any such entity after such time as
all Properties owned or leased by such Borrower have been released from the lien
of the Mortgages.
"Borrowing Date" shall mean a date on which an Advance is made hereunder.
"Borrowing Documents" shall include, without limitation, the following:
(i) a Borrowing Notice;
(ii) an Officer's Certificate (1) reaffirming the representations and
warranties of Borrowers contained in the Loan Documents, with an updated
Schedule 1 with respect thereto, as necessary or appropriate, and (2) confirming
that no Default or Event of Default exists under the Loan Documents;
(iii) for jurisdictions in which mechanic's liens for work done on a
Property may be entitled to a priority equal to or higher than the priority of
the Mortgage encumbering such Property, either (1) an Officer's Certificate
confirming that no work costing in excess of $100,000.00 ("Material Work") that
would give rise to a mechanic's lien claim in such jurisdiction has been
performed since the Closing Date which has not been paid for, or (2) if such
Material Work has been performed and/or is currently being performed, then
Lender shall receive an endorsement to the applicable Title Insurance Policy in
form and substance reasonably satisfactory to Lender covering the applicable
Advance, showing that no unpermitted title exceptions have arisen and
affirmatively insuring over mechanics liens which have been filed or which could
arise from work completed and materials in place or, upon mutual agreement of
Borrowers and Lender, final lien waivers, releases and sworn statements properly
executed by each contractor conducting such Material Work at a Property,
together with an affidavit from such contractor addressed to Lender confirming
the names of the subcontractors involved and that such Material Work has been
fully paid for.
<PAGE>
(iv) a statement, in form and substance reasonably satisfactory to Lender,
setting forth in detail, with appropriate backup, a computation of the Debt
Service Coverage Ratio; and
(v) such other information or documents as Lender may reasonably request.
"Bridge Note" shall mean that certain Note of even date herewith, made by
Borrowers in favor of Lender, substantially in the form of Exhibit A-1 annexed
hereto, as the same may be amended, restated, replaced, supplemented,
consolidated or otherwise modified from time to time.
"Business Day" shall mean any day other than a Saturday, Sunday or any
other day on which national banks in New York, Chicago or the state in which the
Collection Account Bank is located are not open for business.
"Capital Budget" shall have the meaning set forth in Section 5.1(r).
"Capital Expenses" shall mean capital expenditures as determined in
accordance with GAAP.
"Capital Reserve Fund" shall have the meaning set forth in Section 7.4.1.
"Carolina Pledge Agreement" shall mean the Pledge Agreement of even date
herewith from Carolina Borrower to Lender with respect to certain special source
revenue bonds issued in connection with the Carolina Property.
"Cash Collateral Account" shall mean the accounts established and
maintained pursuant to each Cash Collateral Account Agreement.
"Cash Collateral Account Agreement" shall mean, with respect to each
Property, that certain Cash Collateral Account Agreement dated as of the date
hereof among the applicable Borrower, Lender, the Manager of such Property and
the Cash Collateral Account Bank for collecting and retaining all the rents from
such Property.
"Cash Collateral Account Bank" shall mean LaSalle National Bank, or any
successor chosen by Lender at no material additional cost to Borrower.
"Cash Trap Event" shall mean the occurrence of an Event of Default.
"Casualty/Condemnation Prepayments" shall have the meaning set forth in
Section 2.3.2.
"Casualty Repayment Amount" shall mean, at any time of determination, the
difference between (i) the outstanding principal balance of the Loan and (ii)
the Available Amount.
"Collection Account" shall have the meaning set forth in Section 2.6(a).
"Collection Account Agreement" shall have the meaning set forth in
Section 2.6(a).
<PAGE>
"Collection Account Bank" shall have the meaning set forth in Section
2.6(a).
"Closing Date" shall mean the date of the initial Advance of the Loan.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and as it
may be further amended from time to time, any successor statutes thereto, and
applicable U.S. Department of Treasury regulations issued pursuant thereto.
"Commitment" shall mean the obligation of Lender to make Advances not
exceeding $112,000,000.00.
"Condemnation" shall have the meaning set forth in Section 7.1.3.
"Condemnation Proceeds" shall mean all proceeds and awards in respect of
any condemnation of a Property or purchase in lieu thereof.
"Condemnation Restoration" shall have the meaning set forth in
Section 7.1.3.
"Consent and Subordination of Manager" shall mean that certain Consent and
Subordination of Manager dated the date hereof between each Manager and Lender,
if any.
"Control" shall mean with respect to any Person either (i) ownership
directly or through other entities, of more than 50% of all beneficial equity
interest in such Person, or (ii) the power to direct the management, operation
and business of such Person.
"Current Month" shall mean, as of the date of determination, the then
current calendar month.
"Debt" shall mean the outstanding principal amount set forth in, and
evidenced by, the Note, together with all interest accrued and unpaid thereon
and all other sums due to Lender in respect of the Loan, including any Exit Fee
and any sums due under the Note, this Agreement, the Mortgages or in any other
Loan Document.
"Debt Service" shall mean, with respect to any particular period of time,
scheduled principal and interest payments under the Note.
"Debt Service Coverage Ratio" shall mean, as of any date, a ratio in which
(a) the numerator is the sum of (i) the Net Operating Income for the Properties
(excluding any Expansion Space) for the 12-month period immediately preceding
such date and (ii) the Annualized Expansion NOI for any Expansion Space, and (b)
the denominator is the greater of (i) the aggregate amount of principal and
interest that would be due and payable on the Note for such period based upon a
debt service constant of 10.09 and (ii) the aggregate amount of principal and
interest that would be due and payable on the Note based upon the Treasury Rate
as of such date and an amortization term of 360 months.
"Default" shall mean the occurrence of any event hereunder or under any
other Loan Document which, but for the giving of notice or passage of time, or
both, would be an Event of Default.
"Default Rate" shall mean, with respect to the Loan, a rate per annum equal
to the lesser of (a) the maximum rate permitted by applicable law, or (b) five
percent (5%) above the Interest Rate.
<PAGE>
"Environmental Indemnity" shall mean those certain Environmental and
Hazardous Substance Indemnification Agreements executed by Borrowers in
connection with the Loan for the benefit of Lender.
"Equipment" shall have the meaning set forth in the Mortgages.
"Event of Default" shall have the meaning set forth in Section 8.1.
"Exit Fee" shall have the meaning set forth in Section 2.7.
"Expansion Space" shall mean any portion of a Property upon which a
Borrower has constructed an expansion of a factory outlet center which has not
been occupied for twelve (12) full months but which has been at least 70%
occupied for at least three (3) full months.
"Facility Termination Date" shall mean April 11, 2001.
"Fiscal Year" shall mean each twelve month period commencing on January 1
and ending on December 31 during each year of the term of the Loan or such other
fiscal year of a Borrower as such Borrower may adopt from time to time with the
prior written consent of Lender.
"GAAP" shall mean generally accepted accounting principles in the United
States of America as of the date of the applicable financial report.
"General Partner" shall mean PRLP and PR Finance.
"Governmental Authority" shall mean any court, board, agency, commission,
office or authority of any nature whatsoever for any governmental unit (federal,
state, county, district, municipal, city or otherwise) whether now or hereafter
in existence having or asserting jurisdiction over a Person, Property or matter
at issue.
"Guarantor" shall mean Prime Retail, L.P., a Delaware limited partnership.
"Guaranty" shall mean the guaranty of the Loan executed and delivered by
Guarantor.
"Improvements" shall have the meaning set forth in the Mortgages.
"including" shall mean "including, without limitation".
"Indemnified Liabilities" shall have the meaning set forth in Section
10.13(b).
"Independent Director" shall have the meaning set forth in Section 4.1(dd).
"Initial Properties" shall mean the Calhoun Property, the Carolina
Property, the Lee Property, the Buckeye Property, the Latham Property and the
Shasta Property.
"Insurance Premiums" shall have the meaning set forth in Section 7.1.1(c)
hereof.
<PAGE>
"Insurance Proceeds" shall mean the proceeds of the insurance policies
required to be maintained pursuant to clauses (i), (iii), (iv), (v), (vi) and
(viii) of Section 7.1.1 hereof which are received by or on behalf of a Borrower.
"Insured Casualty" shall have the meaning specified in Section 7.1.1(d).
"Interest Rate" shall mean a floating annual rate of interest equal to
LIBOR plus 1.35%.
"knowledge" shall mean, when used to modify a representation or warranty,
actual knowledge or such knowledge as a reasonable person should have under the
circumstances.
"Latham Note" shall mean that certain Note of even date herewith made by
Borrowers in favor of Lender, in substantially the form of Exhibit A-2 annexed
hereto.
"Lease" shall mean any lease or, to the extent of the interest therein of a
Borrower, any sublease or sub-sublease, letting, license, concession or other
agreement (whether written or oral and whether now or hereafter in effect)
pursuant to which any person is granted a possessory interest in, or right to
use or occupy all or any portion of, any space in the Properties, and every
modification, amendment or other agreement relating to such lease, sublease,
sub-sublease, or other agreement entered into in connection with such lease,
sublease, sub-sublease, or other agreement and every guarantee of the
performance and observance of the covenants, conditions and agreements to be
performed and observed by the other party thereto.
"Legal Requirements" shall mean, with respect to the Properties, all
federal, state, county, municipal and other governmental statutes, laws, rules,
orders, regulations, ordinances, judgments, decrees and injunctions of
Governmental Authorities affecting the Properties or any part thereof or the
construction, use, alteration or operation thereof, or any part thereof, whether
now or hereafter enacted and in force, and all permits, licenses, authorizations
and regulations relating thereto.
"Lender" shall mean Nomura Asset Capital Corporation, together with its
successors and assigns.
"LIBOR" shall have the meaning set forth in the Note.
"Licenses" shall have the meaning set forth in Section 4.1(w).
"Lien" shall mean, with respect to any Property, any mortgage, deed of
trust, lien, pledge, hypothecation, assignment, security interest, or any other
encumbrance, charge or transfer of, on or affecting such Property or any portion
thereof or a Borrower, or any interest therein, including 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.
"Loan" shall mean the loan made to Borrowers by Lender pursuant hereto in
the maximum principal amount of $112,000,000.00 and evidenced by the Note and
secured by the Mortgages and the other Loan Documents.
<PAGE>
"Loan Documents" shall mean, collectively, this Agreement, the Note, the
Mortgages, each Assignment of Leases, each Assignment of Agreements, the
Environmental Indemnities, each Consent and Subordination of Manager, if any,
the Collection Account Agreement, the Cash Collateral Account Agreement, the
Guaranty and any other document, agreement or instrument (i) executed and
delivered by a Borrower or any Affiliate of a Borrower evidencing or securing
the Loan, (ii) executed by Borrower and Lender in connection with the Loan or
(iii) which states it is a Loan Document hereunder.
"Management Agreement" shall mean, with respect to the Properties, a
management agreement, if any, entered into by and between each Borrower and the
Manager, pursuant to which the Manager is to provide management and other
services with respect to the Properties.
"Management Fee" shall mean the fee, if any, payable to Manager pursuant to
the Management Agreement.
"Manager" shall mean PRLP or any successor manager of the Properties
approved by Lender, which approval shall not be unreasonably withheld or
delayed.
"Material Adverse Effect" shall mean any event or condition that has a
material adverse effect on (a) any Property, (b) the business, prospects,
profits, operations or condition (financial or otherwise) of any Property or
Borrower, (c) the enforceability, validity, perfection or priority of the lien
of any Loan Document or (d) the ability of any Borrower to perform any
obligations under any Loan Document.
"Maturity Date" shall mean the date on which the final payment of principal
of the Note becomes due and payable as therein provided, whether at the Stated
Maturity Date, by declaration of acceleration, or otherwise.
"Monthly Debt Service Payment Amount" shall have the meaning set forth in
Section 2.2.1.
"Mortgages" shall mean each of the mortgages, deeds of trust and deeds to
secure debt described on Schedule 4 hereto, as the same may be amended,
restated, replaced, supplemented, consolidated or otherwise modified from time
to time. A "Mortgage" shall mean any one of the Mortgages, as the context may
require.
"NACC" shall mean Nomura Asset Capital Corporation, a Delaware corporation.
"Net Operating Income" shall mean, for any Property for any period, the
difference between all Operating Income of such Property during such period,
minus all Operating Expenses of such Property during such period. Net Operating
Income shall be determined in accordance with agreed-upon procedures reasonably
determined by Lender.
"Nomura" shall have the meaning set forth in Section 10.17.
"Note" shall mean, collectively, the Bridge Note and the Latham Note.
"Officer's Certificate" shall mean a certificate delivered to Lender by the
Borrowers which is signed by an authorized officer of the REIT on behalf of the
General Partner or Managing Member of each Borrower.
"Operating Budget" shall have the meaning set forth in Section 5.1(r).
<PAGE>
"Operating Expenses" shall mean, with respect to a Property, for the
applicable period, all expenses directly attributable to the operation, repair
and/or maintenance of the Property including, without limitation, Taxes, Other
Charges, insurance premiums, management fees, marketing and promotion expenses
(to the extent not reimbursed or reimbursable by tenants under Leases), general
administration costs and costs attributable to the operation, repair and
maintenance of the systems for heating, ventilating and air conditioning the
Improvements and actually incurred by a Borrower. Operating Expenses shall not
include interest, principal and premium, if any, due under the Note or otherwise
in connection with the Debt, income taxes, capital improvement costs, or any
non-cash charge or expense such as depreciation or amortization and other costs
properly capitalizable under GAAP. Operating Expenses shall be subject to
adjustment by Lender to provide for (a) a normalized allowance for lease
rollovers including costs for downtime, tenant improvements and leasing
commissions, (b) a reserve for capital expenditures and capital replacements
equal to at least $0.15 per square foot per annum for all rentable space (or
such greater amount as shall be indicated in independent engineering reports
obtained by Lender), to the extent not reimbursable by tenants through CAM
recoveries, (c) a management fee of at least 4% of gross revenues, if actual is
less than 4% (less management expenses), and (d) any other matters related to
the Property or market conditions that may have a material impact on Operating
Expenses in Lender's reasonable opinion. Operating Expenses will not include
debt service, capital expenses (except as described in clauses (a) or (b)
above), non-cash items such as depreciation and amortization and any
extraordinary one-time expenditures not considered operating expenses under
GAAP. The applicable period for determining "Available Amount" shall be the
trailing twelve month period.
"Operating Income" shall mean, with respect to a Property, for the
applicable period, all revenue derived by a Borrower arising from the Property
including, without limitation, rental revenues (whether denominated as basic
rent, additional rent, percentage rent, escalation payments, electrical payments
or otherwise and including only that which is actually due and payable in such
period) and other fees and charges payable pursuant to Leases or otherwise in
connection with the Property, and business interruption, rent or other similar
insurance proceeds. Operating Income shall be subject to adjustment (a) for a
vacancy allowance at the greater of the market vacancy rate, the actual vacancy
rate or 5%, (b) for month-to-month tenants and for any tenants operating under
bankruptcy protection (except to the extent the lease for any such tenant has
been approved by the Bankruptcy Court), (c) if necessary, to mark any Leases to
market rent, (d) to address any rent adjustments or cancellation options
contained in the Leases, and (e) for any other matters related to the Property
or market conditions that may have a material impact on Operating Income in
Lender's reasonable opinion. Operating Income shall not include (a) Insurance
Proceeds (other than proceeds of rent, business interruption or other similar
insurance allocable to the applicable period) and Condemnation Proceeds (other
than Condemnation Proceeds arising from a temporary taking or the use and
occupancy of all or part of the applicable Property allocable to the applicable
period), or interest accrued on such Insurance Proceeds or Condemnation
Proceeds, (b) proceeds of any financing, (c) proceeds of any sale, exchange or
transfer of the Property or any part thereof or interest therein, (d) capital
contributions or loans to Borrower or an Affiliate of Borrower, (e) any item of
income otherwise includable in Operating Income but paid directly by any tenant
to a Person other than Borrower except for real estate taxes paid directly to
any taxing authority by any tenant and any other expense to the extent included
in Operating Expense, (f) any other extraordinary, non-recurring revenues, (g)
Rents paid by or on behalf of any lessee under a Lease in whole or in partial
consideration for the termination of any Lease which, when added to all Rents
received during the applicable period pursuant to the terminated Lease, plus any
Rents received pursuant to any Lease which replaced the Lease which was
terminated, exceeds the Rents which otherwise would be paid pursuant to the
Lease which was terminated, or (h) any tenant recoveries in excess of the actual
amount of the expense recovered plus administrative fees in connection
therewith. The applicable period for determining "Available Amount" shall be the
trailing 12 month period.
<PAGE>
"Other Charges" shall mean all ground rents, maintenance charges,
impositions other than Taxes, and any other charges, including vault charges and
license fees for the use of vaults, chutes and similar areas adjoining the
Properties, now or hereafter levied or assessed or imposed against the
Properties or any part thereof.
"Payment Date" shall mean the eleventh (11th) day of each calendar month
or, if in any month the eleventh (11th) day is not a Business Day, then the
Payment Date for such month shall be the first Business Day thereafter.
"Permitted Encumbrances" shall mean, with respect to a Property,
collectively, (a) the Liens and security interests created by the Loan
Documents, (b) all Liens, encumbrances and other matters disclosed in the Title
Insurance Policy relating to such Property or any part thereof, (c) Liens, if
any, for Taxes or Other Charges not yet payable or delinquent or being contested
in good faith and by appropriate proceedings in accordance with Section 5.1(b),
(d) any mechanics' and materialmen's liens affirmatively insured against by the
Title Insurance Policy or being contested in good faith and by appropriate
proceedings in accordance with Section 6.1(b), (e) any and all governmental,
public or private utility and private restrictions, covenants, reservations,
easements, licenses or other agreements of an immaterial nature which may
hereafter be granted by a Borrower and which do not materially and adversely
affect (x) the marketability of title to the Property or (y) the fair market
value of the Property, (f) rights of future tenants, as tenants only, pursuant
to Leases entered into in accordance with the provisions of the Loan Documents,
(g) liens incurred in connection with the financing or leasing of equipment in
the ordinary course of business and in accordance with the Prudent Manager
Standard and (h) such other title and survey exceptions as Lender has approved
or may approve in writing in Lender's reasonable discretion.
"Permitted Indebtedness" shall mean (a) the Debt, and (b) normal and
customary unsecured trade debt incurred in the ordinary course of business in
accordance with the Prudent Manager Standard (including obligations under any
construction contracts for tenant improvements).
"Permitted Investments" shall have the meaning set forth in the Cash
Collateral Account Agreement.
"Person" shall mean any individual, corporation, partnership, joint
venture, estate, trust, unincorporated association, any federal, state, county
or municipal government or any bureau, department or agency thereof and any
fiduciary acting in such capacity on behalf of any of the foregoing.
"Policies" shall have the meaning specified in Section 7.1.1(c).
"Pooling and Servicing Agreement" shall mean the Servicing Agreement
entered into with the Servicer in connection with any Securitization of the
Loan.
"PR Finance" shall mean Prime Retail Finance IV, Inc., a Maryland
corporation.
"PRLP" shall mean Prime Retail, L.P., a Delaware limited partnership.
"Premises" shall, with respect to a Property, have the meaning set forth in
the Granting Clause of the Mortgage encumbering such Property.
"Properties" shall mean, collectively, the properties described on Schedule
5 attached hereto and each Additional Property and Spreader Property, but shall
not include any Property which is released from the lien of a Mortgage after the
date of such release. A "Property" shall mean any one of the Properties.
<PAGE>
"Property Agreements" shall mean all material agreements, grants of
easements and/or rights-of-way, reciprocal easement agreements, permits,
declarations of covenants, conditions and restrictions, disposition and
development agreements, planned unit development agreements, management or
parking agreements, party wall agreements or other instruments to which a
Borrower is a party, bound or subject or a Property is subject, including,
without limitation, all reciprocal easement agreements, but not including any
brokerage agreements, management agreements, service contracts, Leases or the
Loan Documents.
"Property Worth" shall mean, with respect to each Borrower, the fair market
value of the Property owned by such Borrower as of the Closing Date.
"Prudent Manager Standard" shall mean that standard of property management,
business operations, practices and procedures customarily employed by prudent,
professional managers with significant experience in the operation and
management of retail shopping centers of a size and type comparable to the
Properties who are seeking to maximize the value of such shopping centers.
"Rating Agency" shall mean each of Standard & Poor's Ratings Group, a
division of McGraw-Hill, Inc., Moody's Investors Service, Inc., Duff & Phelps
Credit Rating Co. and Fitch Investors Service, Inc. or, after a Securitization,
any other nationally-recognized statistical rating agency which rates the
securities in connection therewith.
"REIT" shall mean Prime Retail, Inc., a Maryland corporation.
"Remaining Realty" shall have the meaning set forth in Section 2.4.3.
"REMIC" shall mean a "real estate mortgage investment conduit" within the
meaning of Section 860D of the Code.
"REMIC Trust" shall mean a REMIC which holds the Note.
"Rents" shall mean, with respect to the Properties, all rents, rent
equivalents, moneys payable as damages or in lieu of rent or rent equivalents,
royalties (including all oil and gas or other mineral royalties and bonuses),
income, receivables, receipts, revenues, deposits (including security, utility
and other deposits), accounts, cash, issues, profits, charges for services
rendered, and other consideration of whatever form or nature received by or paid
to or for the account of or benefit of a Borrower or its agents or employees
from any and all sources arising from or attributable to the Properties,
including all receivables, customer obligations, installment payment obligations
and other obligations now existing or hereafter arising or created out of the
sale, lease, sublease, license, concession or other grant of the right of the
use and occupancy of the Properties and proceeds, if any, from business
interruption or other loss of income insurance.
"Required Repair Account" shall have the meaning set forth in
Section 7.2.1.
"Required Repair Fund" shall have the meaning set forth in Section 7.2.1.
"Required Repairs" shall have the meaning set forth in Section 7.2.1.
"Required Repairs" shall have the meaning set forth in Section 7.2.1.
<PAGE>
"Restoration" shall have the meaning set forth in Section 7.1.2(b).
"Secondary Market Transaction" shall mean any transaction in which Lender
(i) sells the Loan, the Note and the other Loan Documents to one or more
investors as a whole loan, (ii) participates the Loan to one or more investors,
(iii) deposits the Loan, the Mortgages, the Note and other Loan Documents with a
trust, which trust may sell certificates to investors evidencing an ownership
interest in the trust assets, or (iv) otherwise sells the Loan or an interest
therein to investors.
"Securitization" shall mean the sale of the Note or participation therein
or the securitization of rated single or multi-class securities secured by or
evidencing ownership interests in the Note and the Mortgages.
"Security Agreement" shall have the meaning set forth in
Section 2.3.3(vii).
"Servicer" shall mean the entity appointed by Lender to service the Loan or
its successor in interest, or if any successor servicer is appointed pursuant to
the Pooling and Servicing Agreement, such successor servicer.
"Solvent" shall mean, as to any Person, that (a) the sum of the assets of
such Person, at a fair valuation, exceeds its liabilities, including contingent
liabilities, (b) such Person has sufficient capital with which to conduct its
business as presently conducted and as proposed to be conducted and (c) such
Person has not incurred debts, and does not intend to incur debts, beyond its
ability to pay such debts as they mature. For purposes of this definition,
"debt" means any liability on a claim, and "claim" means (a) a right to payment,
whether or not such right is reduced to judgment, liquidated, unliquidated,
fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable,
secured or unsecured, or (b) a right to an equitable remedy for breach of
performance if such breach gives rise to a payment, whether or not such right to
an equitable remedy is reduced to judgment, fixed, contingent, matured,
unmatured, disputed, undisputed, secured, or unsecured. With respect to any such
contingent liabilities, such liabilities shall be computed in accordance with
GAAP at the amount which, in light of all the facts and circumstances existing
at the time, represents the amount which can reasonably be expected to become an
actual or matured liability.
"SPE" shall have the meaning set forth in Section 4.1(dd) and shall
initially be PR Finance.
"State" shall mean the State of Illinois.
"Stated Maturity Date" shall mean June 11, 2001.
"Survey" shall mean a survey of the Property in question prepared by a
surveyor licensed in the state in which such Property is located and
satisfactory to Lender and the company or companies issuing the Title Insurance
Policies, and containing a certification of such surveyor satisfactory to
Lender.
"Tax and Insurance Escrow Fund" shall have the meaning set forth in
Section 7.3.1.
"Taxes" shall mean all real estate and personal property taxes,
assessments, fees or payments in lieu of real estate taxes, water rates or sewer
rents, now or hereafter levied or assessed or imposed against the Properties or
part thereof.
<PAGE>
"Term" shall mean the entire term of this Agreement, which shall expire
upon repayment in full of the Debt and full performance of each and every
obligation to be performed by Borrowers pursuant to the Loan Documents.
"Title Insurance Policies" shall mean, with respect to the Properties, ALTA
mortgagee title insurance policy or policies acceptable to Lender issued with
respect to the Properties and insuring the liens of the Mortgages encumbering
the Properties.
"Transfer" shall have the meaning set forth in Section 6.1(j).
"Treasury Rate" shall mean, at any time of determination, a rate per annum
equal to 150 basis points plus the rate on the 10 year U.S. Treasury security
then being used by Lender in pricing loans with ten year terms.
"UCC" or "Uniform Commercial Code" shall mean the Uniform Commercial Code
as in effect in the State in which the applicable Property is located.
"U.S. Obligation" shall mean direct non-callable obligations of the United
States of America.
Section I.2 Principles of Construction. All references to sections,
schedules and exhibits are to sections, schedules and exhibits in or to this
Agreement unless otherwise specified. Unless otherwise specified, the words
"hereof," "herein" and "hereunder" and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not to any particular
provision of this Agreement. Unless otherwise specified, all meanings attributed
to defined terms herein shall be equally applicable to both the singular and
plural forms of the terms so defined. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP, as modified herein.
II. GENERAL
Section II.1 The Loan
II.1.1 Commitment. Subject to and upon the terms and conditions set forth
herein, including the conditions precedent set forth in Section 3.1, Lender
hereby agrees to make Advances to Borrowers from time to time from the Date
hereof until the Facility Termination Date in amounts not to exceed at any one
time outstanding the lesser of (i) the amount of the Commitment and (ii) the
Available Amount.
II.1.2 Disbursement to Borrower. Subject to the terms of this Agreement,
Borrower may borrow, repay and reborrow Advances hereunder. The outstanding
amount of the Loan and all other unpaid obligations under the Loan Documents
shall be paid in full by Borrower on the Maturity Date.
II.1.3 Minimum Amount. Each Advance shall be in the minimum amount of
$1,000,000.00 (and in multiples of $500,000.00 in excess thereof), except that
any such Advance may be in an amount equal to the lesser of the then unused
Commitment and the then unused Available Amount. No more than one (1) Advance
may be requested by Borrowers during any month.
II.1.4 Requests for Advance. Borrowers shall give Lender an irrevocable
notice (a "Borrowing Notice") not later than 12:00 noon (Chicago time) at least
seven (7) Business Days before the Borrowing Date for each Advance, specifying
(i) the Borrowing Date (which shall be a Business Day) of such Advance and (ii)
the amount of such Advance. Such Borrowing Notice shall be accompanied by the
Borrowing Documents.
<PAGE>
II.1.5 The Note. The Loan shall be evidenced by the Note, in a maximum
principal amount equal to the Commitment. The Note shall bear interest as
provided therein. The Note shall be subject to repayment as provided in
Section 2.3, shall be entitled to the benefits of this Agreement and shall be
secured by the Mortgages and the other Loan Documents. Lender shall record
Advances and principal payments thereof on the schedule attached to the Note or,
at its option, in its records, and Lender's record thereof shall be conclusive
absent manifest error. Notwithstanding the foregoing, the failure to make, or an
error in making, a notation with respect to any Advance shall not limit or
otherwise affect the obligations of Borrowers hereunder or under the Note to pay
the amount actually owed by Borrowers to Lender.
II.1.6 Use of Proceeds of Loan. Borrowers shall use the proceeds of the
Loan (i) to repay and discharge any existing loans relating to the Properties,
(ii) to pay costs and expenses incurred in connection with the Closing of the
Loan, as approved by Lender, and (iii) for any other lawful purpose.
Section II.2 Interest; Monthly Payments
II.2.1 Generally
(a) From the date hereof through but not including the Maturity Date,
Borrowers shall pay interest on the outstanding principal balance of the Loan at
the Interest Rate.
(b) Commencing with the Payment Date on July 11, 1998 and on each and every
Payment Date thereafter through and including the Maturity Date, interest only
at the Interest Rate shall be payable (the "Monthly Debt Service Payment
Amount"). The Monthly Debt Service Payment Amount due on any Payment Date shall
be applied to the payment of interest accrued from the eleventh (11th) day of
the month preceding the Payment Date through the tenth (10th) day of the month
in which the Payment Date occurs, notwithstanding that the Payment Date may have
been deferred because the eleventh (11th) day of such month is not a Business
Day.
II.2.2 Default Rate. After the occurrence and during the continuance of an
Event of Default, the entire outstanding principal balance of the Loan shall
bear interest at the Default Rate, and shall be payable upon demand from time to
time, to the extent permitted by applicable law. Payment or acceptance of the
increased rates provided for in this subsection is not a permitted alternative
to timely payment and shall not constitute a waiver of any Default or Event of
Default or an amendment to this Agreement or any other Loan Document and shall
not otherwise prejudice or limit any rights or remedies of Lender.
II.2.3 Property Cash Flow Allocation During a Cash Trap Event. Commencing
upon the occurrence of a Cash Trap Event and continuing on each Payment Date
occurring during the existence of a Cash Trap Event, any Rents deposited into
the Cash Collateral Account (or otherwise received by Borrowers) during the
immediately preceding calendar month shall be applied as follows in the
following order of priority:
(a) First, to make required payments to the Tax and Insurance Escrow Fund;
<PAGE>
(b) Second, to Lender to pay the Monthly Debt Service Payment Amount (plus,
if applicable, interest at the Default Rate);
(c) Third, to make required payments to the Capital Reserve Fund; and
(d) Fourth, payments for Approved Operating Expenses, Approved Capital
Expenses and Approved Leasing Expenses of the Properties.
Notwithstanding anything herein to the contrary, the failure of Borrowers
to make all of the payments required under clauses (a) through (d) above in full
on each Payment Date shall constitute a Default under this Agreement.
Section II.3 Loan Repayment
II.3.1 Repayment. Borrowers may repay any outstanding principal
indebtedness of the Loan in whole or in part at any time prior to, and shall
repay the outstanding principal indebtedness of the Loan in full on, the
Maturity Date of the Loan, together with interest thereon to (but excluding) the
date of repayment. Borrower shall give Lender not less than twenty (20) days
notice of any prepayment hereunder.
II.3.2 Mandatory Prepayments. The Loan is subject to the following
mandatory prepayments:
(a) Borrowers shall prepay the Loan, in certain instances of Insured
Casualty or Condemnation (each a "Casualty/Condemnation Prepayment"), in the
manner and to the extent set forth in Sections 7.1.2 and Section 7.1.3 hereof.
Each Casualty/Condemnation Prepayment shall be made only on a Payment Date and
shall include all accrued and unpaid interest on the amount prepaid up to but
not including such Payment Date.
(b) In connection with a sale of a Property, Borrower shall repay an amount
equal to the Release Price (as defined below) for such Property.
II.4 Release of Property. Except as set forth in this Section 2.4, no
repayment or prepayment of all or any portion of the Note shall cause, give rise
to a right to require, or otherwise result in, the release of the Lien of the
Mortgages on the Properties.
II.4.1 Release of Properties
(a) Borrowers may, from time to time, provided no Default or Event of
Default exists hereunder or under any other Loan Document, request in writing a
release of any Property from the Lien of the Mortgage on such Property and
Lender shall, upon satisfaction of all of the following terms and conditions,
permit such Property to be released from the Lien of the Mortgage and the Other
Loan Documents:
(i) Borrower shall have repaid to Lender an amount sufficient to reduce the
outstanding amount of the Loan to the Available Amount (the "Release Price"), as
reasonably determined by Lender as of the date of the proposed release and in
connection therewith, Lender shall have received from Borrowers such information
as Lender may require in order to calculate the Allocated Amount, all in form
acceptable to Lender and accompanied by an Officer's Certificate stating that
all such information is true, correct and complete;
<PAGE>
(ii) There shall exist no Default or Event of Default hereunder or under
any Loan Document; and
(iv) PR Finance shall have resigned as general partner of the Borrower
whose Property is being released or, if such Borrower owns any other Property,
such Borrower shall transfer title to the Property to be released to a person
other than such Borrower or any other Borrower.
(b) In connection with the release of the Lien of a Mortgage, Borrowers
shall submit to Lender, not less than twenty (20) days prior to the date on
which such release is sought, a release of Lien (and related Loan Documents) for
the applicable Property (for execution by Lender) in a form appropriate in the
state in which such Property is located and satisfactory to Lender in its sole
discretion and all other documentation Lender requires to be delivered by
Borrowers in connection with such release, together with an Officer's
Certificate certifying that such documentation (i) is in compliance with all
Legal Requirements, and (ii) will effect such release in accordance with the
terms of this Agreement.
(c) Simultaneously with the release of a Property from the lien of a
Mortgage pursuant to this Section, Lender shall release that portion of all cash
or other accounts maintained pursuant to this Agreement relating to such
Property.
II.4.2 Release on Payment in Full. Lender shall, upon the written request
and at the expense of Borrowers, upon (a) payment in full of all principal and
interest on the Loan and all other amounts due and payable under the Loan
Documents in accordance with the terms thereof and (b) termination of the
Commitment, release the Properties from the Liens of the Mortgages and the other
Loan Documents if not theretofore released.
II.4.3 Out-Parcel Severance. (a) A Borrower shall be permitted to transfer,
and Lender shall release from the lien of the applicable Mortgage and the other
Loan Documents, any unimproved out-parcel or unimproved expansion parcel
comprising a portion of a Property (either of which is hereinafter referred to
as the "Out-Parcel"), upon not less than thirty (30) nor more than ninety (90)
days' prior written notice to Lender, upon satisfaction of all of the following
terms and conditions:
(i) No Default or Event of Default shall have occurred and be continuing
and all amounts which are then required to be deposited into the sub-accounts of
the Cash Collateral Account pursuant to the Cash Collateral Account Agreement
shall have been so deposited.
(ii) The Out-Parcel shall be designated by a metes and bounds description
and a survey reasonably satisfactory to Lender.
(iii) The following conditions shall have been satisfied, and Lender shall
in addition have received an Officer's Certificate, not less than fifteen (15)
Business Days prior to the proposed transfer or release of the Out-Parcel,
stating that:
(A) the use to which the Out-Parcel will be put shall be consistent with
the use to which out-parcels and expansion parcels are generally put in other
first class retail shopping centers;
(B) the portion of the Property remaining subject to the lien of the
Mortgage encumbering the Out-Parcel after release of the Out-Parcel (the
"Remaining Realty") will remain in full compliance with all Legal Requirements
and with the terms of all Leases and Property Agreements affecting the Remaining
Realty;
<PAGE>
(C) the proposed use of the Out-Parcel will not violate the provisions of
any Lease or Property Agreement affecting the Remaining Realty. To the extent
reasonably required, the permitted uses of the Out-Parcel will be restricted of
record, as reasonably agreed to by Lender, to insure that use of the Out-Parcel
will not violate the provisions of the Loan Documents or any Leases or Property
Agreements;
(D) Borrowers shall have caused the Out-Parcel to be a separate parcel of
land for all subdivision, zoning, and taxing purposes;
(E) title to the Out-Parcel shall have been or shall simultaneously be
conveyed to a Person other than a Borrower;
(F) the disposition of the Out-Parcel shall not have a Material Adverse
Effect on the Net Operating Income for the Property of which it was a part;
(G) the occupancy rate of the Remaining Realty shall be greater than 80%;
(H) the Debt Service Coverage Ratio (computed based on the Net Operating
Income of the Remaining Realty and the Allocated Loan Amount for the applicable
Property) shall not be less than 1.25; and
(I) no tenant under any Lease has executed, or is negotiating in
contemplation of executing, a lease or other occupancy agreement with respect to
a portion of such Out-Parcel unless a replacement tenant or tenants acceptable
to Lender have executed a lease for the space to be vacated, and Lender receives
satisfactory evidence thereof;
provided, however, that if the conditions set forth in clauses (G) or (H)
are not satisfied, provided that all of the other conditions required for the
release of an Out-Parcel shall have been satisfied, an Out-Parcel may be
released from the lien of the applicable Mortgage if it is sold to a bona-fide
third Person and all sums received in consideration of such sale are applied to
partially repay the Debt in accordance with the provisions of Section 2.3
hereof.
(iv) To the extent reasonably required, an appropriate Property Agreement
shall be executed and recorded (and a copy delivered to Lender) to govern the
integrated use and operation, if applicable, of the Remaining Realty and the
Out-Parcel.
(v) Lender shall receive, at Borrower's sole cost, an endorsement to
Lender's title insurance policy to the effect that the release of the Out-Parcel
will not have an adverse affect on the priority of the lien of the applicable
Mortgage with respect to the Remaining Realty encumbered by such Mortgage.
(vi) Borrowers shall, at their sole cost and expense, prepare any and all
documents and instruments necessary to effect the release of the Out-Parcel, all
of which shall be subject to the reasonable approval of Lender, and Borrowers
shall pay all costs reasonably incurred by Lender (including, but not limited
to, reasonable attorneys' fees and disbursements, title search costs and
endorsement premiums) in connection with the review, execution and delivery of
such release and any other documents, including Project Agreements, required in
connection with the release of the Out-Parcel.
<PAGE>
(vii) All agreements and instruments to be delivered to Lender pursuant to
this Section 2.4.3 shall be in form and substance reasonably satisfactory to
Lender and its counsel, and included with the Officer's Certificate required to
be delivered pursuant to clause (iii) of this Section 2.4.3 shall be evidence in
form and substance satisfactory to Lender supporting the statements,
calculations and information required pursuant to clauses (iii)(F), (G) and (H)
of this Section 2.4.3.
(b) No Release Price or other consideration shall be payable by Borrowers
to Lender in connection with a release of an Out-Parcel made in accordance with
the provisions of this Section 2.4.3.
II.4.4 Additional Properties. Borrowers shall have the right from time to
time to add one or more factory outlet centers or other retail properties
reasonably acceptable to Lender (each, an "Additional Property") as collateral
for the Loan by executing and delivering to Lender a mortgage, deed of trust or
deed to secure debt, as applicable (an "Additional Mortgage"), encumbering such
Additional Property, in substantially the same form as the Mortgages (with such
modifications as may be required to conform with applicable law) and such other
documents (together with the Additional Mortgage, the "Additional Documents"),
as Lender may in its reasonable discretion require in order to grant Lender a
first priority, perfected lien on and security interest in such Additional
Property and all related rents, personal property, reserves and escrows on the
same terms and conditions as the liens and security interests granted to Lender
in the Properties on the Closing Date. Borrowers' right to add an Additional
Property shall also be subject to the following conditions and restrictions:
(a) No Default or Event of Default shall have occurred and be continuing;
(b) at least sixty (60) days prior to the proposed date of the addition,
Borrowers shall have delivered to Lender appraisals, prepared by Cushman &
Wakefield, Inc., or such other third-party real estate professional as is
approved by Lender and the Rating Agencies, indicating the fair market value for
the proposed Additional Property;
(c) Borrowers shall have delivered a Phase I environmental report and, if
recommended by such Phase I report, a Phase II environmental report prepared by
Environmental Management Group, Inc., IVI Environmental, Inc., or such other
environmental consultant as is approved by Lender and the Rating Agencies,
stating that the Additional Property complies with all applicable environmental
laws, or if remedial steps are required to effect such compliance, identifying
such steps and projecting the cost thereof, in which case Lender shall have the
option to not accept such Additional Property and, if Lender agrees to accept
the Additional Property, Borrowers shall be required to deposit with Lender an
amount equal to one hundred fifty percent (150%) of such projected costs (the
"Engineering Escrow Fund");
(d) Borrowers shall have delivered an engineering report, prepared by
Merrit & Harris, Inc., or such other consulting engineer as is approved by
Lender and the Rating Agencies, stating that the Additional Property complies
with all applicable building laws and do not require performance of deferred
maintenance or if remedial steps are required to effect such compliance or such
deferred maintenance, identifying such steps and projecting the cost thereof, in
which case Borrowers shall be required to deposit into the Engineering Escrow
Fund an amount equal to one hundred fifty percent (150%) of such projected
costs;
<PAGE>
(e) Borrowers shall have caused to be delivered all leases, title
commitments, title insurance policies, surveys, hazard and liability insurance,
evidence of compliance with zoning and other laws, legal opinions and other
items of due diligence with respect to the Additional Property as Lender and/or
the Rating Agencies may require, all of which shall be in form and substance
acceptable to Lender and the Rating Agencies;
(f) the Person transferring the Additional Property to a Borrower shall be
solvent and shall be making such transfer on an arm's length basis and for fair
consideration, and such Borrower and such Person shall deliver certifications
and evidence to such effect and such other certifications as Lender shall
reasonably require to assure itself that the substitution does not constitute a
fraudulent conveyance on the part of any Person (assuming such Person was not
solvent at the time of transfer);
(g) Borrowers shall comply with such other terms and conditions as the
Rating Agencies shall require in connection with the addition of the Additional
Property;
(h) each Rating Agency shall have delivered written confirmation that any
rating issued by such Rating Agency in connection with the Securitization will
not, as a result of the addition of the Additional Property, be downgraded from
the then current ratings thereof, qualified or withdrawn; and
(i) if the Additional Property is not to be owned by an existing Borrower,
the owner of the Additional Property (a "New Borrower") and its organizational
structure shall be acceptable to Lender and the Rating Agencies, and PRLP and
SPE shall collectively own at least 50.1% of the total interest in such New
Borrower. If the Additional Property is to be owned by an existing Borrower, the
organizational documents of the applicable Borrower shall, if required, be
modified to permit the ownership and operation of the Additional Property and
shall be in form and substance reasonably acceptable to Lender.
II.4.5 Adjacent Properties. Borrowers shall have the right to add to the
Properties any real property which a Borrower acquires subsequent to the Closing
Date provided such real property is immediately adjacent to a Property and is
operated or is to be operated as a factory outlet center or for parking or other
uses complementary to a factory outlet center (a "Spreader Premises") by
executing an agreement of spreader and modification of mortgage, deed of trust
or deed to secure debt, as applicable (a "Spreader Agreement"), to spread the
lien of the applicable Mortgage to include such Spreader Premises and such other
documents (together with the Spreader Agreement, the "Spreader Documents"), as
Lender may in its reasonable discretion require in order to grant Lender a first
priority, perfected lien on and security interest in such Spreader Premises and
all related rents, personal property, reserves and escrows on the same terms and
conditions as the liens and security interests granted to Lender in the Property
on the Closing Date. Borrowers' right to add an Spreader Premises to the
Properties shall also be subject to the following conditions and restrictions:
(a) No Default or Event of Default shall have occurred and be continuing;
(b) Borrowers shall have delivered Phase I environmental report and, if
recommended by such Phase I report, a Phase II environmental report prepared by
Environmental Management Group, Inc., IVI
<PAGE>
Environmental, Inc., or such other environmental consultant as is approved
by the Rating Agencies, stating that the Additional Premises comply with all
applicable environmental laws, or if remedial steps are required to effect such
compliance, identifying such steps and projecting the cost thereof, in which
case Lender shall have the option to not accept such Spreader Premises and, if
Lender agrees to accept the Spreader Premises, Borrowers shall be required to
deposit into the Engineering Escrow Fund an amount equal to one hundred fifty
percent (150%) of such projected costs;
(c) Borrowers shall have delivered an engineering report and prepared by
Merrit & Harris, Inc., or such other consulting engineer as is approved by the
Rating Agencies, stating that the Spreader Premises comply with all applicable
building laws and do not require performance of deferred maintenance or if
remedial steps are required to effect such compliance or such deferred
maintenance, identifying such steps and projecting the cost thereof, in which
case Lender shall have the option in its reasonable discretion not to accept
such Spreader Premises and, if Lender does accept such Spreader Premises,
Borrowers shall be required to deposit into the Engineering Escrow Fund an
amount equal to one hundred twenty-five percent (125%) of such projected costs;
(d) Borrowers shall have caused to be delivered all leases, title
commitments, title insurance policies, surveys, hazard and liability insurance,
evidence of compliance with zoning and other laws, legal opinions, and other
items of due diligence with respect to Spreader Premises as the Rating Agencies
may require, all of which shall be in form and substance acceptable to the
Rating Agencies;
(e) Borrowers shall comply with such other terms and conditions as the
Rating Agencies shall require in connection with such addition;
(f) each Rating Agency shall have delivered written confirmation that any
rating issued by such Rating Agency in connection with the Securitization will
not, as a result of the proposed addition of the Spreader Premises, be
downgraded from the then current ratings thereof, qualified or withdrawn; and
(g) the organizational documents of the applicable Borrower shall, if
required, be modified to permit the ownership and operation of the Spreader
Premises and shall be in form and substance reasonably acceptable to Lender;
provided, however that prior to the date of Securitization the provisions in
clauses (b), (c) and (d) of this Section 2.4.5 which relate to the Rating
Agencies' discretion shall be deemed to be the Lender's reasonable discretion.
Section II.5 Payments and Computations
II.5.1 Making of Payments. Each payment by Borrowers hereunder or under the
Note shall be made in funds settled through the New York Clearing House
Interbank Payments System or other funds immediately available to Lender by 2:00
p.m., New York City time, on the date such payment is due, to Lender by deposit
to such account as Lender may designate by written notice to Borrowers. Whenever
any payment hereunder or under the Note shall be stated to be due on a day which
is not a Business Day, such payment shall be made on the first Business Day
thereafter.
<PAGE>
II.5.2 Computations. Interest payable hereunder or under the Note by
Borrowers shall be computed on the basis of the actual number of days elapsed in
the related interest accrual period and a 360-day year.
II.5.3 Late Payment Charge. If any principal, interest or any other sums
due under the Loan Documents is not paid by Borrowers within five (5) days after
the date on which it is due and payable, Borrowers shall pay to Lender upon
demand an amount equal to the lesser of five percent (5%) of such unpaid sum or
the maximum amount permitted by applicable law in order to defray the expense
incurred by Lender in handling and processing such delinquent payment and to
compensate Lender for the loss of the use of such delinquent payment. Any such
amount shall be secured by the Mortgages and the other Loan Documents.
Section II.6 Cash Management Arrangements
(a) All Rents will be transmitted directly into an account or accounts (the
"Collection Account") maintained by Borrowers but controlled by Lender at
Mercantile Safe Deposit and Trust Company or at such other bank or banks
selected by Borrowers (the "Collection Account Bank"). Borrower will establish a
separate "A" Account (the "A" Account) and "B" Account (the "B" Account) with
the Collection Account Bank. Borrowers shall cause all Rents to be sent directly
to the Collection Account Bank by tenants (where practicable) for deposit into
the "A" Account. All other income or revenue received by Borrowers or Manager in
connection with the Properties will be deposited into the "A" Account within one
Business Day after the date of receipt. Until the occurrence of a Cash Trap
Event, the Collection Account Bank shall transfer property receipts that are
cleared on a daily basis from the "A" Account to the "B" Account, which shall be
an account not subject to any restrictions and under the sole control of
Borrower. Following and during the continuance of a Cash Trap Event, the
Collection Account Bank will transfer property receipts that are cleared on a
daily basis to the Cash Collateral Account Bank for deposit into the Cash
Collateral Account. The duties of the Collection Account Bank and the
application and disbursement of all funds deposited with the Collection Account
Bank shall be governed by the terms of this Agreement and the Collection Account
Agreement. Any amounts so deposited into the Cash Collateral Account shall be
applied and disbursed in accordance with the terms and provisions of this
Agreement and the Cash Collateral Account Agreement.
(b) Lender shall have a senior security interest in the aforementioned
accounts and all subaccounts established thereunder. The upfront and ongoing
expenses of maintaining such accounts and subaccounts, and any other accounts
and reserves maintained pursuant to the Loan Documents, shall be the
responsibility of Borrowers. Funds in each account shall be invested for the
benefit of Borrowers in Permitted Investments (as defined in the Cash Collateral
Account Agreement).
(c) Anything hereinabove in this Section to the contrary notwithstanding,
from and after the acceleration of the Loan, 100% of all Rents and other sums
deposited into the Collection Account in any month which remain in the
Collection Account or the Cash Collateral Account shall be applied to the
payment of Debt Service on the Loan (including, if applicable, interest at the
Default Rate), required reserves and Approved Operating Expenses and/or to the
payment of the principal amount of the Note, in such order as Lender shall
determine in its sole discretion.
II.7 Fees.
(a) Borrowers shall pay to Lender, at the time of the initial Advance
hereunder, a structuring fee in the amount of 0.5% of the total Commitment. From
and after such time as Advances in an aggregate amount equal to $95,000,000.00
have been made hereunder, Borrowers shall pay to Lender, at the time of any
additional Advance hereunder, a draw fee in the amount of 0.125% of each such
Advance.
<PAGE>
(b) Borrowers shall pay to Lender an exit fee (the "Exit Fee") in the event
that the Loan is repaid other than with the proceeds of permanent financing
obtained from Lender. The Exit Fee shall be equal to (i) the product of (A) .013
multiplied by (B) seventy percent (70%) of the sum of (1) the Initial Maximum
Amount plus (2) the excess of the Additional Maximum Amount over $50,000,000.00
less (ii) the amount of the Loan that is repaid with the proceeds of permanent
financing obtained from Lender.
As used herein, the following terms shall have the meanings set forth
below:
"Initial Maximum Amount" shall mean the total amount of Advances made on
the basis of the portion of the Available Amount attributable to the Initial
Properties, but in no event more than $112,000,000.00.
"Additional Maximum Amount" shall mean the total amount of Advances made on
the basis of the portion of the Available Amount attributable to Properties
other than the Initial Properties (such Properties being the "Future
Properties"); provided, however, that if Advances made on the basis of the
Available Amount attributable to a particular Future Property are repaid and
reborrowed, only the maximum principal amount of Advances outstanding at any one
time with respect to such Future Property shall be included in the Additional
Maximum Amount. Such maximum principal amount of Advances outstanding shall be
calculated at the time of the making of an Advance.
In determining the Property to which an Advance shall be attributable,
Advances shall be attributed first to the Initial Properties up to the maximum
amount available hereunder based on the Net Operating Income of such Properties
and then to Future Properties on the same basis in the order in which they
became collateral for the Loan. The Exit Fee in respect of any repayment of the
Loan shall be calculated and paid at the time of such repayment (subject to
adjustment on the Maturity Date as provided below); provided, however, that once
an amount equal to $1,019,200.00 has been paid in respect of the Exit Fee, no
further payments of the Exit Fee shall be due and payable until the Maturity
Date, at which time Borrowers and Lender shall calculate the total amount of the
Exit Fee. At such time, any additional amount owed by Borrowers in respect of
the Exit Fee shall be promptly paid by Borrowers, and Lender shall have no
obligation to release any remaining collateral for the Loan until the same has
been paid. In the event that payments theretofore made by Borrowers in respect
of the Exit Fee exceed the total amount of the Exit Fee as calculated on the
Maturity Date, Lender shall refund to Borrowers the amount of such excess.
III. CONDITIONS PRECEDENT
Section III.1 Conditions Precedent to the Initial Advance of the Loan. The
obligation of Lender to make the initial advance of the Loan hereunder is
subject to the fulfillment by Borrowers or waiver by Lender of the following
conditions precedent no later than the Closing Date:
(a) Representations and Warranties: Compliance with Conditions. The
representations and warranties of Borrowers contained in this Agreement and the
other Loan Documents shall be true and correct in all material respects on and
as of the Closing Date with the same effect as if made on and as of such date,
and no Default or Event of Default shall have occurred and be continuing; and
Borrowers shall be in compliance in all material respects with all terms and
conditions set forth in this Agreement and in each other Loan Document on their
part to be observed or performed.
<PAGE>
(b) Loan Agreement and Note. Lender shall have received a copy of this
Agreement and the Note, in each case, duly executed and delivered on behalf of
Borrowers.
(c) Delivery of Loan Documents: Title Insurance: Reports: Leases.
(i) Mortgage, Assignments of Agreements. Lender shall have received from
Borrowers fully executed and acknowledged counterparts of the Mortgage,
Assignment of Leases, the Assignment of Agreements and the Consent and
Subordination of Manager relating to each Property and evidence that
counterparts of the Mortgages have been delivered to the title company for
recording, in the reasonable judgment of Lender, so as to effectively create
upon such recording valid and enforceable Liens upon the Properties of the
requisite priority in favor of Lender (or such other trustee as may be required
or desired under local law), subject only to the Permitted Encumbrances and such
other Liens as are permitted pursuant to the Loan Documents. Lender shall have
also received from Borrowers fully executed counterparts of the Environmental
Indemnity and each Consent and Subordination of Manager.
(ii) Title Insurance. Lender shall have received a Title Insurance Policy
for each Property acceptable to Lender and evidence that the premium in respect
of such Title Insurance Policy has been paid.
(iii) Survey. Lender shall have received a Survey for each Property.
(iv) Insurance. Lender shall have received valid certificates of insurance
for the policies of insurance required hereunder, satisfactory to Lender in its
reasonable discretion, and evidence of the payment of all premiums payable for
the existing policy period, which period shall not be less than one year in
advance.
(v) Environmental Reports. Lender shall have received an environmental
report in respect of each Property satisfactory to Lender.
(vi) Zoning. With respect to each Property, Lender shall have received, at
Lender's option, (i) letters or other evidence with respect to such Property
from the appropriate municipal authorities (or other Persons) concerning
applicable zoning and building laws, in each case reasonably satisfactory to
Lender, (ii) an ALTA 3.1 zoning endorsement for the Title Insurance Policy, or
(iii) a zoning opinion letter, in substance reasonably satisfactory to Lender.
(vii) Encumbrances. Borrowers shall have taken or caused to be taken such
actions so that Lender has a valid and perfected Lien of the requisite priority
as of the Closing Date with respect to the Mortgage on each Property, subject
only to applicable Permitted Encumbrances and such other Liens as are permitted
pursuant to the Loan Documents, and Lender shall have received satisfactory
evidence thereof.
(viii) Guaranty. Lender shall have received the Guaranty, duly executed and
delivered by Guarantors.
<PAGE>
(d) Related Documents. Each additional document not specifically referenced
herein, but relating to the transactions contemplated herein, shall have been
duly authorized, executed and delivered by all parties thereto and Lender shall
have received and approved certified copies thereof.
(e) Delivery of Organizational Documents. On or before the Closing Date,
Borrowers shall deliver or cause to be delivered to Lender (i) copies certified
by each Borrower of all organizational documentation related to such Borrower
and/or the formation, structure, existence, good standing and/or qualification
to do business of such Borrower, as Lender may request in its reasonable
discretion, including good standing certificates, qualifications to do business
in the appropriate jurisdictions, resolutions authorizing the entering into of
the Loan and incumbency certificates as may be requested by Lender.
(f) Opinions of Borrower's Counsel. Lender shall have received opinions of
Borrowers' counsel (i) with respect to non-consolidation, true sale or true
contribution, and fraudulent transfer issues, and (ii) with respect to due
execution, authority, enforceability of the Loan Documents and such other
matters as Lender may require, all such opinions in form, scope and substance
satisfactory to Lender and Lender's counsel in their reasonable discretion.
(g) Intentionally omitted.
(h) Basic Carrying Costs. Borrowers shall have paid or deposited into an
applicable reserve fund (i) the amount described in clause (b) of Section 7.3.1
and (ii) all currently due Other Charges (other than ground lease rents) which
amounts shall be funded with proceeds of the Loan.
(i) Completion of Proceedings. All corporate and other proceedings taken or
to be taken in connection with the transactions contemplated by this Agreement
and other Loan Documents and all documents incidental thereto shall be
reasonably satisfactory in form and substance to Lender, and Lender shall have
received all such counterpart originals or certified copies of such documents as
Lender may reasonably request.
(j) Financial Statements. Borrowers shall have provided financial
statements for each Property acceptable to Lender.
(k) Leases, Rent Roll and Estoppel Certificates. Borrowers shall have
provided Lender with certified copies of each of the Leases in effect as of the
date hereof and requested by Lender, a current rent roll for each Property, and
tenant estoppel certificates and subordination, attornment and non-disturbance
agreements reasonably satisfactory to Lender.
(l) REA Estoppels. Borrowers shall have provided Lender with copies of all
reciprocal easement and operating agreements affecting any of the Properties,
together with original executed estoppel certificates in form and substance
satisfactory to Lender from each of the parties (other than a Borrower) to such
agreements as is required by Lender.
(m) Debt Service Coverage Ratio. The Debt Service Coverage Ratio shall be
at least equal to 1.25.
(n) Loan to Value Ratio; Appraisals. Lender shall have received an
appraisal ("Appraisal") for each Property satisfactory to Lender indicating that
the Allocated Loan Amount for such Property is not more than seventy-five
percent (75%) of the fair market value of such Property as of the date hereof.
<PAGE>
(o) Engineering Reports. Lender shall have received a structural
engineering report for each Property from Merrit & Harris, acceptable to Lender,
identifying, among other things, (i) deferred maintenance for such Property and
the cost thereof and (ii) a three (3) year schedule of anticipated capital
expenditures and the per annum cost thereof.
(p) Declarations of Covenants. Borrowers shall have delivered to Lender
recorded declarations of covenants and cross-easements in form and substance
reasonably satisfactory to Lender covering any parcels adjoining any of the
Properties owned by Borrowers or their Affiliates which contain or are expected
to contain additional phases of the shopping centers on the Properties and are
to be operated in an integrated manner.
(q) Utility Service and Tax Assessment. Borrowers shall have delivered
evidence that all utility services required for the Properties are available and
that each Property is subject to separate tax assessment.
(r) Absence of Adverse Changes. Lender shall have determined that there
have been no material developments prior to the Closing Date which could, in
Lender's sole judgment, adversely affect the ownership or operation of any
Property or the ability of Borrowers to repay the Loan or the ability of any
Borrower to perform any of its covenants and agreements set forth in this
Agreement and the other Loan Documents.
Section III.2 Conditions Precedent to each Advance of the Loan. Lender
shall not be required to make any Advance unless on the applicable Borrowing
Date:
(a) No Default. There exists no Default or Event of Default hereunder or
under any Loan Document.
(b) Representations and Warranties. The representations and warranties of
Borrowers contained in this Agreement and the other Loan Documents shall be true
and correct in all material respects on and as of the Borrowing Date with the
same effect as if made on and as of such date (and no facts, circumstances or
information which in the opinion of Lender are reasonably likely to have a
Material Adverse Effect are disclosed in any updated Schedule 1 delivered to
Lender as part of the Borrowing Documents) and Borrowers shall be in compliance
in all material respects with all terms and conditions set forth in this
Agreement and in each other Loan Document on their part to be observed or
performed.
(c) Debt Service Coverage Ratio. The Debt Service Coverage Ratio shall be
not less than 1.25.
(d) Endorsements. For all jurisdictions in which it is necessary for the
maintenance of the priority of the Mortgages with respect to such Advance,
Lender shall have received and approved (i) an endorsement to the applicable
Title Insurance Policy covering such Advance and showing that no unpermitted
title exceptions have arisen and (ii) federal tax, judgment and lien searches
for the Borrowers performed with the state and counties in which the Properties
are located and the state(s) under which the Borrowers are organized;
(e) Borrowing Documents and Draw Fee. Lender shall have received and
approved the Borrowing Documents and any draw fee payable pursuant to Section
2.7.
<PAGE>
(f) Permits. If applicable and if Lender so requests, Lender has received
and approved copies of all permits and governmental approvals necessary for any
renovation or tenant improvement work at the Properties to be funded from such
Advance;
(g) Leases and Agreements. If applicable and if Lender so requests, copies
of all leases, lease amendments and other Property Agreements entered into since
the date of the last Advance;
(h) Title Insurance. If the Advance would result in the outstanding amount
hereunder being greater than the aggregate amount of the Title Insurance
Policies, the amount of such Title Insurance Policies shall be increased in an
amount sufficient to cover the entire outstanding amount of the Loan, plus any
additional amount (not to exceed 25% of the Allocated Loan Amount for the
Property covered by such Title Insurance Policy) reasonably required by Lender
with respect to any Title Insurance Policy which does not include a tie-in
endorsement. Such increase shall be allocated among the Title Insurance Policies
in a manner reasonably acceptable to Borrowers and Lender.
(i) Absence of Adverse Changes. Lender shall have determined that there
have been no material developments prior to the Borrowing Date which could, in
Lender's sole judgement, adversely affect the ownership or operation of any
Property or the ability of Borrowers to repay the Loan or the ability of any
Borrower to perform any of its covenants and agreements set forth in this
Agreement and the other Loan Documents.
IV. REPRESENTATIONS AND WARRANTIES
Section IV.1 Borrower Representations. Each Borrower represents and
warrants as of the date hereof, as of the Closing Date and as of each Borrowing
Date that, except as disclosed in Schedule 1 hereto or, with respect to
representations and warranties made as of the Borrowing Date, as disclosed in
the Borrowing Documents delivered as of such date:
(a) Organization. Each Borrower and each General Partner has been duly
organized and is validly existing and in good standing with requisite power and
authority to own its properties and to transact the businesses in which it is
now engaged. Each Borrower and each General Partner is duly qualified to do
business and is in good standing in each jurisdiction where it is required to be
so qualified in connection with its properties, businesses and operations. Each
Borrower and each General Partner possesses all rights, licenses, permits and
authorizations, governmental or otherwise, necessary to entitle it to own its
properties and to transact the businesses in which it is now engaged, and the
sole business of each Borrower is the ownership, management and operation of the
Property owned by it.
(b) Proceedings. Each Borrower and each General Partner has taken all
necessary action to authorize the execution, delivery and performance of this
Agreement and the other Loan Documents to which it is a party. This Agreement
and such other Loan Documents have been duly executed and delivered by or on
behalf of each Borrower which is a party thereto and constitute legal, valid and
binding obligations of each such Borrower enforceable against such Borrower in
accordance with their respective terms, subject to applicable bankruptcy,
insolvency and similar laws affecting rights of creditors generally, and
subject, as to enforceability, to general principles of equity (regardless of
whether enforcement is sought in a proceeding in equity or at law).
(c) No Conflicts. The execution, delivery and performance by Borrowers of
this Agreement and the other Loan Documents to which Borrowers or any one of
them are a party will not conflict with or result
<PAGE>
in a breach of any of the terms or provisions of, or constitute a default
under, or result in the creation or imposition of any lien, charge or
encumbrance (other than pursuant to the Loan Documents) upon any of the property
or assets of any Borrower or General Partner pursuant to the terms of any
indenture, mortgage, deed of trust, loan agreement, partnership agreement or
other agreement or instrument to which any Borrower or General Partner is a
party or by which any Borrower's property or assets is subject, nor will such
action result in any violation of the provisions of any statute or any order,
rule or regulation of any court or governmental agency or body having
jurisdiction over any Borrower or any of its properties or assets, and any
consent, approval, authorization, order, registration or qualification of or
with any court or any such regulatory authority or other governmental agency or
body required for the execution, delivery and performance by any Borrower of
this Agreement or any other Loan Documents has been obtained and is in full
force and effect.
(d) Litigation. There are no actions, suits or proceedings at law or in
equity by or before any Governmental Authority or other agency now pending or
threatened against or affecting any Borrower or any of the Properties, which
actions, suits or proceedings, if determined against such Borrower or Property,
either individually or collectively has or is reasonably likely to have a
Material Adverse Effect.
(e) Property Agreements.
(i) Borrowers have delivered to Lender true, correct and complete copies of
all material Property Agreements.
(ii) No Property Agreement provides any party with the right to obtain a
lien or encumbrance upon any Property superior to the lien of the Mortgage
encumbering such Property.
(iii) No Borrower nor any other party to any Property Agreement affecting a
Property is in default of its monetary or other material obligations thereunder
beyond any notice and applicable grace period and no event has occurred which,
with the giving of notice or the passage of time, or both, would constitute such
a monetary default or, to the knowledge of Borrower, any such other default, in
each case which would have a Material Adverse Effect.
(iv) Borrowers have not received or given any written communication which
alleges that a material default exists or, with the giving of notice or the
lapse of time, or both, would exist under the provisions of any Property
Agreement except for such defaults which have been cured.
(v) No condition exists whereby a Borrower or any future owner of a
Property may be required to purchase any other parcel of land which is subject
to any Property Agreement or which gives any Person a right to purchase, or
right of first refusal with respect to, such Property.
(vi) To the best knowledge of Borrowers, no offset or any right of offset
exists respecting continued contributions to be made by any party to any
Property Agreement except as expressly set forth therein. Except as previously
disclosed to Lender in writing, no material exclusions or restrictions on the
utilization, leasing or improvement of any Property (including non-compete
agreements) exists in any Property Agreement.
(vii) Except as previously disclosed to Lender in writing, all
"pre-opening" requirements contained in all Property Agreements (including, but
not limited to, all off-site and on-site construction requirements), if any,
have been fulfilled and, to the best of Borrowers' knowledge, no condition now
exists whereby any party to any such Property Agreement could refuse to honor
its obligations thereunder if such refusal is reasonably likely to have a
Material Adverse Effect.
<PAGE>
(viii) Except as previously disclosed to Lender in writing, all work, if
any, to be performed by a Borrower under each of the Property Agreements has
been substantially performed, all contributions to be made by a Borrower to any
party to such Property Agreements have been made, and all other conditions to
such party's obligations thereunder have been satisfied if the failure to so
perform, contribute or satisfy is reasonably likely to have a Material Adverse
Effect.
(f) Title. Each Borrower has good insurable and marketable fee simple or
leasehold title (as shown on Schedule 7) to the real property comprising part of
the Property owned or leased by it, and good title to the balance of such
Property, free and clear of all Liens whatsoever except the Permitted
Encumbrances, such other Liens as are permitted pursuant to the Loan Documents
and the Liens created by the Loan Documents. Each Mortgage when properly
recorded in the appropriate records, together with any Uniform Commercial Code
financing statements required to be filed in connection therewith, will create
(i) a valid, perfected first priority lien on the Property it purports to
encumber, subject only to Permitted Encumbrances and the Liens created by the
Loan Documents and (ii) perfected security interests in and to, and perfected
collateral assignments of, all personalty (including the Leases), all in
accordance with the terms thereof, in each case subject only to any applicable
Permitted Encumbrances, such other Liens as are permitted pursuant to the Loan
Documents and the Liens created or permitted by the Loan Documents. The
Permitted Encumbrances do not materially adversely affect the value or use of
any Property, or any Borrower's ability to repay the Loan. Except for Permitted
Encumbrances there are no claims for payment for work, labor or materials
affecting any Property which are or may become a lien prior to, or of equal
priority with, the Liens created by the Loan Documents.
(g) No Bankruptcy Filing. No Borrower or General Partner is contemplating
either the filing of a petition by it under any state or federal bankruptcy or
insolvency laws or the liquidation of all or a major portion of its assets or
property, and no Borrower or General Partner has knowledge of any Person
contemplating the filing of any such petition against it.
(h) Full and Accurate Disclosure. No statement of fact made by any Borrower
in this Agreement 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.
(i) No Plan Assets. No Borrower is an "employee benefit plan," as defined
in Section 3(3) of ERISA, subject to Title I of ERISA, and none of the assets of
any Borrower constitutes or will constitute "plan assets" of one or more such
plans within the meaning of 29 C.F.R. Section 2510.3-101.
(j) Compliance. To Borrowers' knowledge, each Borrower and each Property
and the use thereof comply in all material respects with all applicable Legal
Requirements, including building and zoning ordinances and codes and Property
Agreements. No Borrower is in default or violation of any order, writ,
injunction, decree or demand of any Governmental Authority, the violation of
which is reasonably likely to have a Material Adverse Effect. There has not been
committed by Borrowers or, to Borrowers' knowledge, any other person in
occupancy of or involved with the operation or use of the Properties any act or
omission affording the federal government or any state or local government the
right of forfeiture as against any Property or any part thereof or any monies
paid in performance of Borrowers' obligations under any of the Loan Documents.
Borrowers hereby covenant and agree not to commit, permit or suffer to exist any
act or omission affording such right of forfeiture.
(k) Contracts. To Borrowers' knowledge, there are no contracts affecting
any Property which provide for payments of more than $75,000.00 in any year and
which are not terminable on one month's notice or less without cause and without
penalty or premium. All material contracts affecting the Properties have been
entered into at arms-length in the ordinary course of Borrowers' business and
provide for the payment of fees in amounts and upon terms comparable to market
rates existing at the time of execution.
(l) Financial Information. All financial data, including the statements of
cash flow and income and operating expense, that have been delivered to Lender
by or on behalf of Borrowers in respect of the Properties (i) are true, complete
and correct in all material respects, (ii) accurately represent the financial
condition of each Property as of the date of such reports, and (iii) have been
prepared in accordance with GAAP (or such other accounting basis as is
reasonably acceptable to Lender) consistently applied throughout the periods
covered, except as disclosed therein or as otherwise disclosed in writing to
Lender prior to the date hereof. No Borrower has any contingent liabilities,
liabilities for taxes, unusual forward or long-term commitments or unrealized or
anticipated losses from any unfavorable commitments that are known to Borrowers
and reasonably likely to have a material adverse effect on any Property or the
operation thereof, except as referred to or reflected in said financial
statements or as otherwise disclosed in writing to Lender prior to the date
hereof. Since the date of such financial statements, there has been no change in
the financial condition, operations or business of any Borrower from that set
forth in said financial statements which is reasonably likely to have a Material
Adverse Effect.
(m) Condemnation. No Condemnation or other proceeding has been commenced
or, to Borrowers' best knowledge, is contemplated with respect to all or any
portion of any Property or for the relocation of roadways providing access to
any Property which is reasonably likely to have a Material Adverse Effect.
(n) Federal Reserve Regulations. No part of the proceeds of the Loan will
be used for the purpose of purchasing or acquiring any "margin stock" within the
meaning of Regulation U of the Board of Governors of the Federal Reserve System
or for any other purpose which would be inconsistent with such Regulation U or
any other Regulations of such Board of Governors, or for any purposes prohibited
by Legal Requirements or by the terms and conditions of this Agreement or the
other Loan Documents.
(o) Utilities and Public Access. Each Property has rights of access to
public ways and is served by water, sewer, sanitary sewer and storm drain
facilities adequate to service such Property for its intended uses. All public
utilities necessary or convenient to the full use and enjoyment of each Property
are located in the public right-of-way abutting such Property (unless through
permanent insurable easements benefitting such Property), and all such utilities
are connected so as to serve the Property without passing over other property
(unless through permanent insurable easements benefitting such Property). All
roads necessary for the use of each Property for its current purposes have been
completed and dedicated to public use and accepted by all Governmental
Authorities (unless such roads are on private, permanent insurable easements,
benefitting such Property).
(p) Not a Foreign Person. No Borrower is a "foreign person" within the
meaning of Section 1445(f)(3) of the Code.
(q) Separate Lots. Each Property is comprised of one (1) or more parcels
which constitute a separate tax lot and does not constitute a portion of any
other tax lot not a part of such Property.
<PAGE>
(r) Assessments. Except as disclosed in the Title Policies, there are no
pending or, to the knowledge of Borrowers, proposed special or other assessments
for public improvements or otherwise affecting any Property, nor are there any
contemplated improvements to any Property that may result in such special or
other assessments.
(s) Enforceability. Intentionally omitted.
(t) No Prior Assignment. There are no prior assignments of the Leases or
any portion of the Rents due and payable or to become due and payable which are
presently outstanding.
(u) Insurance. Borrowers have obtained and have delivered to Lender
insurance policies reflecting the insurance coverages, amounts and other
requirements set forth in this Agreement.
(v) Use of Property. Each Property is used exclusively as a retail factory
outlet shopping center and other appurtenant and related uses.
(w) Certificate of Occupancy; Licenses. To Borrowers' knowledge, all
certifications, permits, licenses and approvals, including certificates of
completion and occupancy permits and any applicable liquor licenses required for
the legal use, occupancy and operation of the Properties (collectively, the
"Licenses"), have been obtained and are in full force and effect. Borrowers
shall keep and maintain all licenses necessary for the operation of the
Properties. The use being made of each Property is in conformity with the
certificate of occupancy issued for such Property.
(x) Flood Zone. Except as otherwise disclosed on the Surveys, none of the
Improvements on the Properties is located in an area identified by the Federal
Emergency Management Agency as an area having special flood hazards or, if they
are, Borrowers have obtained the flood insurance required hereunder.
(y) Physical Condition. To Borrowers' knowledge, except as disclosed in the
engineering reports delivered to Lender in connection with the underwriting of
the Loan, each Property, including all buildings, improvements, parking
facilities, sidewalks, storm drainage systems, roofs, plumbing systems, HVAC
systems, fire protection systems, electrical systems, equipment, elevators,
exterior sidings and doors, landscaping, irrigation systems and all structural
components, is in good condition, order and repair in all material respects;
there exist no structural or other material defects or damages in any Property,
whether latent or otherwise. Borrowers have not received notice from any
insurance company or bonding company of any defects or inadequacies in the
Properties, or any part thereof, which would adversely affect the insurability
of the same or cause the imposition of extraordinary premiums or charges thereon
or of any termination or threatened termination of any policy of insurance or
bond.
(z) Appraised Value. All of the improvements which were included in
determining the appraised value of each Property lie wholly within the
boundaries and building restriction lines of such Property. Except as disclosed
in the Survey for a Property, no improvements on adjoining properties encroach
upon such Property, and no easements or other encumbrances upon any Property
encroach upon any of the improvements, so as to materially affect the value or
marketability of such Property except those which are insured against by title
insurance.
<PAGE>
(aa) Leases. Attached hereto as Schedule 2 is a rent roll (the "Rent Roll")
for the Properties. The Rent Roll is true, correct and complete with respect to
the subject matter thereof. The only Leases affecting the Properties are those
reflected in the Rent Roll. Except as set forth in Schedule 2: (i) each Lease is
in full force and effect; (ii) the tenants under the Leases have accepted
possession of and are in occupancy of all of their respective demised premises,
have commenced the payment of rent under such Leases; (iii) all rents due and
payable under the Leases have been paid and no portion thereof has been paid for
any period more than thirty (30) days in advance; (iv) the fixed rent payable
under each Lease is the amount of fixed rent set forth in the Rent Roll; (v)
there are no defaults on the part of the landlord under any Lease and no event
has occurred which, with the giving of notice or passage of time, or both, would
constitute such default; (vi) to Borrowers' best knowledge, there is no present
material default by any tenant under any Lease; and (vii) Borrowers do not hold
any security deposits under the Leases. Except as set forth in Schedule 2 or as
disclosed in tenant estoppel certificates delivered to Lender pursuant to
Section 3.1(k): (viii) there are no offsets, claims or defenses to the
enforcement of any Lease; (ix) there is no claim or basis for a claim by the
tenant under any Lease for an adjustment to the rent; and (x) no tenant has made
any claim against the landlord under a Lease which remains outstanding. None of
the Leases contains any option to purchase or right of first refusal to purchase
any Property or any part thereof which remains in effect as of the date hereof.
The Leases have not been assigned or pledged except to Lender, and no other
person whatsoever has any interest therein except the tenants thereunder.
(bb) Survey. The survey for each Property delivered to Lender in connection
with this Agreement does not fail to reflect any material matter affecting such
Property or the title thereto that would normally be set forth in such type of
survey.
(cc) Filing and Recording Taxes. All transfer taxes, deed stamps,
intangible taxes or other amounts in the nature of transfer taxes required to be
paid by any Person under applicable Legal Requirements currently in effect in
connection with the transfer of the Properties to Borrowers have been paid. All
mortgage, mortgage recording, stamp, intangible or other similar tax required to
be paid by any Person under applicable Legal Requirements currently in effect in
connection with the execution, delivery, recordation, filing, registration,
perfection or enforcement of any of the Loan Documents, including the Mortgages,
have been paid and, under current Legal Requirements, each Mortgage is
enforceable against the Borrower party thereto in accordance with its respective
terms by Lender (or any subsequent holder thereof), except as such
enforceability may be limited by insolvency, bankruptcy, moratorium or other
laws affecting creditor's remedies in general and principles of equity.
(dd) Single-Purpose. Each Borrower hereby represents and warrants to, and
covenants with, Lender that, as of the date hereof and until such time as the
Debt shall be paid in full:
(i) Such Borrower does not and will not own any asset or property other
than (A) the Property owned by it, and (B) incidental personal property related
to or arising from the ownership or operation of such Property.
(ii) Such Borrower will not engage in any business other than the
ownership, development, management and operation of the Property owned by it and
will conduct and operate its business as presently conducted and operated.
(iii) Such Borrower will not enter into any contract or agreement with any
of its Affiliates or constituent parties, any guarantor of the Debt or any part
thereof or any Affiliate of any constituent party or Guarantor, except upon
terms and conditions that are no less favorable than those that would be
available on an arms-length basis with third parties other than any such party.
(iv) Such Borrower has not incurred, and such Borrower will not incur, any
indebtedness, secured or unsecured, direct or indirect, absolute or contingent
(including guaranteeing any obligation), other than the Permitted Indebtedness.
No indebtedness other than the Debt may be secured (subordinate or pari passu)
by the Properties.
(v) Such Borrower has not made and will not make any loans or advances to
any third party (including any Affiliate or constituent party, any Guarantor or
any Affiliate of any constituent party or Guarantor).
(vi) Such Borrower is and will remain solvent and will pay its debts and
liabilities (including employment and overhead expenses) from its assets as the
same shall become due.
(vii) Such Borrower has done or caused to be done and will do all things
necessary to observe corporate, partnership, or limited liability company
formalities, as the case may be, and preserve its existence.
(viii) Such Borrower will not, and will not permit any constituent party or
Guarantor to, amend, modify or otherwise change the partnership certificate,
partnership agreement, articles of incorporation and bylaws, operating
agreement, trust, or other organizational documents of such Borrower or such
constituent party or Guarantor in a manner which would adversely affect such
Borrower's existence as a single purpose entity.
(ix) Such Borrower will maintain books and records and bank accounts
separate from those of its Affiliates and any constituent party and such
Borrower will file its own tax returns.
(x) Such Borrower will be, and at all times will hold itself out to the
public as, a legal entity separate and distinct from any other entity (including
any Affiliate, any constituent party, any Guarantor or any Affiliate of any
constituent party or Guarantor), shall conduct business in its own name and
shall maintain and utilize separate stationery, invoices and checks.
(xi) Such Borrower will maintain adequate capital for the normal
obligations reasonably foreseeable in a business of its size and character and
in light of its contemplated business operations.
(xii) Neither such Borrower nor any constituent party will seek the
dissolution or winding up, in whole or in part, of such Borrower.
(xiii) Such Borrower will not commingle its funds and other assets with
those of any Affiliate or constituent party, any Guarantor, or any Affiliate of
any constituent party or Guarantor, or any other Person.
(xiv) Such Borrower has and will maintain its assets in such a manner that
it will not be costly or difficult to segregate, ascertain or identify its
individual assets from those of any Affiliate or constituent party, any
Guarantor, or any Affiliate of any constituent party or Guarantor, or any other
Person.
<PAGE>
(xv) Such Borrower does not and will not hold itself out to be responsible
for the debts or obligations of any other person.
(xvi) Each Borrower which is a limited liability company shall at all times
have one member, and each Borrower which is a limited partnership shall at all
times have a general partner (the "SPE") who is a "single purpose entity" and
which shall at all times comply with each of the representations, warranties,
and covenants contained in this Section 4.1 as if such representation, warranty
or covenant was made directly by such SPE.
(xvii) The charter of each SPE shall at all times have at least one duly
appointed member of its board of directors (an "Independent Director")
reasonably satisfactory to Lender who shall not have been at the time of such
individual's appointment, and may not have been at any time during the preceding
five years (i) a shareholder of, or an officer or employee of, any Borrower or
any of its shareholders, subsidiaries or affiliates, (ii) a customer of, or
supplier to, any 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
such SPE. 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.
(xviii) The board of directors of each SPE shall not take any action which,
under the terms of any certificate of incorporation, by-laws or any voting trust
agreement with respect to any common stock, requires the vote of the board of
directors of the SPE unless at the time of such action there shall be at least
one member who is an Independent Director.
(xix) Such Borrower shall conduct its business so that the assumptions made
with respect to such Borrower in that certain opinion letter dated as of the
Closing Date delivered by Borrowers' counsel in connection with the Loan shall
be true and correct in all respects.
(ee) Investment Company Act. No Borrower is (i) an "investment company" or
a company "controlled" by an "investment company," within the meaning of the
Investment Company Act of 1940, as amended; (ii) 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 (iii) subject to any other
federal or state law or regulation which purports to restrict or regulate its
ability to borrow money.
(ff) Fraudulent Transfer. No Borrower has entered into the Loan or any Loan
Document with the actual intent to hinder, delay, or defraud any creditor. Each
Borrower and each General Partner (i) is and has at all times been Solvent and
will remain Solvent immediately upon the consummation of the transactions
contemplated by the Loan Documents, (ii) is free from bankruptcy, reorganization
or arrangement proceedings or a general assignment for the benefit of creditors
and (iii) is not contemplating the filing of a petition under any
<PAGE>
state or federal bankruptcy or insolvency laws or the liquidation of all or
a major portion of such Person's assets or property and no Borrower has any
knowledge of any Person contemplating the filing of any such petition against it
or any General Partner. No Borrower intends to, or believes that it will, incur
debts and liabilities (including 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 such
Borrower).
(gg) Management Agreement. Each of the Properties is self-managed by the
Borrower which owns the same and there are no Management Agreements affecting
the Properties. If at any time a Borrower elects to retain a Manager to manage
its Property, such manager and the Management Agreement between such Borrower
and the Manager shall be subject to the consent of Lender, not to be
unreasonably withheld or delayed, and all fees due under the Management
Agreement (which shall in no event exceed 4% of gross revenues), and the terms
and provisions of the Management Agreement, shall be subordinate to the
Mortgages and the Manager shall attorn to Lender. If at any time Lender consents
to the appointment of a new Manager, such new Manager and Borrower shall, as a
condition of Lender's consent, execute a Managers Consent and Subordination of
Management Agreement in a form reasonably required by Lender.
Section IV.2 Survival of Representations. Borrowers agree that all of the
representations and warranties of Borrowers set forth in Section 4.1 and
elsewhere in this Agreement and in the other Loan Documents shall survive for so
long as the Debt or any portion thereof remains owing to Lender under this
Agreement or any of the other Loan Documents by Borrowers. All representations,
warranties, covenants and agreements made in this Agreement or in the other Loan
Documents by Borrowers shall be deemed to have been relied upon by Lender
notwithstanding any investigation heretofore or hereafter made by Lender or on
its behalf.
V. AFFIRMATIVE COVENANTS
Section V.1 Borrower Covenants. From the date hereof and until payment and
performance in full of all obligations of Borrowers under the Loan Documents or
the earlier release of the Liens of the Mortgages (and all related obligations)
in accordance with the terms of this Agreement and the other Loan Documents, or
with respect to a particular Borrower, until such Borrower's Property shall be
released pursuant to Section 2.4 hereof, Borrowers hereby covenant and agree
with Lender that:
(a) Existence; Compliance with Legal Requirements: Insurance. Each Borrower
shall (i) do or cause to be done all things necessary to preserve, renew and
keep in full force and effect its existence, rights, licenses, permits and
franchises, (ii) comply with all Legal Requirements and Property Agreements
applicable to it and the Properties, and (iii) at all times maintain, preserve
and protect all franchises and trade names, in each case to the extent failure
to do so would result in a Material Adverse Effect. Each Borrower shall preserve
all the remainder of its property used or useful in the conduct of its business
and shall keep the Properties in good working order and repair, and from time to
time make, or cause to be made, all reasonably necessary repairs, renewals,
replacements, betterments and improvements thereto, all as more fully provided
in the Mortgages. Borrowers shall keep the Properties insured at all times to
such extent and against such risks, and maintain liability and such other
insurance, as is more fully provided in this Agreement.
(b) Taxes and Other Charges. Borrowers shall pay all Taxes and Other
Charges now or hereafter levied or assessed or imposed against the Properties or
any part thereof as the same become due and payable. Borrowers will deliver to
Lender receipts for payment or other evidence satisfactory to Lender that the
Taxes and Other Charges have been so paid or are not then delinquent no later
than ten (10) days prior to the
<PAGE>
date on which the Taxes and/or Other Charges would otherwise be delinquent
if not paid (provided, however, that Borrowers are not required to furnish such
receipts for payment of Taxes in the event that such Taxes have been paid by
Lender pursuant to Section 7.3 hereof). Borrowers shall not suffer and shall
promptly cause to be paid and discharged any lien or charge whatsoever which may
be or become a lien or charge against any Property, and shall promptly pay for
all utility services provided to the Properties. Borrowers, at their own
expense, may contest by appropriate legal proceeding, promptly initiated and
conducted in good faith and with due diligence, the amount or validity or
application in whole or in part of any Taxes or Other Charges, provided that (i)
no Event of Default has occurred and remains uncured, (ii) such proceeding shall
suspend the collection of the Taxes or Other Charges from the applicable
Property or Properties, (iii) such proceeding shall be permitted under and be
conducted in accordance with the provisions of any other instrument to which
Borrowers are subject and shall not constitute a default thereunder, (iv)
neither any Property nor any part thereof or interest therein will be in danger
of being sold, forfeited, terminated, canceled or lost, (v) Borrowers shall have
furnished such security as may be required in the proceeding, or as may be
requested by Lender, to insure the payment of any such Taxes or Other Charges,
together with all interest and penalties thereon; and (vi) Borrowers shall
promptly upon final determination thereof pay the amount of any such Taxes or
Other Charges, together with all costs, interest and penalties which may be
payable in connection therewith. Prior written notice of any such contest must
be given to Lender if the contested Taxes or Other Charges have not been paid
prior to initiation of the contest. Lender may pay over any such cash deposit or
part thereof held by Lender to the claimant entitled thereto at any time when,
in the reasonable judgment of Lender, the entitlement of such claimant is
established.
(c) Litigation. Borrowers shall give prompt written notice to Lender of any
litigation or governmental proceedings pending or threatened against any
Borrower or any Property which might have a Material Adverse Effect.
(d) Premises. Borrowers shall permit agents, representatives and employees
of Lender to inspect the Properties or any part thereof at reasonable hours upon
reasonable advance notice.
(e) Notice of Default. Borrowers shall promptly advise Lender of any
material adverse change in the condition, financial or otherwise, of any
Borrower or of the occurrence of any Default or Event of Default of which any
Borrower has knowledge.
(f) Cooperate in Legal Proceedings. Borrowers shall cooperate fully with
Lender with respect to any proceedings before any court, board or other
Governmental Authority which may in any way affect the rights of Lender
hereunder or any rights obtained by Lender under any of the other Loan Documents
and, in connection therewith, permit Lender, at its election, to participate in
any such proceedings. The foregoing shall not be construed to require Borrowers
to incur expenses in cooperating in any proceeding which arises out of the gross
negligence or wilful misconduct of Lender.
(g) Perform Loan Documents. Borrowers shall observe, perform and satisfy
all the terms, provisions, covenants and conditions of, and shall pay when due
all costs, fees and expenses to the extent required under, the Loan Documents
executed and delivered by, or applicable to, Borrowers.
(h) Insurance Benefits. Borrowers shall cooperate with Lender in obtaining
for Lender the benefits of any Insurance Proceeds lawfully or equitably payable
in connection with the Properties, and Lender shall be reimbursed for any
expenses incurred in connection therewith (including attorneys' fees and
disbursements, and the expense of an appraisal on behalf of Lender in case of a
fire or other casualty affecting any Property or any part thereof) out of such
Insurance Proceeds.
<PAGE>
(i) Further Assurances. Borrowers shall, at Borrowers' sole cost and
expense:
(A) execute and deliver to Lender such documents, instruments,
certificates, assignments and other writings, and do such other acts, reasonably
necessary or desirable, to evidence, preserve and/or protect the collateral at
any time securing or intended to secure their obligations under the Loan
Documents, as Lender may reasonably require; and
(B) do and execute all and such further lawful and reasonable acts,
conveyances and assurances for the better and more effective carrying out of the
intents and purposes of this Agreement and the other Loan Documents, as Lender
shall reasonably require from time to time.
(j) Supplemental Mortgage Affidavits. As of the date hereof, Borrowers
represent that they have paid all state, county and municipal recording and all
other taxes imposed upon the execution and recordation of the Mortgages. If at
any time Lender determines, based on applicable law, that Lender is not being
afforded the agreed upon amount of security available from each Property as a
direct or indirect result of applicable taxes not having been paid with respect
to such Property, Borrowers agree that the appropriate Borrower or Borrowers
will on demand pay any additional taxes.
(k) Financial Reporting.
(i) Each Borrower will keep and maintain or will cause to be kept and
maintained on a Fiscal Year basis, in accordance with GAAP (or such other
accounting basis reasonably acceptable to Lender) consistently applied, proper
and accurate books, records and accounts reflecting (A) all of the financial
affairs of such Borrower and (B) all items of income and expense in connection
with the operation of the Property owned by such Borrower or in connection with
any services, equipment or furnishings provided in connection with the operation
thereof, whether such income or expense may be realized by such Borrower or by
any other Person whatsoever, excepting lessees unrelated to and unaffiliated
with such Borrower who have leased from such Borrower portions of such Property
for the purpose of occupying the same. Lender shall have the right from time to
time at all times during normal business hours upon reasonable notice to examine
such books, records and accounts at the office of such Borrower or other Person
maintaining such books, records and accounts and to make such copies or extracts
thereof as Lender shall desire. After the occurrence of an Event of Default,
Borrowers shall pay any costs and expenses incurred by Lender to examine any
Borrower's accounting records with respect to any Property, as Lender shall
determine to be necessary or appropriate in the protection of Lender's interest.
(ii) Each Borrower shall furnish Lender annually, within ninety (90) days
following the end of each Fiscal Year of such Borrower, with a complete copy of
such Borrower's financial statement audited by an independent certified public
accountant that is reasonably acceptable to Lender (in accordance with GAAP
consistently applied) for such Fiscal Year and containing a statement of
revenues and expenses, a statement of assets and liabilities and a statement of
such Borrower's equity. Such audited financial statement may be prepared on a
combined basis with the other Properties. Together with such Borrower's annual
financial statements, such Borrower shall supplement the combined financial
statement with information on a property-by-property basis that was used in the
preparation of the combined statement and shall furnish an Officer's Certificate
certifying as of the date thereof (i) that the annual financial statements
accurately represent the results of operation and financial condition of such
Borrower and the applicable Property (or, in the case of a combined financial
statement, the results of operation and financial condition of the Borrowers and
the Properties) all in accordance with GAAP consistently applied, and (ii)
whether there exists an event or circumstance which constitutes, or which upon
notice or lapse of time or both would constitute, a Default under the Note or
any other Loan Document executed and delivered by any Borrower, and if such
event or circumstance exists, the nature thereof, the period of time it has
existed and the action then being taken to remedy such event or circumstance.
<PAGE>
(iii) Each Borrower shall furnish Lender monthly, within thirty (30) days
following the end of each month, with a true, complete and correct cash flow
statement with respect to the Property owned by such Borrower showing (i) all
cash receipts of any kind whatsoever and all cash payments and disbursements,
and (ii) year-to-date summaries of such cash receipts, payments and
disbursements together with rent rolls and occupancy reports, each dated as of
the last day of such month, and a certification of the Manager stating that such
items are true, complete and correct.
(iv) Each Borrower shall furnish Lender monthly, within thirty (30) days
following the end of each month, with a certification of the Manager stating
that all Operating Expenses with respect to the Properties which had accrued as
of the last day of the month preceding the delivery of the cash flow statement
referred to in clause (iii) above have been fully paid or otherwise reserved or
provided for by the Manager (any such certification or any certification
furnished by a Manager pursuant to clause (iii) above, a "Manager
Certification").
(v) Each Borrower shall furnish Lender quarterly, (i) within thirty (30)
days following the end of each fiscal quarter of such Borrower, with a true,
complete and correct rent roll for the Property owned by such Borrower,
including a list of which tenants are in default under their respective Leases,
dated as of the last day of the fiscal quarter of such Borrower, identifying
each tenant, the monthly rent and additional rent, if any, payable by such
tenant, the expiration date of such tenant's Lease (which shall include any
landlord termination options), the security deposit, if any, held by such
Borrower under the Lease, the space covered by the Lease, and the arrearages for
such tenant, if any, and (ii) within forty-five (45) days following the end of
each fiscal quarter of such Borrower, with a statement of the sales of tenants
under Leases to the extent that such Borrower has received such information
prior to the date of submission of the rent roll to Lender pursuant to this
paragraph (v), and such rent roll and sales statement, as applicable, shall be
accompanied by an Officer's Certificate, dated as of the date of the delivery of
such rent roll or sales statement, as applicable, certifying that such rent roll
or sales statement, as applicable, is true, correct and complete in all material
respects as of its date.
(vi) Each Borrower shall furnish to Lender, within fifteen (15) Business
Days after Lender's request therefor, such further detailed information with
respect to the operation of any Property and the financial affairs of such
Borrower as may be reasonably requested by Lender.
(vii) Each Borrower shall cause the Manager to furnish to Lender, within
thirty (30) days after the end of each month, a schedule of tenant security
deposits showing any activity in the Security Deposit Account for such month,
together with a certification of the Manager as to the balance in such Security
Deposit Account and that such tenant security deposits are being held in
accordance with all Legal Requirements.
(viii) Each Borrower shall furnish Lender annually, within ninety (90) days
after the end of each Fiscal Year, with a report setting forth (i) the Net
Operating Income for such Fiscal Year, (ii) the average occupancy rate of the
applicable Property during such Fiscal Year, (iii) the capital repairs,
replacements and improvements performed at such Property during such Fiscal Year
and the aggregate Capital Expenses made in connection therewith, together with
(iv) an Officer's Certificate containing a review of the operations of such
Property for such Fiscal Year.
<PAGE>
(ix) Each Borrower shall furnish Lender promptly upon transmission thereof,
with copies of all financial statements, proxy statements, notices and reports
of the REIT as the REIT shall send to its public shareholders and copies of all
registration statements (without exhibits) and all reports which it files with
the Securities and Exchange Commission (or any governmental body or agency
succeeding to the functions of the Securities and Exchange Commission).
(l) Business and Operations. Each Borrower will continue to engage in the
businesses presently conducted by it as and to the extent the same are necessary
for the ownership, maintenance, management and operation of the Property owned
by it. Each Borrower will qualify to do business and will remain in good
standing under the laws of each jurisdiction as and to the extent the same are
required for the ownership, maintenance, management and operation of such
Property, in each case to the extent failure to do so would have a Material
Adverse Effect.
(m) Title to the Property. Borrowers will warrant and defend (i) the title
to the Properties and every part thereof, subject only to Liens permitted under
the Loan Documents (including Permitted Encumbrances), and (ii) the validity and
priority of the Liens of the Mortgages, subject only to Liens permitted under
the Loan Documents (including Permitted Encumbrances), in each case against the
claims of all Persons whomsoever. Borrowers shall reimburse Lender for any
losses, costs, damages or expenses (including reasonable attorneys' fees and
court costs) incurred by Lender if an interest in any Property, other than as
permitted hereunder, is claimed by another Person.
(n) Costs of Enforcement. In the event (i) that any Mortgage is foreclosed
in whole or in part or is put into the hands of an attorney for collection,
suit, action or foreclosure due to the occurrence of a Default or Event of
Default, (ii) of the foreclosure of any mortgage prior to or subsequent to the
Mortgage encumbering any Property in which proceeding Lender is made a party, or
(iii) of the bankruptcy, insolvency, rehabilitation or other similar proceeding
in respect of any Borrower or an assignment by any Borrower for the benefit of
its creditors, Borrowers, their successors or assigns, shall be chargeable with
and agree to pay all costs of collection and defense, including reasonable
attorneys' fees in connection therewith and in connection with any appellate
proceeding or post-judgment action involved therein, which shall be due and
payable together with all required service or use taxes.
(o) Estoppel Statement.
(i) After request by Lender, Borrowers shall within twenty (20) days
furnish Lender with a statement, duly acknowledged and certified, setting forth
(A) the unpaid principal amount of the Note, (B) the Interest Rate of the Note,
(C) the date installments of interest and/or principal were last paid, (D) any
offsets or defenses to the payment of the Debt, if any, and (E) that the Note,
this Agreement, the Mortgages and the other Loan Documents are valid, legal and
binding obligations and have not been modified or if modified, giving
particulars of such modification.
(ii) After request by Borrowers, Lender shall within twenty (20) days
furnish Borrowers with a statement, duly acknowledged and certified, setting
forth (A) the unpaid principal amount of the Note, (B) the Interest Rate of the
Note, (C) the date installments of interest and/or principal were last paid, and
(D) that the Note, this Agreement, the Mortgages and the other Loan Documents
have not been modified or if modified, giving particulars of such modification.
(p) Loan Proceeds. Each Borrower shall use the proceeds of the Loan
received by it on the Closing Date only for the purposes set forth in
Section 2.1.6.
<PAGE>
(q) Performance by Borrowers. Borrowers shall in a timely manner observe,
perform and fulfill each and every covenant, term and provision of each Loan
Document executed and delivered by, or applicable to, Borrowers, and shall not
enter into or otherwise suffer or permit any amendment, waiver, supplement,
termination or other modification of any Loan Document executed and delivered
by, or applicable to, Borrowers without the prior written consent of Lender.
(r) Annual Budget. Borrowers shall prepare and submit (or shall cause
Manager to prepare and submit) to Lender, within thirty (30) days after the
occurrence of a Cash Trap Event and thereafter at least 45 days prior to the end
of each Fiscal Year during the existence of a Cash Trap Event, for approval by
Lender, which approval shall not be unreasonably withheld or delayed, a proposed
pro forma budget for each Property during the then current (in the case of the
budget first submitted after a Cash Trap Event) or succeeding Fiscal Year (the
"Annual Budget") and, promptly after preparation thereof, any subsequent
revisions to such Annual Budget. Lender's failure to approve or disapprove any
Annual Budget within thirty (30) days after Lender's receipt thereof shall be
deemed to constitute Lender's approval thereof. The Annual Budget for each
Property shall consist of (a) an operating expense budget (the "Operating
Budget") showing, on a month-by-month basis, in reasonable detail, each line
item of the Borrowers' anticipated income and Operating Expenses for such
Property (on a cash and accrual basis), including amounts required to establish,
maintain and/or increase reserves, (b) a Capital Expense Budget (the "Capital
Budget") showing, on a month-by-month basis, in reasonable detail, each line
item of anticipated Capital Expenses for such Property.
(s) Confirmation of Representations. Borrowers shall deliver to Lender
within ten (10) days of the request of Lender, which request may be given not
less than ten (10) days nor more than thirty (30) days prior to the anticipated
date of Securitization, an Officer's Certificate updating all of the
representations and warranties contained in this Agreement and the other Loan
Documents and certifying that all of the representations and warranties
contained in this Agreement and the other Loan Documents, as updated pursuant to
such Officer's Certificate, are true, accurate and complete as of the date of
such Officer's Certificate, and noting any exceptions.
(t) No Joint Assessment. Borrowers shall not suffer, permit or initiate the
joint assessment of any Property (i) with any other real property constituting a
tax lot separate from such Property, or (ii) with any portion of such Property
which may be deemed to constitute personal property, or any other procedure
whereby the lien of any taxes which may be levied against such personal property
shall be assessed or levied or charged to such Property.
(u) Leasing Matters. Borrowers shall not enter into, modify, amend or renew
any Lease except in accordance with the Prudent Manager Standard, and shall not
enter into, modify, amend or renew any one or more Leases with a tenant and/or
its affiliates if the same is effected as part of a single transaction or a
series of substantially integrated transactions related to 50,000 leasable
square feet or more in the aggregate of any or all of the Properties, in each
case without Lender's consent, not to be unreasonably withheld or delayed.
Without limiting the generality of the foregoing, it shall not be unreasonable
for Lender to withhold its consent to any such Lease, amendment or renewal which
does not provide for the payment of market rents or is not in compliance with
the Prudent Manager Standard. All Leases shall provide for rental rates, terms
and conditions which constitute good and prudent business practice and are
consistent with the Prudent Manager Standard and shall be arms-length
transactions. All Leases shall provide that they are subordinate to the
Mortgages and that the lessees thereunder attorn to Lender. Borrowers shall
deliver copies of all Leases, amendments, modifications and renewals to Lender.
Borrowers (i) shall observe and perform the obligations imposed upon the lessor
under the Leases; (ii) shall, consistent with the Prudent Manager Standard,
enforce the terms, covenants and conditions contained in the Leases upon the
part of the lessee thereunder to be observed or performed; (iii) shall not
collect any of the rents more than one (1) month in advance (other than security
deposits); (iv) shall not execute any other assignment of lessor's interest in
the Leases or the Rents (except as contemplated by the Loan Documents); and (v)
shall execute and deliver at the request of Lender all such further assurances,
confirmations and assignments in connection with the Leases as Lender shall from
time to time reasonably require.
<PAGE>
(v) Principal Place of Business. No Borrower shall change its principal
place of business set forth on the first page of this Agreement without first
giving Lender thirty (30) days prior written notice.
(w) Management Agreement. Borrowers shall cause the Properties to be
operated in accordance with the Prudent Manager Standard. At any time when a
Management Agreement is in existence, the Properties shall be operated pursuant
to the Management Agreement and each Borrower shall:
(i) promptly perform and/or observe all of the covenants and agreements
required to be performed and observed by it under the Management Agreement and
do all things necessary to preserve and to keep unimpaired its material rights
thereunder;
(ii) promptly notify Lender of any default under the Management Agreement
of which it is aware;
(iii) promptly deliver to Lender a copy of each financial statement,
business plan, capital expenditures plan, property improvement plan and any
other notice, report and estimate received by it under the Management Agreement;
and
(iv) promptly enforce the performance and observance of all of the
covenants and agreements required to be performed and/or observed by the Manager
under the Management Agreement.
(x) Carolina Bonds. In the event that any Special Source Revenue Bonds
("Bonds") are issued by Cherokee County, South Carolina ("Cherokee County") in
connection with an expansion of the Carolina Property, Borrower shall purchase
such Bonds and shall pledge such Bonds to Lender. In connection therewith,
Borrower shall (i) execute and deliver to Lender a pledge agreement in
substantially the form of the Carolina Pledge Agreement, (ii) deliver to Lender
the original certificates or instruments evidencing the Bonds, which shall be in
suitable form for transfer by delivery or shall be accompanied by duly executed
assignments in blank, all in form and substance satisfactory to Lender, (iii)
deliver to Lender such consents, acknowledgements, estoppels or similar
documents executed by Cherokee County as may be required by Lender, including
without limitation a Confirmation of Pledge Agreement in substantially the form
of the Confirmation of Pledge Agreement executed in connection with the Carolina
Pledge Agreement, and take such other steps as may be necessary to perfect,
among other things, Lender's interest in the Bonds and (iv) deliver to Lender
such opinions of counsel as Lender may require covering due authorization,
execution and delivery of the pledge agreement, enforceability of the pledge
agreement, perfection of Lender's security interest in the Bonds and such other
matters as Lender may reasonably request, which opinion shall be in form and
substance and from counsel reasonably acceptable to Lender.
<PAGE>
VI. NEGATIVE COVENANTS
Section VI.1 Borrowers' Negative Covenants. From the date hereof until
payment and performance in full of all obligations of Borrowers under the Loan
Documents or the earlier release of the Lien of the Mortgages in accordance with
the terms of this Agreement and the other Loan Documents or, with respect to a
particular Borrower, until such Borrower's Property shall be released pursuant
to Section 2.4 hereof, each Borrower covenants and agrees with Lender that it
will not do, directly or indirectly, any of the following:
(a) Operation of Property. No Borrower shall, without Lender's prior
consent: (i) surrender, terminate or cancel the Management Agreement or
otherwise replace the Manager of the Property owned by it or enter into any
other management agreements with respect to such Property (except pursuant to
Section 9.5), (ii) reduce or consent to the reduction of the term of the
Management Agreement; (iii) increase or consent to the increase of the amount of
any charges under the Management Agreement; or (iv) otherwise modify, change,
supplement, alter or amend, or waive or release any of its rights and remedies
under the Management Agreement in any material respect.
(b) Liens. No Borrower shall, without the prior written consent of Lender,
create, incur, assume or suffer to exist any Lien on any portion of its Property
or permit any such action to be taken, except (i) Permitted Encumbrances, (ii)
Liens created by or permitted pursuant to the Loan Documents and (iii) Liens for
Taxes or Other Charges not yet due. Without limiting the foregoing, Borrowers,
at their own expense, may contest by appropriate legal proceeding, promptly
initiated and conducted in good faith and with due diligence, any Lien (other
than a Lien relating to non-payment of Taxes or Other Charges, the contest of
which shall be governed by Section 5.1(b) hereof) provided that (i) no Event of
Default has occurred and remains uncured, (ii) such proceeding shall suspend the
collection of, or any realization upon the contested Lien or amount from the
applicable Property or Properties, (iii) neither any Property nor any part
thereof or interest therein will be in danger of being sold, forfeited,
terminated, canceled or lost, (iv) such contest shall not affect the ownership,
use or occupancy of any Property, (v) such contest shall not subject Lender or
any Borrower to the risk of civil or criminal liability (other than the civil
liability of the applicable Borrower for the amount in question), (vi) such Lien
is subordinate to the lien of the applicable Mortgage or the title insurance
policy insuring the lien of such Mortgage affirmatively insures, to Lender's
reasonable satisfaction, against any loss, cost or damage which Lender may
suffer as a result of the existence or enforcement of such Lien, (vii) Borrowers
shall have furnished such security as may be required in the proceeding to
insure the payment of any such Lien, together with all interest and penalties
thereon, and (viii) Borrowers shall promptly upon final determination thereof
pay the amount of any such Lien, together with all costs, interest and penalties
which may be payable in connection therewith. Lender agrees that it will join in
and subordinate the Liens of the Mortgages to any easement, license or
restrictive covenant (i) which arises after the date hereof and (ii) that
Lender, in Lender's reasonable discretion, deems to constitute a Permitted
Encumbrance.
(c) Dissolution. No Borrower shall dissolve, terminate, liquidate, merge
with or consolidate into another Person.
(d) Change In Business. No Borrower shall enter into any line of business
other than the ownership and operation of the Property owned by it, or make any
material change in the scope or nature of its business objectives, purposes or
operations, or undertake or participate in activities other than the continuance
of its present business.
<PAGE>
(e) Debt Cancellation. No Borrower shall cancel or otherwise forgive or
release any claim or debt owed to such Borrower by any Person, except for
adequate consideration or in the ordinary course of such Borrower's business in
its reasonable judgment and consistent with the Prudent Manager Standard.
(f) Affiliate Transactions. No Borrower shall enter into, or be a party to,
any transaction with an Affiliate of any Borrower or any of the partners or
members of any Borrower except on terms which are no less favorable to such
Borrower than would be obtained in a comparable arm's-length transaction with an
unrelated third party.
(g) Zoning. No Borrower shall initiate or consent to any zoning
reclassification of any portion of any Property or seek any variance under any
existing zoning ordinance or use or permit the use of any portion of any
Property in any manner that could result in such use becoming a non-conforming
use under any zoning ordinance or any other applicable land use law, rule or
regulation, without the prior consent of Lender which shall not be unreasonably
withheld or delayed.
(h) Assets. No Borrower shall purchase or own any properties other than the
Property owned by it (as shown on Schedule 5), other than a Replacement Property
or Additional Premises which is encumbered by a Mortgage pursuant hereto.
(i) Debt. No Borrower shall create, incur or assume any debt (including
subordinate debt) other than the Debt and the Permitted Indebtedness. In
addition, no person owning any direct interest in any Borrower shall pledge,
transfer or otherwise dispose of its interest in such Borrower to secure any
financing for the benefit of such person, any Borrower or any Property.
(j) Transfers. No Borrower shall, without the prior written consent of
Lender, suffer or permit the sale, assignment or transfer (collectively,
"Transfer") of (i) all or any part of any Property other than (A) as otherwise
expressly permitted under Section 2.4.3 hereunder or (B) a Transfer of an
interest which constitutes a Permitted Encumbrance, (ii) any direct interest in
any Borrower or (iii) any direct or indirect interest in any partner or member
of any Borrower; provided, however, that the restrictions provided herein shall
not apply to any Transfer of any securities of the REIT or the limited
partnership interests in PRLP or, as to any Borrower that is a limited
partnership, Transfers of limited partnership interests in Borrower so long as
PRLP and SPE collectively own at least 50.1% of the total partnership interests
in such Borrower or, as to any Borrower that is a limited liability company,
Transfers of membership interests so long as PRLP and SPE collectively own at
least 50.1% of the total membership interests of such Borrower. No Transfer
requiring consent by Lender pursuant to clause (ii) or (iii) above shall be
permitted unless Lender shall have received evidence in writing from the
applicable Rating Agencies to the effect that such a Transfer will not result in
a qualification, withdrawal or downgrading of the ratings in effect immediately
prior to such Transfer for the Securities issued in connection with the
Securitization which are then outstanding. On or before the completion of any
such permitted Transfer, Borrowers will pay all reasonable expenses of Lender
incurred in connection therewith.
VII. CASUALTY; CONDEMNATION; ESCROWS
Section VII.1 Insurance; Casualty and Condemnation.
VII.1.1 Insurance.
(a) Each Borrower shall, at its expense, maintain the following insurance
coverages with respect to the Property owned by such Borrower during the Term:
(i) Insurance against loss or damage by fire, casualty and other hazards
included in an "all-risk" extended coverage endorsement or its equivalent, with
such endorsements as Lender may from time to time reasonably require and which
are customarily required by institutional lenders of similar properties
similarly situated, covering each Property in an amount not less than the
greater of (A) 100% of the insurable replacement value of the Property
(exclusive of the land and footings and foundations) and (B) such other amount
as is necessary to prevent any reduction in such policy by reason of and to
prevent any Borrower, Lender or any other insured thereunder from being deemed
to be a co-insurer. Not less frequently than once every three years, such
Borrower, at its option, shall either (A) have the Appraisal updated or obtain a
new appraisal of the Property, (B) have a valuation of the Property made by or
for its insurance carrier conducted by an appraiser experienced in valuing
properties of similar type to that of the Property which are in the geographical
area in which the Property is located or (C) provide such other evidence as
will, in Lender's sole judgment, enable Lender to determine whether there shall
have been an increase in the insurable value of the Property and such Borrower
shall deliver such updated Appraisal, new appraisal, insurance valuation or
other evidence acceptable to Lender, as the case may be and, if such updated
Appraisal, new appraisal, insurance valuation, or other evidence acceptable to
Lender reflects an increase in the insurable value of the Property, the amount
of insurance required hereunder shall be increased accordingly and such Borrower
shall deliver evidence satisfactory to Lender that such policy has been so
increased.
(ii) Commercial comprehensive general liability insurance against claims
for personal and bodily injury and/or death to one or more persons or property
damage, occurring on, in or about the Property (including the adjoining streets,
sidewalks and passageways therein) in such amounts as Lender may from time to
time reasonably require (but in no event shall Lender's requirements be
increased more frequently than once during each twelve (12) month period) and
which are customarily required by institutional lenders for similar properties
similarly situated, but not less than $10,000,000.00.
(iii) Business interruption, rent loss or other similar insurance (A) with
loss payable to Lender, (B) covering all risks required to be covered by the
insurance provided for in Section 7.1.1(a)(i), (C) containing an extended period
of indemnity endorsement which provides that after the physical loss to the
Property has been repaired, the continued loss of rental income shall be insured
until six (6) months after completion of such repairs notwithstanding that the
policy may expire prior to the end of such period, and (D) in an amount not less
than 100% of the actual fixed or base rent plus percentage rent based on the
preceding twelve (12) month period. The amount of such insurance shall be
determined upon the execution of this Agreement, and not more frequently than
once each calendar year thereafter based on such Borrower's reasonable estimate
of projected fixed or base rent plus percentage rent from the Property for the
next succeeding twelve (12) months. In the event the Property shall be damaged
or destroyed, such Borrower shall and hereby does assign to Lender all payment
of claims under the policies of such insurance, and all amounts payable
thereunder, and all net amounts, shall be collected by Lender under such
policies and shall be applied in accordance with this Agreement; provided,
however, that nothing herein contained shall be deemed to relieve such Borrower
of its obligations to timely pay all amounts due under the Loan Documents,
except to the extent such amounts are actually paid out of the proceeds of such
insurance.
(iv) War risk insurance when such insurance is obtainable from the United
States of America or any agency or instrumentality thereof at reasonable rates
(for the maximum amount of insurance obtainable) and if requested by Lender, and
such insurance is then customarily required by institutional lenders of similar
properties similarly situated.
<PAGE>
(v) Insurance against loss or damages from (A) leakage of sprinkler systems
and (B) explosion of steam boilers, air conditioning equipment, pressure vessels
or similar apparatus now or hereafter installed at the Property, in such amounts
as Lender may from time to time reasonably require and which are then
customarily required by institutional lenders of similar properties similarly
situated.
(vi) Flood insurance in an amount equal to the full insurable value of the
Property or the maximum amount available, whichever is less, if the Improvements
are located in an area designated by the Secretary of Housing and Urban
Development as being "an area of special flood hazard" under the National Flood
Insurance Program (i.e., having a one percent or greater chance of flooding),
and if flood insurance is available under the National Flood Insurance Act and
is required by Lender.
(vii) Worker's compensation insurance or other similar insurance which may
be required by Governmental Authorities or Legal Requirements.
(viii) Insurance against loss or damage from earthquakes, together with
such other insurance as may from time to time be required by Lender and which is
then customarily required by institutional lenders for similar properties
similarly situated, against other insurable hazards, including, but not limited
to, malicious mischief, vandalism or windstorm, which at the time are commonly
insured against and generally available in the case of properties similarly
situated, due regard to be given to the size and type of the Premises,
Improvements and Equipment and their location, construction and use.
(ix) If any Borrower is a partnership, such Borrower shall cause SPE to
maintain fidelity insurance in an amount equal to or greater than the annual
Operating Income of the Property for the six (6) month period immediately
preceding the date on which the premium for such insurance is due and payable.
(x) Each Borrower shall cause any Manager of the Property to maintain
fidelity insurance in an amount equal to or greater than the annual Operating
Income of the Property for the six (6) month period immediately preceding the
date on which the premium for such insurance is due and payable or such lesser
amount as Lender shall approve.
(b) All insurance required by this Section 7.1.1 shall be in the form
(other than with respect to Sections 7.1.1(a)(vi) and (vii) above when insurance
in those two sub-sections is placed with a governmental agency or
instrumentality on such agency's forms) and amount and with deductibles as, from
time to time, shall be reasonably acceptable to Lender, under valid and
enforceable policies issued by financially responsible insurers authorized to do
business in the State where the Property is located, with a claims paying
ability rating of not less than "AA" from at least two nationally recognized
statistical rating agencies (one of which must be Standard & Poor's); provided,
however, with respect to insurance against damage or loss resulting from
earthquake damage, a claims paying ability rating of not less than "BBB" shall
be acceptable. Originals or certified copies of all insurance policies shall be
delivered to and held by Lender. All such policies (except policies for worker's
compensation) shall name Lender as an additional named insured, shall provide
for loss payable to Lender and shall contain (or have attached): (i) standard
"non-contributory mortgagee" endorsement or its equivalent relating, inter alia,
to recovery by Lender notwithstanding the negligent or willful acts or omissions
of any Borrower; (ii) a waiver of subrogation endorsement as to Lender; (iii) an
endorsement indicating that neither Lender nor any Borrower shall be or be
deemed to be a co-insurer with respect to any casualty risk insured by such
policies and shall provide for a deductible per loss of an amount not more than
that which is customarily maintained by owners of similar properties similarly
situated, and (iv) a provision that such policies shall not be canceled,
terminated, denied renewal or amended, including, without limitation, any
amendment reducing the scope or limits of coverage, without at least thirty (30)
days' prior written notice to Lender in each instance. Not less than thirty (30)
days prior to the expiration dates of the insurance policies obtained pursuant
to this Agreement, originals or certified copies of renewals of such policies
(or certificates evidencing such renewals) bearing notations evidencing the
payment of premiums or accompanied by other reasonable evidence of such payment
(which premiums shall not be paid by any Borrower through or by any financing
<PAGE>
arrangement which would entitle an insurer to terminate a policy) shall be
delivered by Borrowers to Lender. Borrowers shall not carry separate insurance,
concurrent in kind or form or contributing in the event of loss, with any
insurance required under this Section 7.1.1.
(c) Borrowers shall notify Lender of the renewal premium of each insurance
policy (collectively, "Insurance Premiums") and, upon Borrowers' failure to pay
such premium in accordance with the terms of this Agreement, Lender shall be
entitled to pay, or upon Borrowers' written request, shall pay such amount on
behalf of Borrowers from the Tax and Insurance Escrow Fund to the extent of
funds deposited in such Fund. With respect to insurance policies which require
periodic payments (i.e., monthly or quarterly) of premiums, Lender shall be
entitled to pay such amounts fifteen (15) days (or such lesser number of days as
Lender shall determine) prior to the respective due dates of such installments.
(d) If any Property is damaged or destroyed, in whole or in part, by fire
or other (d) If any Property is damaged or destroyed, in whole or in part, by
fire or other casualty (an "Insured Casualty"), Borrowers shall give prompt
notice thereof to Lender. Following the occurrence of an Insured Casualty,
Borrowers, provided Lender does not apply any of the Insurance Proceeds
resulting therefrom to the Debt (other than Lender's expenses incurred in the
adjustment and collection of such Insurance Proceeds), shall promptly proceed to
restore, repair, replace or rebuild such Property to be of at least equal value
and of substantially the same character as prior to such damage or destruction,
all to be effected in accordance with Legal Requirements and applicable Property
Agreements. The expenses incurred by Lender in the adjustment and collection of
insurance proceeds shall become part of the Debt and be secured hereby and shall
be reimbursed by Borrowers to Lender upon demand.
VII.1.2 Casualty and Application of Proceeds
(a) In case of loss or damages covered by any of the Policies, the
following provisions shall apply:
(i) If an Insured Casualty does not exceed $100,000 and there exists no
Event of Default, Borrowers may settle and adjust any claim without the consent
of Lender; provided that such adjustment is carried out in a competent and
timely manner. In such case, Borrowers are hereby authorized to collect and
receipt for any such insurance proceeds.
(ii) If an Insured Casualty shall equal or exceed $100,000, Lender may
settle and adjust any claim (without the consent of Borrowers if there exists an
Event of Default and otherwise with the consent of Borrowers, not to be
unreasonably withheld or delayed) and agree with the insurance company or
companies on the amount to be paid on the loss and the proceeds of any such
policy shall be due and payable solely to Lender and held in escrow by Lender in
accordance with the terms hereof.
(b) In the event of an Insured Casualty where the loss is in an aggregate
amount less than 75% of the reasonably estimated aggregate value of the affected
Property, and if, in the reasonable judgment of Lender, (i) the affected
Property can be restored no later than six (6) months prior to the Stated
Maturity Date, (ii) the Debt Service Coverage Ratio after substantial completion
of the restoration shall be at least equal to 1.25, and (iii) leases covering
seventy percent (70%) or more of the total gross leasable area of the affected
Property shall remain in full force and effect (provided, however, if the
applicable Borrower shall have entered into one or more leases or letters of
intent with prospective tenants with respect to the leasing of all or a portion
of the space physically affected by such casualty which are, or, in the case of
letters of intent, which contemplate leases which will be, in form and substance
substantially similar to the Leases which are terminating and which provide for
rental and other payments thereunder, net of any rebates, credits and other
concessions granted or to be granted by the Borrower thereunder equal to or not
less than 85% of the rental and other payments due immediately prior to the
casualty under the Leases which are terminating and the Borrower shall have
delivered a copy of each such lease or letter of intent to Lender, such leases
or prospective leases shall be counted toward the 70% threshold for purposes of
this clause), then, if no Default or Event of Default shall have occurred and be
then continuing, the proceeds of insurance (after reimbursement of any expenses
incurred by Lender) shall be applied to pay or reimburse Borrowers for the cost
of restoring, repairing, replacing or rebuilding such Property or part thereof
subject to the Insured Casualty (the "Restoration"), in the manner set forth
herein. Borrowers hereby covenant and agree to commence and diligently prosecute
such Restoration; provided that (i) Borrowers shall pay all costs of such
Restoration in excess of the net proceeds of insurance
<PAGE>
made available pursuant to the terms hereof; (B) the Restoration shall be
done in compliance with all Legal Requirements and applicable Property
Agreements; and (C) Lender shall have received evidence reasonably satisfactory
to it that, during the period of the Restoration, the sum of (I) income derived
from the affected Property, as reasonably determined by Lender, plus (II)
proceeds of rent loss insurance or business interruption insurance, if any, to
be paid, plus (III) funds otherwise readily available to Borrowers, as evidenced
to the satisfaction of Lender, will equal or exceed the sum of (y) expenses in
connection with the operation of such Property and (z) the debt service payable
with respect to the Allocated Loan Amount for such Property.
(c) The proceeds of insurance collected upon any Insured Casualty shall, at
the option of Lender in its sole discretion, except as provided above, be
applied to the payment of the Debt up to an amount equal to the Casualty
Repayment Amount for the affected Property (with the balance to Borrower), or
applied to pay or reimburse Borrowers for the cost of any Restoration, in the
manner set forth below. Any such application to the Debt shall be on a Payment
Date and without payment of any Exit Fees. Any such application to the Debt
shall be applied to those payments of principal and interest last due under the
Note but shall not postpone or reduce any payments otherwise required pursuant
to the Note other than such last due payments.
(d) If Borrowers are entitled to reimbursement out of insurance proceeds
held by Lender, such proceeds shall be deposited by Lender into the
Casualty/Condemnation Subaccount (as described in the Cash Collateral Agreement)
and disbursed from time to time from the Casualty/Condemnation Subaccount upon
Lender being furnished with (1) evidence reasonably satisfactory to it of the
estimated cost of completion of the Restoration, (2) funds or, at Lender's
option, assurances reasonably satisfactory to Lender that such funds are
available, sufficient in addition to the proceeds of insurance to complete the
proposed Restoration, (3) such architect's certificates, waivers of lien,
contractor's sworn statements, title insurance endorsements, bonds, plats of
survey and such other evidences of cost, payment and performance as Lender may
reasonably require and approve, and (4) all plans and specifications for such
Restoration, such plans and specifications to be approved by Lender prior to
commencement of any work, such approval not to be unreasonably withheld or
delayed. In addition, no payment made prior to the final completion of the
Restoration shall exceed ninety percent (90%) of the value of the work performed
from time to time; funds other than proceeds of insurance which are required to
be deposited with Lender due to a shortfall of insurance proceeds shall be
disbursed prior to disbursement of such proceeds; and at all times, the
undisbursed balance of such proceeds remaining in the hands of Lender, together
with funds deposited for that purpose or irrevocably committed to the
satisfaction of Lender by or on behalf of Borrowers for that purpose, shall be
at least sufficient in the reasonable judgment of Lender to pay for the cost of
completion of the Restoration, free and clear of all liens or claims for lien.
Any surplus which may remain out of insurance proceeds held by Lender after
payment of such costs of Restoration shall be paid to Borrowers.
VII.1.3 Condemnation
(a) Borrowers shall promptly give Lender written notice of the actual or
threatened commencement of any condemnation or eminent domain proceeding
affecting a Property (a "Condemnation") and shall deliver to Lender copies of
any and all papers served in connection with such Condemnation. Following the
occurrence of a Condemnation, Borrowers, so long as Lender makes the entire
Award (less Lender's costs incurred in connection with the Condemnation and
collection of the Award) available to Borrower pursuant to Section 7.1.3(c)
regardless of whether the amount of the Award is sufficient, shall promptly
proceed to restore, repair, replace or rebuild the affected Property to the
extent practicable to be a complete unit and of substantially the same character
as prior to such Condemnation, all to be effected in accordance with Legal
Requirements and applicable Property Agreements.
(b) Lender is hereby irrevocably appointed as Borrowers' attorney-in-fact,
coupled with an interest, with exclusive power to collect, receive and retain
any award or payment in respect of a Condemnation (an "Award") and to make any
compromise or settlement in connection with such Condemnation, subject to
Borrowers' approval (not to be unreasonably withheld or delayed) except after
the occurrence of an Event of Default, in which cash such approval shall not be
required, and the provisions of this Section; provided, however, that Borrowers
may participate in any such proceedings and shall, unless an Event of Default
exists, be authorized and entitled to compromise or settle any such proceeding
with respect to Condemnation Proceeds in an amount less than five percent (5%)
of the Allocated Loan Amount. Notwithstanding any Condemnation by any public or
quasi-public authority (including any transfer made in lieu of or in
anticipation of such a Condemnation), Borrowers shall continue to pay the Debt
at the time and in the manner provided for in the Note, in this Agreement and
the other Loan Documents and the Debt shall not be reduced unless and until any
Award shall have been actually received and applied by Lender to expenses of
collecting the Award and to discharge of the Debt. Lender shall not be limited
to the interest paid on the Award by the condemning authority but shall be
entitled to receive out of the Award interest at the rate or rates provided in
the Note. Borrowers shall cause any Award that is payable to any Borrower to be
paid directly to Lender.
(c) In the event of any Condemnation where the Award is in an aggregate
amount less than $1,000,000, and if, in the reasonable judgment of Lender, the
affected Property can be restored, under then current economic conditions,
applicable zoning laws, building regulations and other applicable Legal
Requirements and Property Agreements, no later than six (6) months prior to the
Stated Maturity Date to a complete, rentable facility of the same sort as
existed prior to the condemnation, and after such restoration the Debt Service
Coverage Ratio (determined based on the projected Net Operating Income and the
Allocated Loan Amount of the affected Property) will be at least equal to 1.25,
then, if no Default or Event of Default shall have occurred and be then
continuing, the proceeds of the Award (after reimbursement of any expenses
incurred by Lender) shall be applied to pay or reimburse Borrowers for the cost
of restoring, repairing, replacing or rebuilding the Property or part thereof
subject to Condemnation (the "Condemnation Restoration") in the manner set forth
below. Borrowers hereby covenant and agree to commence and diligently to
prosecute such Condemnation Restoration; provided that (i) Borrowers shall pay
all costs (and if required by Lender, Borrowers shall deposit the total thereof
with Lender in advance) of such Condemnation Restoration in excess of the Award
made available pursuant to the terms hereof; (ii) the Condemnation Restoration
shall be done in compliance with all Legal Requirements and Property Agreements;
and (iii) Lender shall have received evidence reasonably satisfactory to it
that, during the period of the Condemnation Restoration, the sum of (A) income
derived from the affected Property, as reasonably determined by Lender, plus (B)
proceeds of rent loss insurance or business interruption insurance, if any, to
be paid plus (c) funds otherwise readily available to Borrowers, as evidenced to
the satisfaction of Lender, will equal or exceed the sum of (I) expenses in
connection with the operation of such Property and (II) the debt service payable
with respect to the Allocated Loan Amount for such Property.
<PAGE>
(d) The Award collected upon any Condemnation shall, at the option of
Lender in its sole discretion, except as provided above, be applied to the
payment of the Debt up to an amount equal to the Casualty Repayment Amount for
the affected Property (with the balance thereof to be paid to Borrowers) or
applied to reimburse Borrowers for the cost of the Condemnation Restoration in
the manner set forth below. Any such application to the Debt shall be on a
Payment Date and without payment of any Exit Fee. Any such application to the
Debt shall be applied to those payments of principal and interest last due under
the Note but shall not postpone or reduce any payments otherwise required
pursuant to the Note other than such last due payments. If the affected Property
is sold, through foreclosure or otherwise, prior to the receipt by Lender of
such Award, Lender shall have the right, whether or not a deficiency judgment on
the Note shall be recoverable or shall have been sought, recovered or denied, to
receive all or a portion of said Award sufficient to pay the Debt.
(e) In the event Borrowers are entitled to reimbursement out of the Award
received by Lender, such proceeds shall be disbursed from time to time upon
Lender being furnished with (1) evidence satisfactory to it of the estimated
cost of completion of the Condemnation Restoration, (2) funds or, at Lender's
option, assurances reasonably satisfactory to Lender that such funds are
available, sufficient in addition to the proceeds of the Award to complete the
Condemnation Restoration, (3) such architect's certificates, waivers of lien,
contractor's sworn statements, title insurance endorsements, bonds, plats of
survey and such other evidences of costs, payment and performance as Lender may
reasonably require and approve, and (4) all plans and specifications for such
Condemnation Restoration, such plans and specifications to be approved by Lender
prior to commencement of work, such approval not to be unreasonably withheld or
delayed. In addition, no payment made prior to the final completion of the
restoration, repair, replacement and rebuilding shall exceed ninety percent
(90%) of the value of the work performed from time to time, (5) funds other than
proceeds of the Award shall be disbursed prior to disbursement of such proceeds,
and (6) at all times, the undisbursed balance of such proceeds remaining in the
hands of Lender, together with funds deposited for that purpose or irrevocably
committed to the satisfaction of Lender by or on behalf of Borrowers for that
purpose, shall be at least sufficient in the reasonable judgment of Lender to
pay for the costs of completion of the Condemnation Restoration free and clear
of all liens or claims for lien. Any surplus which may remain out of the Award
received by Lender after payment of such costs of restoration, repair,
replacement or rebuilding shall, in the sole and absolute discretion of Lender,
be retained by Lender and applied to payment of the Debt.
Section VII.2 Required Repair; Required Repair Funds
VII.2.1 Required Repairs; Deposits. Borrowers shall perform the repairs at
the Properties set forth on Schedule 3 annexed hereto (the "Required Repairs").
Borrowers shall complete each of the Required Repairs on or before the deadline
for same set forth on Schedule 3. On the Closing Date, Borrowers shall deposit
with Lender the amount set forth on Schedule 3 hereto to perform the Required
Repairs for the Properties. Amounts so deposited with Lender (the "Required
Repair Fund") shall be held by Lender in an account (the "Required Repair
Account") in Lender's name at a financial institution selected by Lender in its
sole discretion and shall be invested in Permitted Investments. Interest earned
on the amounts in the Required Repair Fund shall be deposited in the Required
Repair Fund and treated in the same manner as other funds therein.
<PAGE>
VII.2.2 Grant of Security Interest. Borrowers hereby pledge, assign and
grant a security interest to Lender, as security for payment of all sums due in
respect of the Loan and the performance of all other terms, conditions and
covenants of the Loan Documents and this Agreement on Borrowers' part to be paid
and performed, all of Borrowers' right, title and interest in and to the
Required Repair Fund and the Required Repair Account. Borrowers shall not,
without obtaining the prior written consent of Lender, further pledge, assign or
grant any security interest in the Required Repair Fund or the Required Repair
Account or permit any lien or encumbrance to attach thereto, or any levy to be
made thereon, or any UCC-l Financing Statements, except those naming Lender as
the secured party, to be filed with respect thereto. This Agreement is, among
other things, intended by the parties to be a security agreement for purposes of
the Illinois Uniform Commercial Code.
VII.2.3 Release of Required Repair Funds. Lender shall disburse to
Borrowers all Required Repair Funds in the Required Repair Account upon
satisfaction by Borrowers of each of the following conditions: (a) Borrowers
shall submit a written request for payment to Lender at least thirty (30) days
prior to the date on which Borrowers request such payment be made (except in the
case of an emergency repair which requires immediate attention, in which event
Borrowers may submit such payment request within ten (10) days), (b) on the date
such request is received by Lender and on the date such payment is to be made,
no Event of Default shall exist and remain uncured, (c) Lender shall have
received an Officer's Certificate from Borrowers certifying that all Required
Repairs at the Properties for which disbursement has been requested have been
completed (i) in a good and workmanlike manner, and (ii) in accordance with all
applicable Legal Requirements and applicable Property Agreements, such
certificate to be accompanied by a copy of each license, permit or other
approval required by any Governmental Authority with respect to the Required
Repair, (d) Lender shall have received an Officer's Certificate from Borrowers
(i) identifying each Person that supplied materials or labor in connection with
the Required Repairs for which disbursement has been requested and (ii) stating
that each such Person has been paid in full or will be paid in full with the
funds disbursed, such certificate to be accompanied by a copy of appropriate
lien waivers or other evidence of payment satisfactory to Lender, (e) at
Lender's option, a title search for the applicable Property indicating that such
Property is free from all liens, claims and other encumbrances arising from the
Required Repair or not previously approved by Lender, and (f) Lender shall have
received such other evidence as Lender shall reasonably request that the
Required Repairs at the Properties have been completed and paid for. Lender
shall be required to make only one disbursement from the Required Repair Account
during a month and such disbursement shall be made only upon satisfaction of
each condition contained in this Section 7.2.3. Upon completion of all Required
Repairs in accordance with the terms hereof, Lender shall disburse to Borrowers
any amounts then remaining in the Required Repair Account.
VII.2.4 Failure to Perform Required Repairs. It shall be a default under
this Agreement if Borrowers do not complete the Required Repairs at the
Properties by the required deadline for each repair as set forth on Schedule 3
(other than as a result of events or circumstances beyond Borrowers' reasonable
control). Upon acceleration of the Debt, Lender, at its option, may withdraw all
Required Repair Funds from the Required Repair Account and Lender may apply such
funds either to completion of the Required Repairs at the Properties or toward
payment of the Debt in such order, proportion and priority as Lender may
determine in its sole discretion. Lender's right to withdraw and apply Required
Repair Funds shall be in addition to all other rights and remedies provided to
Lender under this Agreement and the other Loan Documents.
Section VII.3 Tax and Insurance Escrow Fund
<PAGE>
VII.3.1 Tax and Insurance Escrow Fund. Borrowers shall pay to Lender, with
respect to each Property, (a) on each Payment Date commencing August 11, 1998,
(i) one-twelfth of the Taxes that Lender estimates will be payable during the
next ensuing twelve (12) months in order to accumulate with Lender sufficient
funds to pay all such Taxes at least thirty (30) days prior to their respective
due dates, (ii) one-twelfth of the Insurance Premiums that Lender estimates will
be payable for the renewal of the coverage afforded by the Policies upon the
expiration thereof in order to accumulate with Lender sufficient funds to pay
all such Insurance Premiums at least thirty (30) days prior to the expiration of
the Policies and (iii) one-twelfth of the amount of rent under any ground lease
of a Property that Lender estimates will be payable during the next ensuing
twelve (12) months in order to accumulate with Lender sufficient funds to pay
all such ground rents at least thirty (30) days prior to their respective due
dates, and (b) on the Closing Date, an amount which, when combined with the
monthly deposits described in (a) above, shall be sufficient to pay the next
installment of Taxes, the next required payment of Insurance Premiums on the due
date therefor and the next required ground rent payment under each ground lease
of a Property on the due date therefor (said amounts in (a) and (b) above
hereinafter called the "Tax and Insurance Escrow Fund"). The Tax and Insurance
Escrow Fund, and the payments of interest or principal or both, payable pursuant
to the Note, shall be added together and shall be paid as an aggregate sum by
Borrowers to Lender. Lender will apply the Tax and Insurance Escrow Fund to
payments of Taxes, ground lease rents and Insurance Premiums required to be made
by Borrowers pursuant to Section 5.1 hereof, or to reimburse Borrowers for such
amounts upon presentation of evidence of payment and an Officer's Certificate in
form and substance reasonably satisfactory to Lender; subject, however, to
Borrowers' right to contest Taxes in accordance with Section 5.1(b) hereof. In
making any payment relating to the Tax and Insurance Escrow Fund, Lender may do
so according to any direction of the Borrowers or, after an Event of Default,
any bill, statement or estimate procured from the appropriate public office
(with respect to Taxes) or insurer or agent (with respect to Insurance
Premiums), without inquiry into the accuracy of such bill, statement or estimate
or into the validity of any tax, assessment, sale, forfeiture, tax lien or title
or claim thereof. If the amount of the Tax and Insurance Escrow Fund shall
exceed the amounts due for Taxes and Insurance Premiums pursuant to Section 5.1
hereof, Lender shall credit such excess against future payments to be made to
the Tax and Insurance Escrow Fund or, at Borrowers' option, provided there
exists no Event of Default, return any excess to Borrower. In allocating such
excess, Lender may deal with the Person shown on the records of Lender to be the
owner of the relevant Property. If at any time Lender determines that the Tax
and Insurance Escrow Fund is not or will not be sufficient to pay the items set
forth in (a) and (b) above, Lender shall notify Borrowers of such determination
and Borrowers shall increase their monthly payments to Lender by the amount that
Lender estimates is sufficient to make up the deficiency at least thirty (30)
days prior to delinquency of the Taxes and/or expiration of the Policies, as the
case may be.
VII.3.2 Grant of Security Interest. Borrowers hereby pledge, assign and
grant a security interest to Lender, as security for payment of all sums due
under the Loan and the performance of all other terms, conditions and provisions
of the Loan Documents and this Agreement on Borrowers' part to be paid and
performed, of all Borrowers' right, title and interest in and to the Tax and
Insurance Escrow Fund. Borrowers shall not, without obtaining the prior written
consent of Lender, further pledge, assign or grant any security interest in the
Tax and Insurance Escrow Fund, or permit any lien or encumbrance to attach
thereto, or any levy to be made thereon, or any UCC-1 Financing Statements,
except those naming Lender as the secured party, to be filed with respect
thereto. This Agreement is, among other things, intended by the parties to be a
security agreement for purposes of the Illinois Uniform Commercial Code.
VII.3.3 Application of Tax and Insurance Escrow Fund. Upon the acceleration
of the Debt, Lender may apply any sums then present in the Tax and Insurance
Escrow Fund to the payment of the following items in any order in its sole
discretion: (a) Taxes and Other Charges; (b) Insurance Premiums; (c) interest on
the unpaid principal balance of the Note; (d) the unpaid principal balance of
the Note; or (e) all other sums payable pursuant to this Agreement and the other
Loan Documents. The Tax and Insurance Escrow Fund shall not constitute a trust
fund and may be commingled with other
<PAGE>
monies held by Lender. Sums in the Tax and Insurance Escrow Fund shall be
held by Lender in an account in Lender's name at a financial institution
selected by Lender in its sole discretion and shall be invested in Permitted
Investments. Earnings or interest, if any, thereon shall be retained as part of
such funds and refunded or applied in accordance with this Section 7.3. Lender
shall not be liable for any loss sustained on the investment of any funds
constituting the Tax and Insurance Escrow Fund.
Section VII.4 Capital Reserve Fund
VII.4.1 Capital Reserve Fund. Borrowers shall pay to Lender on each Payment
Date commencing August 11, 1998 an amount with respect to each Property equal to
one-twelfth (1/12th) of the product obtained by multiplying (i) the dollars per
square foot capital expenditure requirement for such Property (as shown on
Schedule 3 under the heading "Reserved/Underwritten Annual CapEx ($sf), NACC
Actual" by (ii) the aggregate amount of square feet of rentable space in such
Property (said amounts hereinafter called the "Capital Reserve Fund"). Lender
will apply the Capital Reserve Fund to payment of Capital Expenses pursuant to
the terms hereof. If the amount of the Capital Reserve Fund shall exceed the
amounts due for Capital Expenses pursuant to the terms hereof, Lender shall, or,
at Borrowers' option, provided there exists no Event of Default, return any
excess to Borrowers, if future Capital Reserve Fund payments are then required,
credit such excess against such future payments or, at Borrowers' option,
provided there exists no Event of Default, return any excess to Borrowers;
provided, however, if the Loan shall have been accelerated, then Lender may
credit such excess against the Debt in such priority and proportions as Lender
in its sole and absolute discretion shall deem proper.
VII.4.2 Grant of Security Interst. Borrowers hereby pledge and assign to
Lender, and grant to Lender a security interest in all Borrowers' right, title
and interest in and to the Capital Reserve Fund, as security for payment of all
sums due under the Loan and the performance of all other terms, conditions and
provisions of the Loan Documents and this Agreement on Borrowers' part to be
paid and performed. Borrowers shall not, without obtaining the prior written
consent of Lender, further pledge, assign or grant any security interest in the
Capital Reserve Fund, or permit any lien or encumbrance to attach thereto, or
any levy to be made thereon, or any UCC-1 Financing Statements, except those
naming Lender as the secured party, to be filed with respect thereto. This
Agreement is, among other things, intended by the parties to be a security
agreement for purposes of the Illinois Uniform Commercial Code.
VII.4.3 Application of Capital Reserve Fund. Upon the acceleration of the
Debt, Lender may apply any sums then present in the Capital Reserve Fund to the
payment of the following items in any order in its sole discretion: (a) Capital
Expenses; (b) interest on the unpaid principal balance of the Note; (c) the
unpaid principal balance of the Note; or (d) all other sums payable pursuant to
this Agreement and the other Loan Documents. The Capital Reserve Fund shall not
constitute a trust fund and may be commingled with other monies held by Lender.
Sums in the Capital Reserve Fund shall be held by Lender in an account in
Lender's name at a financial institution selected by Lender in its sole
discretion and shall be invested in Permitted Investments. Earnings or interest,
if any, thereon shall be retained as part of such funds and applied in
accordance with this Section 7.4. Lender shall not be liable for any loss
sustained on the investment of any funds constituting the Capital Reserve Fund
VII.4.4 Payment of Capital Expenses. Funds held in the Capital Reserve Fund
may be used for Capital Expenses. From time to time, Borrowers may send a
request for disbursement of funds in the Capital Reserve Fund, but not more than
one (1) time per month and, to the extent there are sufficient funds available
in the Capital Reserve Fund, such disbursements shall be made by Lender so long
as (A) such expenditure is for Capital Expense or, during a Cash
<PAGE>
Trap Event, an Approved Capital Expense; and (B) the request for
disbursement is accompanied by (1) an Officer's Certificate certifying (v) the
amount of funds to be disbursed, (w) that such funds will be used to pay or
reimburse Borrowers for Capital Expenses and a description thereof, (x) that the
same has not been the subject of a previous disbursement, (y) that all
outstanding trade payables (other than those to be paid from the requested
disbursement or those otherwise permitted to be outstanding under Section 6.1(i)
hereof) have been paid in full, and (z) that all previous disbursements have
been used to pay the previously identified Capital Expenses, and (2) reasonably
detailed documentation as to the amount, necessity and purpose therefor.
Section VII.5 Payment of Approved Operating Expenses, Approved Capital
Expenses and Approved Leasing Expenses. Funds held in the Cash Collateral
Account may be used for Approved Operating Expenses, Approved Capital Expenses
and Approved Leasing Expenses (collectively, "Approved Expenses"). Borrowers may
from time to time send a request for disbursement of funds in the Cash
Collateral Account for payment of Approved Expenses but not more than one (1)
time per month. To the extent there are funds available in the Cash Collateral
Account in excess of the amounts required to fund the Tax and Insurance Escrow
Fund, the Capital Reserve Fund and to pay the Monthly Debt Service Payment
Amount due in respect of the Loan on the next Payment Date, such disbursements
for Approved Expenses shall be made by the Lender so long as (A) such
expenditure is for an Approved Expense; provided, however that Approved Capital
Expenses shall be funded from the Cash Collateral Account only to the extent
there are no funds available therefor in the Capital Reserve Fund; and (B) the
request for disbursement is accompanied by (1) an Officer's Certificate
certifying (v) the amount of funds to be disbursed, (w) that such funds will be
used to pay Approved Expenses and a description thereof, (x) that all
outstanding trade payables (other than those to be paid from the requested
disbursement or those otherwise permitted to be outstanding under Section 6.1(i)
hereof) have been paid in full, (y) that the same has not been the subject of a
previous disbursement, and (z) that all previous disbursements have been or will
be used to pay the previously identified Approved Expenses and (2) reasonably
detailed documentation as to the amount, necessity and purpose therefor. Subject
to satisfaction of the preceding conditions, if Lender receives from Borrowers a
valid request for a disbursement for payment of Approved Expenses for the then
Current Month at least five (5) Business Days prior to the Payment Date
occurring in such Current Month, then the disbursement in respect of such
Approved Expenses shall be made to Borrowers on such Payment Date. If Borrowers
shall fail to validly request a disbursement for payment of Approved Expenses,
for the then Current Month at least five (5) Business Days prior to the Payment
Date in such Current Month, then Lender shall retain in the Cash Collateral
Account an amount equal to the anticipated Approved Expenses, for the then
Current Month as set forth in the approved Operating Budget for such month, and
Lender shall, subject to satisfaction of the preceding conditions, disburse same
to Borrowers five (5) Business Days after Lender receives a valid request
therefor. Amounts disbursed to Borrowers under this Section 7.5 shall be used by
Borrowers to pay current Approved Expenses, and for no other purpose. Borrowers
shall furnish Lender with copies of bills, statements, invoices, receipts or
other evidence as Lender may reasonably request in connection with a request for
disbursement.
VIII. DEFAULTS
Section VIII.1 Events of Default
(a) Each of the following events shall constitute an event of default
hereunder (each, an "Event of Default"):
(i) if any installment of principal or interest is not paid when due under
the Note, or if any other portion of the Debt is not paid within five (5) days
after written notice from Lender;
(ii) if any of the Taxes or Other Charges are not paid prior to
delinquency, subject to Borrowers' right to contest Taxes in accordance with
Section 5.1(b) hereof;
(iii) if the Policies are not kept in full force and effect;
(iv) if, without Lender's prior written consent, (A) any Borrower transfers
or encumbers all or any portion of a Property or (B) any direct or indirect
interest in any Borrower is transferred or assigned except as expressly
permitted under Section 6.1(j) hereof;
(v) if any representation or warranty made by any Borrower herein or in any
other Loan Document, or made by any Borrower in any report, certificate,
financial statement or other instrument, agreement or document furnished by a
Borrower to Lender, its consultants, attorneys or agents in connection with this
Agreement or any other Loan Document, shall be false or misleading in any
material respect as of the date the representation or warranty was made;
(vi) if any Borrower shall make an assignment for the benefit of creditors,
or if any Borrower shall generally not be paying its debts as they become due;
(vii) if a receiver, liquidator or trustee shall be appointed for any
Borrower or if any Borrower shall be adjudicated a bankrupt or insolvent, or if
any petition for bankruptcy, reorganization or arrangement pursuant to federal
bankruptcy law, or any similar federal or state law, shall be filed by or
against, consented to, or acquiesced in by, such Borrower, or if any proceeding
for the dissolution or liquidation of a Borrower shall be instituted; and if
such appointment, adjudication, petition or proceeding was involuntary and not
consented to by such Borrower, the same is not discharged, stayed or dismissed
within sixty (60) days;
(viii) if any Borrower attempts to assign its respective rights under this
Agreement in contravention of the Loan Documents or any of the other Loan
Documents or any interest herein or therein;
(ix) if any Borrower breaches any of its covenants contained in
Sections 6.1(c), (g), (h), (i) or (j) or any covenant contained in
Section 4.1(dd) hereof;
(x) if an Event of Default as defined or described in any of the other Loan
Documents occurs, whether as to a Borrower or a Property;
(xi) if Borrowers shall be in default of their obligations to make deposits
into the Required Repair Fund or the Tax and Insurance Escrow Fund or the
Capital Reserve Fund; or
(xii) if Borrowers shall continue to be in Default under any of the other
terms, covenants or conditions of this Agreement not specified in subsections
(i) to (xi) above, for ten (10) days after notice to Borrowers from Lender, in
the case of any Default which can be cured by the payment of a sum of money, or
for thirty (30) days after notice from Lender in the case of any other Default;
provided, however, that if such non-monetary Default is susceptible of cure but
cannot reasonably be cured within such 30-day period and provided further that
Borrowers shall have commenced to cure such Default within such 30-day period
and thereafter diligently and expeditiously proceed to cure the same, such
30-day period shall be extended for an additional period of time as is
reasonably necessary for Borrowers in the exercise of due diligence to cure such
Default, such additional period not to exceed ninety (90) days.
<PAGE>
(b) Upon the occurrence of an Event of Default (other than an Event of
Default described in clauses (vi), (vii) or (viii) above) and at any time
thereafter Lender may, in addition to any other rights or remedies available to
it pursuant to this Agreement and the other Loan Documents or at law or in
equity, take such action, without notice or demand, that Lender deems advisable
to protect and enforce its rights against Borrowers and in and to the
Properties, including declaring the Debt to be immediately due and payable, and
Lender may enforce or avail itself of any or all rights or remedies provided in
the Loan Documents against Borrowers and the Properties, including all rights or
remedies available at law or in equity; and upon any Event of Default described
in clauses (vi), (vii) or (viii) above, the Debt and all other obligations of
Borrowers hereunder and under the other Loan Documents shall immediately and
automatically become due and payable, without notice or demand, and Borrowers
hereby expressly waive any such notice or demand, anything contained herein or
in any other Loan Document to the contrary notwithstanding.
Section VIII.2 Remedies.
(a) Upon the occurrence of an Event of Default, Lender shall have no
obligation to make Advances hereunder and all or any one or more of the rights,
powers, privileges and other remedies available to Lender against Borrowers
under this Agreement or any of the other Loan Documents executed and delivered
by, or applicable to, Borrowers or at law or in equity may be exercised by
Lender at any time and from time to time, whether or not all or any of the Debt
shall be declared due and payable, and whether or not Lender shall have
commenced any foreclosure proceeding or other action for the enforcement of its
rights and remedies under any of the Loan Documents with respect to the
Properties. Any such actions taken by Lender shall be cumulative and concurrent
and may be pursued independently, singly, successively, together or otherwise,
at such time and in such order as Lender may determine in its sole discretion,
to the fullest extent permitted by law, without impairing or otherwise affecting
the other rights and remedies of Lender permitted by law, equity or contract or
as set forth herein or in the other Loan Documents. Without limiting the
generality of the foregoing, Borrowers agree that if an Event of Default is
continuing (i) Lender is not subject to any "one action" or "election of
remedies" law or rule, and (ii) all liens and other rights, remedies or
privileges provided to Lender shall remain in full force and effect until Lender
has exhausted all of its remedies against the Properties and the Mortgages have
been foreclosed, sold and/or otherwise realized upon in satisfaction of the Debt
or the Debt has been paid in full.
(b) Upon acceleration of all or a portion of the outstanding principal
balance of the Loan, Lender shall have the right from time to time to partially
foreclose any Mortgage or Mortgages in any manner and for any amounts secured by
the Mortgages then due and payable as determined by Lender in its sole
discretion including, without limitation, the following circumstances: (i) in
the event Borrowers default in the payment of one or more scheduled payments of
principal and interest, Lender may foreclose any Mortgage or Mortgages to
recover such delinquent payments, or (ii) in the event Lender elects to
accelerate less than the entire outstanding principal balance of the Loan,
Lender may foreclose any Mortgage or Mortgages to recover so much of the
principal balance of the Loan as Lender may accelerate. Notwithstanding one or
more partial foreclosures, the Properties shall remain subject to the Mortgages
to secure payment of sums secured by the Mortgages and not previously recovered.
(c) Upon acceleration of all or a portion of the outstanding principal
balance of the Loan, Lender shall have the right from time to time to sever the
Note and the other Loan Documents into one or more separate notes, mortgages and
other security documents in such denominations as Lender shall determine in its
sole discretion for purposes of evidencing and enforcing its rights and remedies
provided hereunder. Borrowers shall execute and deliver to Lender from time to
<PAGE>
time, promptly after the request of Lender, a severance agreement and such other
documents as Lender shall request in order to effect the severance described in
the preceding sentence, all in form and substance reasonably satisfactory to
Lender. Each Borrower hereby absolutely and irrevocably appoints Lender as its
true and lawful attorney, coupled with an interest, in its name and stead to
make and execute all documents necessary or desirable to effect the aforesaid
severance, each Borrower ratifying all that its said attorney shall do by virtue
thereof.
Section VIII.3 Remedies Cumulative. The rights, powers and remedies of
Lender under this Agreement shall be cumulative and not exclusive of any other
right, power or remedy which Lender may have against Borrowers pursuant to this
Agreement or the other Loan Documents, or existing at law or in equity or
otherwise. Lender's rights, powers and remedies may be pursued singly,
concurrently or otherwise, at such time and in such order as Lender may
determine in Lender's sole discretion. No delay or omission to exercise any
remedy, right or power accruing upon an Event of Default shall impair any such
remedy, right or power or shall be construed as a waiver thereof, but any such
remedy, right or power may be exercised from time to time and as often as may be
deemed expedient. A waiver of one Default or Event of Default with respect to
Borrowers shall not be construed to be a waiver of any subsequent Default or
Event of Default by Borrowers or to impair any remedy, right or power consequent
thereon.
IX. SPECIAL PROVISIONS
Section IX.1 Sale of Notre and Securitization. Lender shall have the right
to transfer, assign or sell participations in the Note and the other Loan
Documents and any interest therein, provided, however, that no such transfer,
assignment or sale shall (i) materially increase, decrease or otherwise affect
either Borrowers' or Lender's obligations under this Loan Agreement or the other
Loan Documents, except as described in the Securitization Indemnification
Agreement or (ii) result in the holder of the Latham Note being different from
the holder of the Bridge Note.
Section IX.2 Securitization Indemnification. Borrowers and Lender have
entered into a Securitization Indemnification Agreement of even date herewith, a
copy of which is attached hereto as Exhibit D, which shall be a "Loan Document"
hereunder.
Section IX.3 Termination of Manager. If (i) Borrowers shall not achieve,
and within thirty (30) days of the end of each calendar quarter (the "DSCR
Determination Date") provide evidence to Lender of the achievement of, a Debt
Service Coverage Ratio for the Properties for such calendar quarter of at least
1.10 to 1.0 (the "Manager Termination Ratio") and Lender determines in its
reasonable discretion that a reputable independent property manager can manage
the Properties at competitive rates more efficiently and with better results
than Borrowers or Manager, or (ii) there exists an Event of Default, Lender
shall have the right to remove the Manager (or Borrowers as self-managers),
terminate the Management Agreement, if any (unless there exists no Event of
Default and Borrowers shall defease a portion of the Loan to a level such that
the Debt Service Coverage Ratio on the undefeased portion of the Loan is
restored to a level of not less than the Manager Termination Ratio), and replace
the Manager (or Borrowers as self-managers) with a manager approved by Lender on
terms and conditions satisfactory to Lender. In the event that Borrowers do not
propose a replacement manager to Lender for its approval within fifteen (15)
business days after the Lender's request that Borrowers do so, Lender may
propose two or more such property managers for Borrowers' consideration. If
Borrowers then fail to select and retain one of such property managers within
fifteen (15) business days thereafter, Lender shall have the right to select a
property manager for the Properties, and to enter into a management agreement
with such manager in the name of Borrowers. Each Borrower hereby appoints Lender
its attorney-in-fact, which appointment is coupled with an interest, for the
purpose of entering into such management agreement. The management agreement
entered into between Borrowers and any Manager shall be in form and substance
reasonably acceptable to Lender. All calculations of Debt Service Coverage Ratio
shall be subject to verification by Lender.
<PAGE>
Section IX.4 Retention of Servicer. Lender reserves the right to retain the
Servicer to act as its agent hereunder with such powers as are specifically
delegated to the Servicer by Lender, whether pursuant to the terms of this
Agreement, the Pooling and Servicing Agreement or the Cash Collateral Account
Agreement or otherwise, together with such other powers as are reasonably
incidental thereto. Borrowers shall pay any reasonable fees and expenses of the
Servicer in connection with a release or addition of a Property, assumption or
modification of the Loan or enforcement of the Loan Documents.
X. MISCELLANEOUS
Section X.1 Survival. This Agreement and all covenants, agreements,
representations and warranties made herein and in the certificates delivered
pursuant hereto shall survive the making by Lender of the Loan and the execution
and delivery to Lender of the Note, and shall continue in full force and effect
so long as all or any of the Debt is outstanding and unpaid (but the accuracy
thereof shall be determined as of the Closing Date, each Borrowing Date and any
subsequent date on which the same are re-made). Whenever in this Agreement any
of the parties hereto is referred to, such reference shall be deemed to include
the legal representatives, successors and assigns of such party. All covenants,
promises and agreements in this Agreement contained, by or on behalf of either
party, shall inure to the benefit of the respective legal representatives,
successors and assigns of the other.
Section X.2 Lender's Discretion. Whenever pursuant to this Agreement,
Lender exercises any right given to it to approve or disapprove, or any
arrangement or term is to be satisfactory to Lender, the decision of Lender to
approve or disapprove or to decide whether arrangements or terms are
satisfactory or not satisfactory shall (except as is otherwise specifically
herein provided) be in the sole discretion of Lender and shall be final and
conclusive.
Section X.3 Governing Law
(a) THIS AGREEMENT WAS NEGOTIATED IN THE STATE OF ILLINOIS, AND MADE BY
LENDER AND ACCEPTED BY BORROWERS IN THE STATE OF ILLINOIS, AND THE PROCEEDS OF
THE NOTE DELIVERED PURSUANT HERETO WERE DISBURSED FROM THE STATE OF ILLINOIS,
WHICH STATE THE PARTIES AGREE HAS A SUBSTANTIAL RELATIONSHIP TO THE PARTIES AND
TO THE UNDERLYING TRANSACTION EMBODIED HEREBY, AND IN ALL RESPECTS, INCLUDING
MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS AGREEMENT AND THE
OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE INTERNAL LAWS OF THE STATE OF ILLINOIS (WITHOUT REGARD TO CONFLICTS OF
LAW PROVISIONS) APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE AND ANY
APPLICABLE LAW OF THE UNITED STATES OF AMERICA, EXCEPT THAT AT ALL TIMES THE
PROVISIONS FOR THE CREATION, PERFECTION, AND ENFORCEMENT OF THE LIENS AND
SECURITY INTERESTS CREATED PURSUANT HERETO AND PURSUANT TO THE OTHER LOAN
DOCUMENTS SHALL BE GOVERNED BY AND CONSTRUED ACCORDING TO THE LAW OF THE STATE
IN WHICH THE APPLICABLE PROPERTY IS LOCATED, IT BEING UNDERSTOOD THAT, TO THE
FULLEST EXTENT PERMITTED BY THE LAW OF SUCH STATE, THE LAW OF THE STATE OF
ILLINOIS SHALL GOVERN THE VALIDITY AND THE ENFORCEABILITY OF ALL LOAN DOCUMENTS
AND ALL OF THE INDEBTEDNESS OR OBLIGATIONS ARISING HEREUNDER OR THEREUNDER. TO
THE FULLEST EXTENT PERMITTED BY LAW, EACH BORROWER AND LENDER HEREBY
UNCONDITIONALLY AND IRREVOCABLY WAIVES ANY CLAIM TO ASSERT THAT THE LAW OF ANY
OTHER JURISDICTION GOVERNS THIS AGREEMENT AND THE NOTE.
<PAGE>
(b) ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST LENDER OR BORROWERS
ARISING OUT OF OR RELATING TO THIS AGREEMENT SHALL BE INSTITUTED IN ANY FEDERAL
OR STATE COURT IN CHICAGO, ILLINOIS, AND EACH BORROWER WAIVES ANY OBJECTION
WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH SUIT,
ACTION OR PROCEEDING, AND EACH BORROWER HEREBY IRREVOCABLY SUBMITS TO THE
JURISDICTION OF ANY SUCH COURT IN ANY SUIT, ACTION OR PROCEEDING. EACH BORROWER
DOES HEREBY DESIGNATE AND APPOINT MILES A. CRAWFORD, HUNTLEY FACTORY SHOPS,
11300 FACTORY SHOPS BLVD., HUNTLEY, ILLINOIS 60142 AS ITS AUTHORIZED AGENT TO
ACCEPT AND ACKNOWLEDGE ON ITS BEHALF SERVICE OF ANY AND ALL PROCESS WHICH MAY BE
SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING IN ANY FEDERAL OR STATE COURT IN
CHICAGO, ILLINOIS, AND AGREES THAT SERVICE OF PROCESS UPON SAID AGENT AT SAID
ADDRESS AND WRITTEN NOTICE OF SAID SERVICE OF SUCH BORROWER MAILED OR DELIVERED
TO SUCH BORROWER IN THE MANNER PROVIDED HEREIN SHALL BE DEEMED IN EVERY RESPECT
EFFECTIVE SERVICE OF PROCESS UPON SUCH BORROWER, IN ANY SUCH SUIT, ACTION OR
PROCEEDING IN THE STATE OF ILLINOIS. EACH BORROWER (I) SHALL GIVE PROMPT NOTICE
TO LENDER OF ANY CHANGED ADDRESS OF ITS AUTHORIZED AGENT HEREUNDER, (II) MAY AT
ANY TIME AND FROM TIME TO TIME DESIGNATE A SUBSTITUTE AUTHORIZED AGENT WITH AN
OFFICE IN CHICAGO, ILLINOIS (WHICH OFFICE SHALL BE DESIGNATED AS THE ADDRESS FOR
SERVICE OF PROCESS), AND (III) SHALL PROMPTLY DESIGNATE SUCH A SUBSTITUTE IF ITS
AUTHORIZED AGENT CEASES TO HAVE AN OFFICE IN CHICAGO, ILLINOIS OR IS DISSOLVED
WITHOUT LEAVING A SUCCESSOR.
Section X.4 Modification, Waiver in Writing. No modification, amendment,
extension, discharge, termination or waiver of any provision of this Agreement,
or of the Note, or of any other Loan Document, nor consent to any departure by
either party 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 Borrowers, shall entitle Borrowers to any other or
future notice or demand in the same, similar or other circumstances.
Section X.5 Delay Not a Waiver. Neither any failure nor any delay on the
part of Lender in insisting upon strict performance of any term, condition,
covenant or agreement, or exercising any right, power, remedy or privilege
hereunder, or under the Note or under any other Loan Document, or any other
instrument given as security therefor, shall operate as or constitute a waiver
thereof, nor shall a single or partial exercise thereof preclude any other
future exercise, or the exercise of any other right, power, remedy or privilege.
In particular, and not by way of limitation, by accepting payment after the due
date of any amount payable under this Agreement, the Note or any other Loan
Document, Lender shall not be deemed to have waived any right either to require
prompt payment when due of all other amounts due under this Agreement, the Note
or the other Loan Documents, or to declare a default for failure to effect
prompt payment of any such other amount.
Section X.6 Notices. All notices, consents, approvals and requests required
or permitted hereunder or under any other Loan Document shall be given in
writing and shall be effective for all purposes if hand delivered or sent by (a)
certified or registered United States mail, postage prepaid, or (b) expedited
prepaid delivery service, either commercial or United States Postal Service,
<PAGE>
with proof of attempted delivery, addressed as follows (or at such other address
and person as shall be designated from time to time by any party hereto, as the
case may be, in a written notice to the other parties hereto in the manner
provided for in this Section):
If to Lender:
Nomura Asset Capital Corporation
Two World Financial Center
Building B
New York, New York 10281
Attention: Barry Funt
with a copy to:
Nomura Asset Capital Corporation
600 East Los Colinas Blvd.
Suite 300
Irving, Texas 75039
Attention: Legal Department
with a copy to:
Nomura Asset Capital Corporation
311 South Wacker Drive
Suite 6100
Chicago, Illinois 60601
Attention: David Murdoch
If to Borrowers:
c/o Prime Retail, L.P.
100 East Pratt Street, 19th Floor
Baltimore, Maryland 21202
Attention: Steven S. Gothelf
with copies to:
c/o Prime Retail, L.P.
100 East Pratt Street, 19th Floor
Baltimore, Maryland 21202
Attention: C. Alan Schroeder
Winston & Strawn
35 West Wacker Drive
Chicago, Illinois 60601
Attention: James D. Burton
A notice shall be deemed to have been given: in the case of hand delivery,
at the time of delivery; in the case of registered or certified mail, when
delivered or the first attempted delivery on a Business Day; or in the case of
expedited prepaid delivery, upon the first attempted delivery on a Business Day.
<PAGE>
Section X.7 Trial by Jury. EACH BORROWER AND LENDER HEREBY AGREES NOT TO
ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVES ANY
RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR
HEREAFTER EXIST WITH REGARD TO THE LOAN DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM OR
OTHER ACTION ARISING IN CONNECTION THEREWITH. THIS WAIVER OF RIGHT TO TRIAL BY
JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY EACH BORROWER AND LENDER, AND IS
INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE
RIGHT TO A TRIAL BY JURY WOULD OTHERWISE ACCRUE. EACH PARTY IS HEREBY AUTHORIZED
TO FILE A COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF
THIS WAIVER BY THE OTHER PARTY.
Section X.8 Headings. The Article and/or Section headings and the Table of
Contents in this Agreement are included herein for convenience of reference only
and shall not constitute a part of this Agreement for any other purpose.
Section X.9 Severability. Wherever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement 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 remainder of such
provision or the remaining provisions of this Agreement.
Section X.10 Preferences. To the extent Borrowers make a payment or
payments to Lender, which payment or proceeds or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside
or required to be repaid to a trustee, receiver 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 proceeds received, the obligations hereunder or
part thereof intended to be satisfied shall be revived and continue in full
force and effect, as if such payment or proceeds had not been received by
Lender.
Section X.11 Waiver of Notive. Borrowers shall not be entitled to any
notices of any nature whatsoever from Lender except with respect to matters for
which this Agreement or the other Loan Documents specifically and expressly
provide for the giving of notice by Lender to Borrowers and except with respect
to matters for which Borrowers are not, pursuant to applicable Legal
Requirements, permitted to waive the giving of notice. Borrowers hereby
expressly waive the right to receive any notice from Lender with respect to any
matter for which this Agreement or the other Loan Documents do not specifically
and expressly provide for the giving of notice by Lender to Borrowers.
Section X.12 Remedies of Borrowers. In the event that a claim or
adjudication is made that Lender or its agents, including Servicer, have acted
unreasonably or unreasonably delayed acting in any case where by law or under
this Agreement or the other Loan Documents, Lender or such agent, as the case
may be, has an obligation to act reasonably or promptly, Borrowers agree that
neither Lender nor its agents, including Servicer, shall be liable for any
monetary damages, and Borrowers' sole remedies shall be limited to commencing an
action seeking injunctive relief or declaratory judgment.
Section X.13 Expenses; Indemnity
(a) Borrowers covenant and agree to reimburse Lender (or the holder of the
Loan, as applicable) upon receipt of written notice from such holder for all
<PAGE>
reasonable costs and expenses (including reasonable attorneys' fees and
disbursements but excluding Lender's administrative overhead) incurred by Lender
in connection with (i) the preparation, negotiation, execution and delivery of
this Agreement and the other Loan Documents and the consummation of the
transactions contemplated hereby and thereby and all the costs of furnishing all
opinions by counsel for Borrowers (including any opinions requested by Lender as
to any legal matters arising under this Agreement or the other Loan Documents
with respect to the Properties); (ii) Borrowers' ongoing performance of and
compliance with Borrowers' respective agreements and covenants contained in this
Agreement and the other Loan Documents on its part to be performed or complied
with after the Closing Date, including confirming compliance with environmental
and insurance requirements; (iii) Lender's ongoing performance and compliance
with all agreements and conditions contained in this Agreement and the other
Loan Documents on its part to be performed or complied with after the Closing
Date, including the making of Advances; (iv) the negotiation, preparation,
execution, delivery and administration of any consents, amendments, waivers or
other modifications to this Agreement and the other Loan Documents and any other
documents or matters requested by Lender; (v) the filing and recording fees and
expenses, title insurance and reasonable fees and expenses of counsel for
providing to Lender all required legal opinions, and other similar expenses
incurred in creating and perfecting the Liens in favor of Lender pursuant to
this Agreement and the other Loan Documents; (vi) enforcing or preserving any
rights, in response to third party claims or the prosecuting or defending of any
action or proceeding or other litigation, in each case against, under or
affecting Borrowers, this Agreement, the other Loan Documents, the Properties,
or any other security given for the Loan; and (vii) enforcing any obligations of
or collecting any payments due from Borrowers under this Agreement, the other
Loan Documents or with respect to the Properties or in connection with any
refinancing or restructuring of the credit arrangements provided under this
Agreement in the nature of a "work-out" or of any insolvency or bankruptcy
proceedings; provided, however, that Borrowers shall not be liable for the
payment of any such costs and expenses to the extent the same arise by reason of
the gross negligence, illegal acts, fraud or willful misconduct of Lender. Any
costs and expenses due and payable to Lender hereunder which are not paid by
Borrowers within ten (10) days after demand may be paid from any amounts in the
Cash Collateral Account, with notice thereof to Borrowers. Notwithstanding the
foregoing, Borrowers shall not be obligated to reimburse Lender for expenses
incurred in connection with the Securitization of the Loan.
(b) Borrowers shall indemnify and hold harmless Lender from and against any
and all other liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, claims, costs, expenses and disbursements of any kind or
nature whatsoever (including the reasonable fees and disbursements of counsel
for Lender in connection with any investigative, administrative or judicial
proceeding commenced or threatened, whether or not Lender shall be designated a
party thereto), that may be imposed on, incurred by, or asserted against Lender
in any manner relating to or arising out of (i) any breach by any Borrower of
its obligations under, or any material misrepresentation by any Borrower
contained in this Agreement or the other Loan Documents or (ii) the use or
intended use of the proceeds of the Loan, (collectively, the "Indemnified
Liabilities"); provided, however, that Borrowers shall not have any obligation
to Lender hereunder to the extent that such Indemnified Liabilities arise from
the gross negligence, illegal acts, fraud or willful misconduct of Lender. To
the extent that the undertaking to indemnify and hold harmless set forth in the
preceding sentence may be unenforceable because it violates any law or public
policy, Borrowers shall contribute the maximum portion that they are permitted
to pay and satisfy under applicable law to the payment and satisfaction of all
Indemnified Liabilities incurred by Lender.
Section X.14 Exhibits Incorporated. The Exhibits and Schedules annexed
hereto are hereby incorporated herein as a part of this Agreement with the same
effect as if set forth in the body hereof.
Section X.15 Offsets, Counterclaims and Defenses. Any assignee of Lender's
interest in and to this Agreement, the Note and the other Loan Documents shall
<PAGE>
take the same free and clear of all offsets, counterclaims or defenses which are
unrelated to such documents which Borrowers may otherwise have against any
assignor of such documents, and no such unrelated counterclaim or defense shall
be interposed or asserted by Borrowers in any action or proceeding brought by
any such assignee upon such documents and any such right to interpose or assert
any such unrelated offset, counterclaim or defense in any such action or
proceeding is hereby expressly waived by Borrowers.
Section X.16 No Joint Venture of Partnership. Borrowers and Lender intend
that the relationships created hereunder and under the other Loan Documents be
solely that of borrower and lender. Nothing herein or therein is intended to
create a joint venture, partnership, tenancy-in-common, or joint tenancy
relationship between Borrowers and Lender nor to grant Lender any interest in
the Properties other than that of mortgagee or lender.
Section X.17 Publicity. (a) All promotional news releases, publicity or
advertising by Borrowers or their respective Affiliates through any media
intended to reach the general public shall not refer to the Loan Documents or
the financing evidenced by the Loan Documents, or to Lender or to Nomura
Securities International, Inc. ("Nomura") or to NACC without the prior written
approval of Lender or Nomura or NACC, as applicable, in each instance, such
approval not to be unreasonably withheld or delayed. Subject to Section 10.17(c)
hereof, Lender shall be authorized to provide information relating to the
Properties, the Loan and matters relating thereto to rating agencies,
underwriters, potential securities investors, auditors, regulatory authorities
and to any parties which may be entitled to such information by operation of law
and Borrowers and their Affiliates shall be authorized to provide such
information to auditors, regulatory authorities and to any parties which may be
entitled by law to such information.
(b) No promotional news releases, publicity or advertising by Lender or its
Affiliates through any media intended to reach the general public shall refer to
PRLP or any of its Affiliates without the prior written approval of PRLP, such
approval not to be unreasonably withheld or delayed.
(c) Lender shall keep, and shall use good faith efforts to cause the Rating
Agencies to keep, rent rolls, per square foot sales figures and information
provided pursuant to Section 5.1(k) which any Borrower, in its reasonable
discretion, deems in writing to be proprietary in nature (collectively, the
"Confidential Information") confidential, provided, however, that nothing herein
shall be deemed to prohibit (x) the Rating Agencies from including summary
statements, conclusions or analysis based on the Confidential Information in
reports they prepare and distribute with respect to the Loan or (y) distribution
of the Confidential Information to the Rating Agencies, underwriters, auditors,
regulatory authorities or any Parties which may be entitled by law to such
information, or (z) distribution of the Confidential Information as provided
below. Information provided by Borrowers to Lender will be available to any
holders of any certificates issued in connection with a Securitization;
provided, however, as long as the Debt Service Coverage Ratio equals or exceeds
1.10 and no Event of Default has occurred, the Confidential Information will be
available only to any private holder of such certificates that signs a
confidentiality agreement. In addition, Confidential Information provided by
Borrower to Lender will be available to potential holders of non-investment
grade certificates if such potential holders sign a confidentiality agreement.
If the Debt Service Coverage Ratio is less than 1.10 or an Event of Default has
occurred, no separate confidentiality agreement will be required with respect to
holders of certificates issued in connection with the Securitizations but the
first page of any such Confidential Information shall contain a legend stating
that the Confidential Information contains economic, commercial and financial
information which is confidential and/or proprietary in nature to Borrower and
its affiliates and that the recipients of the Confidential Information (i) shall
not disclose the contents of the Confidential Information to any third party and
(ii) shall use the Confidential Information solely in connection with their
ownership of any certificates issued in connection with a Securitization. If,
however, Borrowers deposit with Lender U.S. Obligations the payment from which
<PAGE>
will increase the Debt Service Coverage Ratio to 1.10 when recalculated with an
adjustment to Operating Income to include as income the payments to be made from
the U.S. Obligations for the next succeeding twelve (12) month period the
requirement for a separate confidentiality agreement shall be reinstated.
Section X.18 Waiver of Marshalling of Assets. To the fullest extent
Borrowers may legally do so, Borrowers waive all rights to a marshalling of the
assets of Borrowers, Borrowers' partners and/or members, and others with
interests in Borrowers, and of Borrowers' properties, or to a sale in inverse
order of alienation in the event of foreclosure of the interests hereby created,
and agrees not to assert any right under any laws pertaining to the marshalling
of assets, the sale in inverse order of alienation, homestead exemption, the
administration of estates of decedents, or any other matters whatsoever to
defeat, reduce or affect the right of Lender under the Loan Documents to a sale
of the Properties for the collection of the related indebtedness without any
prior or different resort for collection, of the right of Lender or any deed of
trust trustee to the payment of the related indebtedness out of the net proceeds
of the Properties in preference to every other claimant whatsoever.
Section X.19 Waiver of Counterclaim. Borrowers hereby waive the right to
assert a counterclaim, other than a compulsory counterclaim, in any action or
proceeding brought against it by Lender or its agents, including Servicer.
Section X.20 Conflict; Construction of Documents. In the event of any
conflict between the provisions of this Agreement and any of the other Loan
Documents, the provisions of this Agreement shall control. The parties hereto
acknowledge that they were represented by counsel in connection with the
negotiation and drafting of the Loan Documents and that such Loan Documents
shall not be subject to the principle of construing their meaning against the
party which drafted same.
Section X.21 Brokers and Financial Advisors. Borrowers hereby represent
that they have dealt with no financial advisors, brokers, underwriters,
placement agents, agents or finders in connection with the transactions
contemplated by this Agreement. Borrowers and Lender hereby agree to indemnify
and hold the other harmless from and against any and all claims, liabilities,
costs and expenses of any kind in any way relating to or arising from a claim by
any Person that such Person acted on behalf of the indemnifying party in
connection with the transactions contemplated herein. The provisions of this
Section 10.21 shall survive the expiration and termination of this Agreement and
the repayment of the Debt.
Section X.22 No Third Party Beneficiaries. This Agreement and the other
Loan Documents are solely for the benefit of Lender and Borrowers and nothing
contained in this Agreement or the other Loan Documents shall be deemed to
confer upon anyone other than Lender and Borrowers any right to insist upon or
to enforce the performance or observance of any of the obligations contained
herein or therein. All conditions to the obligations of Lender to make the Loan
hereunder are imposed solely and exclusively for the benefit of Lender and no
other Person shall have standing to require satisfaction of such conditions in
accordance with their terms or be entitled to assume that Lender will refuse to
make the Loan in the absence of strict compliance with any or all thereof and no
other Person shall under any circumstances be deemed to be a beneficiary of such
conditions, any or all of which may be freely waived in whole or in part by
Lender if, in Lender's sole discretion, Lender deems it advisable or desirable
to do so.
Section X. 23 Prior Agreements. This Agreement and the other Loan Documents
contain the entire agreement of the parties hereto and thereto in respect of the
transactions contemplated hereby and thereby, and all prior agreements among or
between such parties, whether oral or written, are superseded by the terms of
this Agreement and the other Loan Documents.
<PAGE>
Section 10.24 Contribution Among Borrowers.
(a) Contribution. To provide for just and equitable contribution among
Borrowers, if any payment is made by a Borrower (a "Funding Borrower") hereunder
or under the Note or any other Loan Document in respect of the Debt such Funding
Borrower shall be entitled to a contribution from other Borrowers for all
payments, damages and expenses incurred by such Funding Borrower under or in
connection with such Debt, such contributions to be made in the manner and to
the extent set forth below. Any amount payable as a contribution under this
Agreement shall be determined as of the date on which the related payment is
made by a Funding Borrower.
(b) Calculation of Contributions. Each Borrower shall be liable for
contribution to each Funding Borrower in respect of all payments, damages and
expenses incurred by such Funding Borrower hereunder or under the Note or any
other Loan Document in an aggregate amount, subject to Section 10.24(c) hereof,
equal to (i) the ratio of (x) the Property Worth of the Property owned by such
Borrower to (y) the Property Worth of the Properties owned by all Borrowers,
multiplied by (ii) the aggregate amount of such payments, damages and expenses
incurred by such Funding Borrower under or in connection with the Obligations.
(c) Rights to Contribution Subordinated. Each Borrower agrees (c) Rights to
Contribution Subordinated. Each Borrower agrees that all of its rights to
receive contribution under this Section 10.24 (whether for payments, damages,
expenses or otherwise) and all of its rights, if any, to be subrogated to any of
the rights of Lender shall be subordinated in right of payment (in liquidation
or otherwise) to the prior payment in full in cash of all of the Debt (whether
for principal, interest, premium or otherwise). If any amount shall at any time
be paid to a Borrower on account of such rights of contribution or subrogation,
or in contravention of the provisions of this Section 10.24(c) at any time, such
amount shall be held in trust, segregated from the other assets of such
Borrower, for the benefit of the Lender and shall promptly be paid to the
Lender. The foregoing shall constitute a continuing offer to, and agreement
with, all persons that from time to time may become holders of, or continue to
hold, Debt under this Agreement, and the provisions of the foregoing sentence
are made for the benefit of such holders and such holders, as third party
beneficiaries hereunder, are entitled to enforce such provisions.
(d) Joint and Several/Continuing Obligations.
(i) Notwithstanding anything to the contrary set forth in this Agreement or
any of the other Loan Documents, the Borrowers shall be jointly and severally
liable for all of the Obligations.
(ii) Each Borrower's obligations under Section 10.24(a) above shall remain
outstanding until all Debt of all Borrowers have been paid in full.
(iii) No payment or payments with respect to the obligations of any
Borrower hereunder made by any other Borrower or any other Person or received or
collected by the Lender from such other Borrower or such other Person by virtue
of any action or proceeding or any setoff or appropriation or application, at
any time or from time to time, in reduction of or in payment of the Debt or any
release of security hereunder shall be deemed to modify, reduce, release or
otherwise affect the primary liability of such Borrower in respect thereof.
(iv) If any amount shall be at any time be paid to a Borrower on account of
such rights of contribution or subrogation, in contravention of the provisions
<PAGE>
of this Section 10.24 at any time, such amount shall be held in trust,
segregated from the other assets of such Borrower, for the benefit of the Lender
and shall promptly be paid to the Lender.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Loan Agreement to
be duly executed by their duly authorized representatives, all as of the day and
year first above written.
BORROWERS:
BUCKEYE FACTORY SHOPS LIMITED PARTNERSHIP,
a Delaware limited partnership
By: Prime Retail, L.P., a Delaware
limited partnership, its Managing
General partner
By: Prime Retail, Inc., a
Maryland corporation, its
general partner
By: /s/ Steven S. Gotehelf
Name: Steven S. Gothelf
Title: Senior Vice President
LATHAM FACTORY STORES LIMITED PARTNERSHIP,
a Delaware limited partnership
By: Prime Retail, L.P., a Delaware
limited partnership, its Managing
General Partner
By: Prime Retail, Inc., a
Maryland corporation, its
general partner
By: /s/ Steven S. Gothelf
Name: Steven S. Gothelf
Title: Senior Vice President
CAROLINA FACTORY SHOPS LIMITED
PARTNERSHIP, a Delaware limited partnership
By: Prime Retail, L.P., a Delaware
limited partnership, its Managing
General Partner
By: Prime Retail, Inc., a
Maryland corporation, its
general partner
By: /s/ Steven S.Gothelf
Name: Steven S. Gothelf
Title: Senior Vice President
<PAGE>
SHASTA OUTLET CENTER LIMITED PARTNERSHIP,
a Delaware limited partnership
By: Prime Retail, L.P., a Delaware
limited partnership, its Managing
General Partner
By: Prime Retail, Inc., a
Maryland corporation, its
general partner
By: /s/ Steven S. Gothelf
Name: Steven S. Gothelf
Title: Senior Vice President
THE PRIME OUTLETS AT CALHOUN LIMITED
PARTNERSHIP, a Delaware limited partnership
By: Prime Retail, L.P., a Delaware
limited partnership, its Managing
General Partner
By: Prime Retail, Inc., a
Maryland corporation, its
general partner
By: /s/ Steven S. Gothelf
Name: Steven S. Gothelf
Title: Senior Vice President
<PAGE>
THE PRIME OUTLETS AT LEE LIMITED
PARTNERSHIP, a Delaware limited partnership
By: Prime Retail, L.P., a Delaware
limited partnership, its Managing
General Partner
By: Prime Retail, Inc., a
Maryland corporation, its
general partner
By: /s/ Steven S. Gothelf
Name: Steven S. Gothelf
Title: Senior Vice President
LENDER:
NOMURA ASSET CAPITAL CORPORATION
By: /s/ John M. Burke
Name: John M. Burke
Title: Director
<PAGE>
Schedule 1
Matters Regarding Representations
<PAGE>
Schedule 2
Rent Roll
See Certificate regarding Rent Roll dated as of even date herewith
delivered by Borrowers to Lender.
<PAGE>
Schedule 3
Required Repairs
<PAGE>
Schedule 4
Mortgages
1. The first priority Deed to Secure Debt, Assignment of Leases and Rents
and Security Agreement executed and delivered by Calhoun Borrower as security
for the Loan and encumbering the Calhoun Property.
2. The first priority Mortgage, Assignment of Leases and Rents and Security
Agreement executed and delivered by Lee Borrower as security for the Loan and
encumbering the Lee Property.
3. The first priority Leasehold Mortgage, Assignment of Leases and Rents
and Security Agreement executed and delivered by Carolina Borrower as security
for the Loan and encumbering the Carolina Property.
4. The first priority Open End Mortgage, Assignment of Leases and Rents and
Security Agreement executed and delivered by Buckeye Borrower as security for
the Loan and encumbering the Buckeye Property.
5. The first priority Mortgage, Assignment of Leases and Rents and Security
Agreement executed and delivered by Latham Borrower as security for the Latham
Note and encumbering the Latham Property.
6. The first priority Deed of Trust, Assignment of Leases and Rents and
Security Agreement executed and delivered by Shasta Borrower as security for the
Loan and encumbering the Shasta Property.
<PAGE>
Schedule 5
Description of Properties
"Calhoun Property" shall mean that certain parcel of real property and
improvements thereon owned by Calhoun Borrower and encumbered by the Calhoun
Mortgage, together with all rights pertaining to such property and improvements,
as more particularly described in the Granting Clauses of the Calhoun Mortgage
and referred to therein as the "Property" and known as the Calhoun Factory Shops
in Calhoun, Georgia.
"Lee Property" shall mean that certain parcel of real property and
improvements thereon owned by Lee Borrower and encumbered by the Lee Mortgage,
together with all rights pertaining to such property and improvements, as more
particularly described in the Granting Clauses of the Lee Mortgage and referred
to therein as the "Property" and known as the Berkshire Outlet Village in Lee,
Massachusetts.
"Carolina Property" shall mean that certain parcel of real property and
improvements thereon leased by Carolina Borrower and encumbered by the Carolina
Mortgage, together with all rights pertaining to such property and improvements,
as more particularly described in the Granting Clauses of the Carolina Mortgage
and referred to therein as the "Property" and known as the Carolina Factory
Shops in Gaffney, South Carolina.
"Buckeye Property" shall mean that certain parcel of real property and
improvements thereon owned by Buckeye Borrower and encumbered by the Buckeye
Mortgage, together with all rights pertaining to such property and improvements,
as more particularly described in the Granting Clauses of the Buckeye Mortgage
and referred to therein as the "Property" and known as the Buckeye Factory Shops
in Burbank, Ohio.
"Latham Property" shall mean that certain parcel of real property and
improvements thereon owned by Latham Borrower and encumbered by the Latham
Mortgage, together with all rights pertaining to such property and improvements,
as more particularly described in the Granting Clauses of the Latham Mortgage
and referred to therein as the "Property" and known as the Latham Factory Stores
in Colonie, New York.
"Shasta Property" shall mean that certain parcel of real property and
improvements thereon owned by Shasta Borrower and encumbered by the Shasta
Mortgage, together with all rights pertaining to such property and improvements,
as more particularly described in the Granting Clauses of the Shasta Mortgage
and referred to therein as the "Property" and known as the Shasta Factory Stores
in Anderson, California.
<PAGE>
Schedule 6
Allocated Loan Amounts
Buckeye Property $ 20,868,416.00
Latham Property $ 1,725,526.00
Carolina Property $ 21,907,750.00
Shasta Property $ 5,808,928.00
Calhoun Property $ 19,165,820.00
Lee Property $ 25,810,220.00
<PAGE>
Schedule 7
Prime Bridge Loan
<TABLE>
<CAPTION>
- ---------------------------------------- ------------------------------------- -------------------------------------
Property Borrower Fee or Leasehold
- ---------------------------------------- ------------------------------------- -------------------------------------
<S> <C> <C>
- ---------------------------------------- ------------------------------------- -------------------------------------
Calhoun Factory Shops The Prime Outlets at Calhoun Fee
Limited Partnership
- ---------------------------------------- ------------------------------------- -------------------------------------
- ---------------------------------------- ------------------------------------- -------------------------------------
Carolina Factory Shops Carolina Factory Shops Limited Leasehold
Partnership
- ---------------------------------------- ------------------------------------- -------------------------------------
- ---------------------------------------- ------------------------------------- -------------------------------------
The Prime Outlets at Lee The Prime Outlets at Lee Limited Fee
Partnership
- ---------------------------------------- ------------------------------------- -------------------------------------
- ---------------------------------------- ------------------------------------- -------------------------------------
Buckeye Factory Shops Buckeye Factory Shops Limited Fee
Partnership
- ---------------------------------------- ------------------------------------- -------------------------------------
- ---------------------------------------- ------------------------------------- -------------------------------------
Latham Factory Stores Latham Factory Stores Limited Fee
Partnership
- ---------------------------------------- ------------------------------------- -------------------------------------
- ---------------------------------------- ------------------------------------- -------------------------------------
Shasta Factory Outlets Shasta Outlet Center Limited Fee
Partnership
- ---------------------------------------- ------------------------------------- -------------------------------------
</TABLE>
<PAGE>
Exhibit A-1
Form of Bridge Note
<PAGE>
Exhibit A-2
Form of Latham Note
<PAGE>
Exhibit B
Securitization Indemnification Agreement
EXHIBIT 10.4
GUARANTY
This Guaranty made as of the ____ day of June, 1998, by PRIME RETAIL, L.P.
a Delaware limited partnership ("Guarantor"), to and for the benefit of NOMURA
ASSET CAPITAL CORPORATION, a Delaware corporation, and its successors and
assigns ("Lender").
RECITALS
A. Buckeye Factory Shops Limited Partnership, Latham Factory Stores Limited
Partnership, Carolina Factory Shops Limited Partnership, Shasta Outlet Center
Limited Partnerships, The Prime Outlets at Calhoun Limited Partnership and The
Prime Outlets at Lee Limited Partnership, each a Delaware limited partnership
(collectively, "Borrowers"), have requested that Lender make a loan to Borrowers
in the amount of $112,000,000.00 (the "Loan"). Lender has agreed to make such
loan pursuant to the terms of that certain Loan Agreement of even date among
Borrowers and Lender (the "Loan Agreement"). All capitalized terms used herein
unless otherwise defined shall have the meaning set forth in the Loan Agreement.
B. Borrowers have executed and delivered to Lender one or more notes of
even date in the aggregate principal amount of $112,000,000.00 as evidence of
their indebtedness to Lender (collectively, the "Note"). To secure payment of
the Note, Borrowers have executed and delivered to Lender the Mortgages and
various other Loan Documents.
C. Guarantor owns a direct or indirect interest in Borrowers. Accordingly,
Guarantor will derive financial benefit from the Loan. The execution and
delivery of this Guaranty by Guarantor is a condition precedent to Lender making
the Loan.
AGREEMENTS
NOW, THEREFORE, Guarantor, in consideration of the matters described in the
foregoing Recitals, which Recitals are incorporated herein and made a part
hereof, and for other good and valuable consideration, hereby agree as follows:
1. Guarantor absolutely, unconditionally, and irrevocably guarantees to
Lender:
(a) the full and prompt payment of the principal of and interest on the
Note when due, whether at stated maturity, upon acceleration or otherwise, and
at all times thereafter, and the prompt payment of all fees and all other sums
which may now be or may hereafter become due and owing under the Note, the Loan
Agreement, the Mortgages, and the other Loan Documents; and
(b) the payment of all Enforcement Costs (as hereinafter defined in
Paragraph 7 hereof).
<PAGE>
All debts, liabilities, and payment obligations described in
subparagraphs (a) and (b) of this Paragraph 1 are referred to herein as the
"Indebtedness."
2. In the event of any default by Borrowers in making payment of the
Indebtedness, as aforesaid, Guarantor agrees, on demand by Lender or the holder
of the Note, to pay all the Indebtedness as is then, or as shall thereafter
become, due and owing under the terms of the Note, the Mortgages and the other
Loan Documents, and to pay any expenses reasonably incurred by Lender in
protecting, preserving, or defending its interest in the Properties or in
connection with the Loan or under any of the Loan Documents, including, without
limitation, all reasonable attorneys' fees and costs, regardless of (i) any
defense, right of set-off or claims which Borrowers may have against Lender or
the holder of the Note and (ii) any defense, right of set-off or claims which
Guarantor may have against Lender or the holder of the Note.
3. Guarantor does hereby waive (i) notice of acceptance of this Guaranty by
Lender and any and all notices and demands of every kind which may be required
to be given by any statute, rule or law, (ii) any defense, right of set-off or
other claim which Borrowers may have against Lender or the holder of the Note
(other than payment of the Indebtedness), and any right to assert any claims
that Guarantor may have against Lender as a defense, right of set-off or other
claim in any action or proceeding by Lender against Borrowers or Guarantor under
any of the Loan Documents, (iii) presentment for payment, demand for payment
(other than as provided for in Paragraph 2 above), notice of nonpayment or
dishonor, protest and notice of protest, diligence in collection and any and all
formalities which otherwise might be legally required to charge Guarantor with
liability, and (iv) any failure by Lender to inform Guarantor of any facts
Lender may now or hereafter know about Borrowers, the Properties, the Loan, or
the transactions contemplated by the Loan Documents, it being understood and
agreed that Lender has no duty so to inform and that Guarantor is fully
responsible for being and remaining informed by the Borrowers of all
circumstances bearing on the existence or creation, or the risk of nonpayment of
the Indebtedness. Credit may be granted or continued from time to time by Lender
to Borrowers without notice to or authorization from Guarantor, regardless of
the financial or other condition of the Borrowers at the time of any such grant
or continuation. Lender shall have no obligation to disclose or discuss with
Guarantor its assessment of the financial condition of Borrowers. Guarantor
acknowledges that no representations of any kind whatsoever have been made by
Lender to Guarantor. No modification or waiver of any of the provisions of this
Guaranty shall be binding upon Lender except as expressly set forth in a writing
duly signed and delivered on behalf of Lender. Guarantor further agree that any
exculpatory language contained in the Loan Agreement, the Note or the Mortgages
shall in no event apply to this Guaranty, and will not prevent Lender from
proceeding against Guarantor to enforce this Guaranty.
4. Guarantor further agrees that Guarantor's liability as guarantor shall
not be impaired or affected by any renewals or extensions which may be made from
time to time, with or without the knowledge or consent of Guarantor of the time
for payment of interest or principal under the Note or by any forbearance or
delay in collecting interest or principal under the Note, or by any waiver by
Lender under the Mortgages or any other Loan Documents, or by Lender's failure
or election not to pursue any other remedies it may have against Borrowers, or
by any change or
<PAGE>
modification in the Loan Agreement, the Note, the Mortgages or any other
Loan Documents, or by the acceptance by Lender of any additional security or any
increase, substitution or change therein, or by the release by Lender of any
security or any withdrawal thereof or decrease therein, or by the application of
payments received from any source to the payment of any obligation other than
the Indebtedness, even though Lender might lawfully have elected to apply such
payments to any part or all of the Indebtedness, it being the intent hereof that
Guarantor shall remain liable as principal for payment of the Indebtedness until
all indebtedness has been paid in full and the other terms, covenants and
conditions of the Loan Agreement, the Mortgages and the other Loan Documents and
this Guaranty have been performed, notwithstanding any act or thing which might
otherwise operate as a legal or equitable discharge of a surety. Guarantor
further understands and agrees that Lender may at any time enter into agreements
with Borrowers to amend and modify the Note, the Loan Agreement, the Mortgages
or the other Loan Documents, or any thereof, and may waive or release any
provision or provisions of the Note, the Loan Agreement, the Mortgages and the
other Loan Documents or any thereof, and, with reference to such instruments,
may make and enter into any such agreement or agreements as Lender and Borrowers
may deem proper and desirable, without in any manner impairing or affecting this
Guaranty or any of Lender's rights hereunder or any of the Guarantor's
obligations hereunder.
5. This is an absolute, present and continuing guaranty of payment and not
of collection. Guarantor agrees that this Guaranty may be enforced by Lender
without the necessity at any time of resorting to or exhausting any other
security or collateral given in connection herewith or with the Note, the Loan
Agreement, the Mortgages or any of the other Loan Documents through foreclosure
proceedings under the Mortgages or otherwise, or resorting to any other
guaranties, and Guarantor hereby waives the right to require Lender to join
Borrowers in any action brought hereunder or to commence any action against or
obtain any judgment against Borrowers or to pursue any other remedy or enforce
any other right. Guarantor further agrees that nothing contained herein or
otherwise shall prevent Lender from pursuing concurrently or successively all
rights and remedies available to it at law and/or in equity or under the Note,
the Loan Agreement, the Mortgages or any other Loan Documents, and the exercise
of any of its rights or the completion of any of its remedies shall not
constitute a discharge of any of Guarantor's obligations hereunder, it being the
purpose and intent of the Guarantor that the obligations of Guarantor hereunder
shall be absolute, independent and unconditional under any and all circumstances
whatsoever. Neither Guarantor's obligations under this Guaranty nor any remedy
for the enforcement thereof shall be impaired, modified, changed or released in
any manner whatsoever by any impairment, modification, change, release or
limitation of the liability of Borrowers under the Loan Agreement, the Note, the
Mortgages or other Loan Documents or by reason of the bankruptcy of any
Borrowers or by reason of any creditor or bankruptcy proceeding instituted by or
against Borrowers. In the event of the foreclosure of the Mortgages and of a
deficiency, Guarantor hereby promises and agrees forthwith to pay the amount of
such deficiency notwithstanding the fact that recovery of said deficiency
against Borrowers would not be allowed by applicable law. This Guaranty shall
continue to be effective or be reinstated (as the case may be) if at any time
payment of all or any part of any sum payable pursuant to the Note, the
Mortgages or any other Loan Document is rescinded or otherwise required to be
returned by the payee upon the insolvency, bankruptcy, or reorganization of the
payor, all as though such payment to Lender had not been made, regardless of
whether Lender contested the order requiring the return of such payment. The
obligations of Guarantor pursuant to the preceding sentence shall survive any
termination, cancellation, or release of this Guaranty.
<PAGE>
6. This Guaranty shall be assignable by Lender to any assignee of the Note.
7. If: (i) this Guaranty, the Note, or any Loan Document is placed in the
hands of an attorney for collection or is collected through any legal
proceeding; (ii) an attorney is retained to represent Lender in any bankruptcy,
reorganization, receivership, or other proceedings affecting creditors' rights
and involving a claim under this Guaranty, the Note, or any Loan Document;
(iii) an attorney is retained to protect or enforce the lien of the Mortgages or
any of the other Loan Documents or to provide advice or other representation
with respect to the Properties or Loan Documents; or (iv) an attorney is
retained to represent Lender in any other proceedings whatsoever in connection
with this Guaranty, the Loan Agreement, the Note, the Mortgages, any of the Loan
Documents, or any property subject thereto, then Guarantor shall pay to Lender
upon demand all reasonable attorney's fees, costs and expenses, including,
without limitation, court costs, filing fees, recording costs, expenses of
foreclosure, title insurance premiums, survey costs, minutes of foreclosure, and
all other costs and expenses incurred in connection therewith (all of which are
referred to herein as "Enforcement Costs"), in addition to all other amounts due
hereunder.
8. The parties hereto intend and believe that each provision in this
Guaranty comports with all applicable local, state and federal laws and judicial
decisions. However, if any provision or provisions, or if any portion of any
provision or provisions, in this Guaranty is found by a court of law to be in
violation of any applicable local, state or federal ordinance, statute, law,
administrative or judicial decision, or public policy, and if such court should
declare such portion, provision or provisions of this Guaranty to be illegal,
invalid, unlawful, void or unenforceable as written, then it is the intent of
all parties hereto that such portion, provision or provisions shall be given
force to the fullest possible extent that they are legal, valid and enforceable,
that the remainder of this Guaranty shall be construed as if such illegal,
invalid, unlawful, void or unenforceable portion, provision or provisions were
not contained therein, and that the rights, obligations and interest of Lender
or the holder of the Note under the remainder of this Guaranty shall continue in
full force and effect.
9. Any indebtedness of Borrowers to Guarantor now or hereafter existing is
hereby subordinated to the Indebtedness. Guarantor agrees that, until the entire
Indebtedness has been paid in full, Guarantor will not seek, accept, or retain
for Guarantor's own account, any payment from Borrowers on account of such
subordinated debt. Any payments to Guarantor on account of such subordinated
debt shall be collected and received by Guarantor in trust for Lender and shall
be paid over to Lender on account of the Indebtedness without impairing or
releasing the obligations of Guarantor hereunder.
<PAGE>
10. Any amounts received by Lender from any source on account of any
indebtedness may be applied by Lender toward the payment of such indebtedness,
and in such order of application, as is provided for payments made by Borrowers
under the Loan Agreement.
11. The Guarantor hereby submits to personal jurisdiction in the State of
Illinois for the enforcement of this Guaranty and waive any and all personal
rights to object to such jurisdiction for the purposes of litigation to enforce
this Guaranty. Guarantor hereby consents to the jurisdiction of either the state
of federal courts in the State of Illinois, in any action, suit, or proceeding
which Lender may at any time wish to file in connection with this Guaranty or
any related matter. Guarantor hereby agrees that an action, suit, or proceeding
to enforce this Guaranty may be brought in any state or federal court in the
State of Illinois and hereby waives any objection which Guarantor may have to
the laying of the venue of any such action, suit, or proceeding in any such
court; provided, however, that the provisions of this Paragraph shall not be
deemed to preclude Lender from filing any such action, suit, or proceeding in
any other appropriate forum.
12. All notices, consents, approvals and requests required or permitted
hereunder or under any other Loan Document shall be given in writing and shall
be effective for all purposes if hand delivered or sent by (a) certified or
registered United States mail, postage prepaid, or (b) expedited prepaid
delivery service, either commercial or United States Postal Service, with proof
of attempted delivery, addressed as follows (or at such other address and person
as shall be designated from time to time by any party hereto, as the case may
be, in a written notice to the other parties hereto in the manner provided for
in this Section):
If to Lender:
Nomura Asset Capital Corporation
Two World Financial Center
Building B
New York, New York 10281
Attention: Barry Funt
with a copy to:
Nomura Asset Capital Client Services LLC
600 East Las Colinas Blvd.
Suite 1300
Irving, Texas 75039
Attention: Legal Department
<PAGE>
with a copy to:
Sonnenschein Nath & Rosenthal
8000 Sears Tower
Chicago, Illinois 60606
Attention: Mark F. Mehlman
If to Guarantor:
Prime Retail, L.P.
100 East Pratt Street, 19th Floor
Baltimore, Maryland 21202
Attention: Steven S. Gothelf
with copies to:
Prime Retail, L.P.
100 East Pratt Street, 19th Floor
Baltimore, Maryland 21202
Attention: C. Alan Schroeder
and to:
Winston & Strawn
35 West Wacker Drive
Chicago, Illinois 60601
Attention: James D. Burton
A notice shall be deemed to have been given: in the case of hand delivery,
at the time of delivery; in the case of registered or certified mail, when
delivered or the first attempted delivery on a Business Day; or in the case of
expedited prepaid delivery, upon the first attempted delivery on a Business Day.
13. Promptly upon the filing thereof, Guarantor shall provide copies of all
registration statements and annual, quarterly, monthly or other reports and any
other public information which the Guarantor or any of its respective
subsidiaries file with the Securities and Exchange Commission and such other
information (including without limitation, financial statements and
non-financial information) as the Lender from time to time reasonably requests.
Together with the quarterly and annual reports required hereunder, Guarantor
shall provide a compliance certificate in form and substance satisfactory to
Lender signed by the Chief Financial Officer or Chief Accounting Officer of the
REIT, showing the calculations and computations necessary to determine
compliance with the covenants contained in Paragraph 14(b) hereof.
<PAGE>
14. During the term of this Guaranty, unless the Lender should otherwise
consent in writing:
(a) The REIT shall at all times cause its common stock to be listed on a
nationally recognized stock exchange, and the REIT shall remain qualified as a
real estate investment trust under the Code.
(b) The REIT shall at all times either directly or indirectly hold 100% of
the general partnership interest in the Operating Partnership.
15. The occurrence of any one or more of the following events shall
constitute an event of default under this Guaranty and under each of the other
Loan Documents:
(a) The breach of any of the terms or provisions of Paragraph 14 of this
Guaranty.
(b) Any representation or warranty made by Guarantor to the Lender under or
in connection with this Guaranty, or any material certificate or information
delivered in connection with this Guaranty or any other Loan Document shall be
materially false on the date as of which made.
(c) The breach by Guarantor of any of the other terms and provisions of
this Guaranty which is not remedied within 15 days after written notice from the
Lender.
16. In order to induce Lender to make the Loan, Guarantor makes the
representations and warranties to Lender set forth in this Paragraph 16.
Guarantor acknowledges that but for the truth and accuracy of the matters
covered by the following representations and warranties, the Lender would not
have agreed to make the Loan.
A. The statements contained in the Recitals to this Guaranty regarding
Guarantor's relationship to Borrowers and to the Properties are true and
correct.
B. Guarantor has been duly organized and is validly existing and in good
standing with requisite power and authority to own its properties and to
transact the businesses in which it is now engaged. Guarantor is duly qualified
to do business and is in good standing in each jurisdiction where it is required
to be so qualified in connection with its properties, businesses and operations.
Guarantor possesses all rights, licenses, permits and authorizations,
governmental or otherwise, necessary to entitle it to own its properties and to
transact the businesses in which it is now engaged.
C. Guarantor has taken all necessary action to authorize the execution,
delivery and performance of this Guaranty and the other Loan Documents to which
it is a party. This Guaranty and such other Loan Documents have been duly
executed and delivered by or on behalf of Guarantor.
<PAGE>
D. Any and all balance sheets, net worth statements, and other financial
data with respect to Guarantor which have heretofore been given to Lender by
Guarantor fairly and accurately present the financial condition of Guarantor as
of the respective dates thereof, and, since the respective dates thereof, there
has been no materially adverse change in the financial condition of Guarantor.
E. The execution, delivery, and performance by Guarantor of this Guaranty
do not and will not contravene or conflict with (i) any existing agreement
between Guarantor (or any affiliate of Guarantor) and the Borrowers, (ii) any
law, order, rule, regulation, writ, injunction, or decree now in effect of any
government, governmental instrumentality or court having jurisdiction over
Guarantor, (iii) any organizational document of Guarantor or (iv) any
contractual restriction binding on or affecting Guarantor or Guarantor's
property or assets.
F. Except as disclosed in writing to Lender, there is no action,
proceeding, or investigation pending or, to the knowledge of Guarantor,
threatened or affecting Guarantor, which is reasonably likely to materially and
adversely affect Guarantor's ability to fulfill Guarantor's obligations under
this Guaranty. There are no judgments or orders for the payment of money
rendered against Guarantor for an amount in excess of $500,000 in any instance
or $1,000,000 in the aggregate, which have been undischarged for a period of ten
(10) or more consecutive days and the enforcement of which is not stayed by
reason of a pending appeal or otherwise. Guarantor is not in default under any
agreements to which Guarantor is a party, which defaults could materially
adversely affect Guarantor's ability to perform its obligations under this
Guaranty.
G. All statements set forth in the Recitals are true and correct.
Guarantor hereby agrees to indemnify and hold Lender free and harmless from
and against all loss, cost, damage, and expense, including attorney's fees and
costs, which Lender may sustain by reason of the inaccuracy or breach of any of
the foregoing representations and warranties as of the date the foregoing
representations and warranties are made and are deemed remade.
17. Guarantor shall, within five business days after receipt thereof,
deliver to Lender copies of any notices of default served on Guarantor pursuant
to the terms of any other agreement to which Guarantor is a party, which
defaults could materially affect Guarantor's obligations to perform their
obligations under this Guaranty.
18. This Guaranty shall be binding upon the successors and assigns of
Guarantor, and shall inure to the benefit of Lender's successors and assigns.
19. This Guaranty shall be construed and enforced under the internal laws
of the State of Illinois.
20. This Guaranty may be executed in two or more counterparts all of which
shall together constitute a single original.
<PAGE>
IN WITNESS WHEREOF, Guarantor has delivered this Guaranty as of the date
first written above.
PRIME RETAIL, L.P.
By: Prime Retail, Inc., its general partner
By:
Name:
Title:
PRIME RETAIL, INC. is signing below to
evidence its agreement to the covenants
contained in Paragraph 14
PRIME RETAIL, INC.
By:___________________________________
Name:________________________________
Title:________________________________
<PAGE>
STATE OF ILLINOIS)
) SS.
COUNTY OF COOK )
I, the undersigned, a Notary Public, in and for said County, in the State
aforesaid, DO HEREBY CERTIFY, that , personally known
to me to be the same person whose name is subscribed to the foregoing
instrument, appeared before me this day in person and acknowledged that he
signed and delivered the said instrument as his own free and voluntary act as
____________ of Prime Retail, Inc., on behalf of said corporation and on behalf
of Prime Retail, L.P., for the uses and purposes therein set forth.
GIVEN under my hand and Notarial Seal, this day of June, 1998.
, Notary Public
My Commission Expires:__________
<PAGE>
EXHIBIT 10.5
GUARANTY
This Guaranty made as of the ____ day of June, 1998, by PRIME RETAIL, L.P.
a Delaware limited partnership ("Guarantor"), to and for the benefit of NOMURA
ASSET CAPITAL CORPORATION, a Delaware corporation, and its successors and
assigns ("Lender").
RECITALS
A. THIRD HORIZON GROUP LIMITED PARTNERSHIP, a Delaware limited partnership,
NEBRASKA CROSSING FACTORY SHOPS, L.L.C., a Delaware limited liability company,
and INDIANA FACTORY SHOPS, L.L.C., a Delaware limited liability company
("Borrowers"), have requested that Lender make a loan to Borrowers in the amount
of $108,205,000.00 (the "Loan"). Lender has agreed to make such loan pursuant to
the terms of that certain Loan Agreement of even date among Borrowers and Lender
(the "Loan Agreement"). All capitalized terms used herein unless otherwise
defined shall have the meaning set forth in the Loan Agreement.
B. Borrowers have executed and delivered to Lender a note of even date in
the principal amount of $108,205,000.00 as evidence of their indebtedness to
Lender (the "Note"). To secure payment of the Note, Borrower has executed and
delivered to Lender the Mortgages and various other Loan Documents.
C. Guarantor will derive benefit from the Loan insofar as the Loan will
facilitate the spinoff from Guarantor of certain of the assets and liabilities
of the Borrowers and the related merger of Guarantor with Horizon/Glen Outlet
Centers, L.P. The execution and delivery of this Guaranty by Guarantor is a
condition precedent to Lender making the Loan.
AGREEMENTS
NOW, THEREFORE, Guarantor, in consideration of the matters described in the
foregoing Recitals, which Recitals are incorporated herein and made a part
hereof, and for other good and valuable consideration, hereby agree as follows:
1. Guarantor absolutely, unconditionally, and irrevocably guarantees to
Lender:
(a) the full and prompt payment of the principal of and interest on the
Note when due, whether at stated maturity, upon acceleration or otherwise, and
at all times thereafter, and the prompt payment of all fees and all other sums
which may now be or may hereafter become due and owing under the Note, the Loan
Agreement, the Mortgages, and the other Loan Documents; and
(b) the payment of all Enforcement Costs (as hereinafter defined in
Paragraph 7 hereof).
<PAGE>
All debts, liabilities, and payment obligations described in
subparagraphs (a) and (b) of this Paragraph 1 are referred to herein as the
"Indebtedness."
Guarantor's liability hereunder for the amounts described in Section 1.a
shall not exceed Twelve Million Two Hundred Five Thousand Dollars
($12,205,000.00) (the "Guaranteed Amount"). The Guaranteed Amount shall be
reduced to Ten Million Dollars ($10,000,000.00) at such time as $2,205,000 of
the principal balance of the Loan, exclusive of any scheduled amortization
payments, has been repaid. Anything in this Guaranty to the contrary
notwithstanding, all payments made upon the indebtedness evidenced by the Note
or secured by the Loan Documents or upon any of the Indebtedness (except
payments from Guarantor's separate funds not derived from the Properties or any
other collateral for the Indebtedness (the "Collateral") made following demand
by Lender under this Guaranty), and the proceeds, rents and avails of the
Properties and the Collateral shall first be deemed applied upon the
unguaranteed portion of such indebtedness until such unguaranteed portion has
been fully paid before any payments upon such indebtedness or any of the
proceeds, rents or avails of the Properties or the Collateral shall be credited
upon the obligation of Guarantor, it being the intention and agreement of
Guarantor that, so long as any part of the unguaranteed portion of such
indebtedness remains unpaid, no payments on such indebtedness shall be
considered in whole or in part satisfaction of the obligations of Guarantor
hereunder if the funds for such payment represent the proceeds, rents or avails
of the Properties or any other Collateral. There shall be no limitation on the
liability of Guarantor for Enforcement Costs.
2. In the event of any default by Borrowers in making payment of the
Indebtedness, as aforesaid, Guarantor agrees, on demand by Lender or the holder
of the Note, to pay all the Indebtedness as is then, or as shall thereafter
become, due and owing under the terms of the Note, the Mortgages and the other
Loan Documents, and to pay any expenses reasonably incurred by Lender in
protecting, preserving, or defending its interest in the Properties or in
connection with the Loan or under any of the Loan Documents, including, without
limitation, all reasonable attorneys' fees and costs, regardless of (i) any
defense, right of set-off or claims which Borrowers may have against Lender or
the holder of the Note and (ii) any defense, right of set-off or claims which
Guarantor may have against Lender or the holder of the Note.
3. Guarantor does hereby waive (i) notice of acceptance of this Guaranty by
Lender and any and all notices and demands of every kind which may be required
to be given by any statute, rule or law, (ii) any defense, right of set-off or
other claim which Borrowers may have against Lender or the holder of the Note
(other than payment of the Indebtedness), and any right to assert any claims
that Guarantor may have against Lender as a defense, right of set-off or other
claim in any action or proceeding by Lender against Borrowers or Guarantor under
any of the Loan Documents, (iii) presentment for payment, demand for payment
(other than as provided for in Paragraph 2 above), notice of nonpayment or
dishonor, protest and notice of protest, diligence in collection and any and all
formalities which otherwise might be legally required to charge Guarantor with
liability, and (iv) any failure by Lender to inform Guarantor of any facts
Lender may now or hereafter know about Borrowers, the Properties, the Loan, or
the transactions contemplated by the Loan Documents, it being understood and
agreed that Lender has no duty so to inform and that Guarantor is fully
responsible for being and remaining informed by the Borrowers of all
circumstances bearing on the existence or creation, or the risk of nonpayment of
the Indebtedness. Credit may be granted or continued from time to time by Lender
to Borrowers without notice to or authorization from Guarantor, regardless of
the financial or other condition of the Borrowers at the time of any such grant
or continuation. Lender shall have no obligation to disclose or discuss with
Guarantor its assessment of the financial condition of Borrowers. Guarantor
acknowledges that no representations of any kind whatsoever have been made by
Lender to Guarantor. No modification or waiver of any of the provisions of this
Guaranty shall be binding upon Lender except as expressly set forth in a writing
duly signed and delivered on behalf of Lender. Guarantor further agree that any
exculpatory language contained in the Loan Agreement, the Note or the Mortgages
shall in no event apply to this Guaranty, and will not prevent Lender from
proceeding against Guarantor to enforce this Guaranty.
<PAGE>
4. Guarantor further agrees that Guarantor's liability as guarantor shall
not be impaired or affected by any renewals or extensions which may be made from
time to time, with or without the knowledge or consent of Guarantor of the time
for payment of interest or principal under the Note or by any forbearance or
delay in collecting interest or principal under the Note, or by any waiver by
Lender under the Mortgages or any other Loan Documents, or by Lender's failure
or election not to pursue any other remedies it may have against Borrowers, or
by any change or modification in the Loan Agreement, the Note, the Mortgages or
any other Loan Documents, or by the acceptance by Lender of any additional
security or any increase, substitution or change therein, or by the release by
Lender of any security or any withdrawal thereof or decrease therein, or by the
application of payments received from any source to the payment of any
obligation other than the Indebtedness, even though Lender might lawfully have
elected to apply such payments to any part or all of the Indebtedness, it being
the intent hereof that Guarantor shall remain liable as principal for payment of
the Indebtedness until all indebtedness has been paid in full and the other
terms, covenants and conditions of the Loan Agreement, the Mortgages and the
other Loan Documents and this Guaranty have been performed, notwithstanding any
act or thing which might otherwise operate as a legal or equitable discharge of
a surety. Guarantor further understands and agrees that Lender may at any time
enter into agreements with Borrowers to amend and modify the Note, the Loan
Agreement, the Mortgages or the other Loan Documents, or any thereof, and may
waive or release any provision or provisions of the Note, the Loan Agreement,
the Mortgages and the other Loan Documents or any thereof, and, with reference
to such instruments, may make and enter into any such agreement or agreements as
Lender and Borrowers may deem proper and desirable, without in any manner
impairing or affecting this Guaranty or any of Lender's rights hereunder or any
of the Guarantor's obligations hereunder.
5. This is an absolute, present and continuing guaranty of payment and not
of collection. Guarantor agrees that this Guaranty may be enforced by Lender
without the necessity at any time of resorting to or exhausting any other
security or collateral given in connection herewith or with the Note, the Loan
Agreement, the Mortgages or any of the other Loan Documents through foreclosure
proceedings under the Mortgages or otherwise, or resorting to any other
guaranties, and Guarantor hereby waives the right to require Lender to join
Borrowers in any action brought hereunder or to commence any action against or
<PAGE>
obtain any judgment against Borrowers or to pursue any other remedy or
enforce any other right. Guarantor further agrees that nothing contained herein
or otherwise shall prevent Lender from pursuing concurrently or successively all
rights and remedies available to it at law and/or in equity or under the Note,
the Loan Agreement, the Mortgages or any other Loan Documents, and the exercise
of any of its rights or the completion of any of its remedies shall not
constitute a discharge of any of Guarantor's obligations hereunder, it being the
purpose and intent of the Guarantor that the obligations of Guarantor hereunder
shall be absolute, independent and unconditional under any and all circumstances
whatsoever. Neither Guarantor's obligations under this Guaranty nor any remedy
for the enforcement thereof shall be impaired, modified, changed or released in
any manner whatsoever by any impairment, modification, change, release or
limitation of the liability of Borrowers under the Loan Agreement, the Note, the
Mortgages or other Loan Documents or by reason of the bankruptcy of any
Borrowers or by reason of any creditor or bankruptcy proceeding instituted by or
against Borrowers. In the event of the foreclosure of the Mortgages and of a
deficiency, Guarantor hereby promises and agrees forthwith to pay the amount of
such deficiency notwithstanding the fact that recovery of said deficiency
against Borrowers would not be allowed by applicable law. This Guaranty shall
continue to be effective or be reinstated (as the case may be) if at any time
payment of all or any part of any sum payable pursuant to the Note, the
Mortgages or any other Loan Document is rescinded or otherwise required to be
returned by the payee upon the insolvency, bankruptcy, or reorganization of the
payor, all as though such payment to Lender had not been made, regardless of
whether Lender contested the order requiring the return of such payment. The
obligations of Guarantor pursuant to the preceding sentence shall survive any
termination, cancellation, or release of this Guaranty.
6. This Guaranty shall be assignable by Lender to any assignee of the Note.
7. If: (i) this Guaranty is placed in the hands of an attorney for
collection or is collected through any legal proceeding; (ii) an attorney is
retained to represent Lender in any bankruptcy, reorganization, receivership, or
other proceedings affecting creditors' rights and involving a claim under this
Guaranty; or (iii) an attorney is retained to represent Lender in any other
proceedings whatsoever in connection with this Guaranty, then Guarantor shall
pay to Lender upon demand all reasonable attorney's fees, costs and expenses,
including, without limitation, court costs, filing fees, recording costs,
expenses of foreclosure, title insurance premiums, survey costs, minutes of
foreclosure, and all other costs and expenses incurred in connection therewith
(all of which are referred to herein as "Enforcement Costs"), in addition to all
other amounts due hereunder.
8. The parties hereto intend and believe that each provision in this
Guaranty comports with all applicable local, state and federal laws and judicial
decisions. However, if any provision or provisions, or if any portion of any
provision or provisions, in this Guaranty is found by a court of law to be in
violation of any applicable local, state or federal ordinance, statute, law,
administrative or judicial decision, or public policy, and if such court should
declare such portion, provision or provisions of this Guaranty to be illegal,
invalid, unlawful, void or unenforceable as written, then it is the intent of
all parties hereto that such portion, provision or provisions shall be given
force to the fullest possible extent that they are legal, valid and enforceable,
that the remainder of this Guaranty shall be construed as if such illegal,
invalid, unlawful,
<PAGE>
void or unenforceable portion, provision or provisions were not contained
therein, and that the rights, obligations and interest of Lender or the holder
of the Note under the remainder of this Guaranty shall continue in full force
and effect.
9. Any indebtedness of Borrowers to Guarantor now or hereafter existing is
hereby subordinated to the Indebtedness. Guarantor agrees that, until the entire
Indebtedness has been paid in full, Guarantor will not seek, accept, or retain
for Guarantor's own account, any payment from Borrowers on account of such
subordinated debt. Any payments to Guarantor on account of such subordinated
debt shall be collected and received by Guarantor in trust for Lender and shall
be paid over to Lender on account of the Indebtedness without impairing or
releasing the obligations of Guarantor hereunder.
10. Any amounts received by Lender from any source on account of any
indebtedness may be applied by Lender toward the payment of such indebtedness,
and in such order of application, as is provided for payments made by Borrowers
under the Loan Agreement.
11. The Guarantor hereby submits to personal jurisdiction in the State of
Illinois for the enforcement of this Guaranty and waive any and all personal
rights to object to such jurisdiction for the purposes of litigation to enforce
this Guaranty. Guarantor hereby consents to the jurisdiction of either the state
of federal courts in the State of Illinois, in any action, suit, or proceeding
which Lender may at any time wish to file in connection with this Guaranty or
any related matter. Guarantor hereby agrees that an action, suit, or proceeding
to enforce this Guaranty may be brought in any state or federal court in the
State of Illinois and hereby waives any objection which Guarantor may have to
the laying of the venue of any such action, suit, or proceeding in any such
court; provided, however, that the provisions of this Paragraph shall not be
deemed to preclude Lender from filing any such action, suit, or proceeding in
any other appropriate forum.
12. All notices, consents, approvals and requests required or permitted
hereunder or under any other Loan Document shall be given in writing and shall
be effective for all purposes if hand delivered or sent by (a) certified or
registered United States mail, postage prepaid, or (b) expedited prepaid
delivery service, either commercial or United States Postal Service, with proof
of attempted delivery, addressed as follows (or at such other address and person
as shall be designated from time to time by any party hereto, as the case may
be, in a written notice to the other parties hereto in the manner provided for
in this Section):
<PAGE>
If to Lender:
Nomura Asset Capital Corporation
Two World Financial Center
Building B
New York, New York 10281
Attention: Barry Funt
with a copy to:
Nomura Asset Capital Client Services LLC
600 East Las Colinas Blvd.
Suite 1300
Irving, Texas 75039
Attention: Legal Department
with a copy to:
Sonnenschein Nath & Rosenthal
8000 Sears Tower
Chicago, Illinois 60606
Attention: Mark F. Mehlman
If to Guarantor:
Prime Retail, L.P.
100 East Pratt Street, 19th Floor
Baltimore, Maryland 21202
Attention: Steven S. Gothelf
with copies to:
Prime Retail, L.P.
100 East Pratt Street, 19th Floor
Baltimore, Maryland 21202
Attention: C. Alan Schroeder
and to:
Winston & Strawn
35 West Wacker Drive
Chicago, Illinois 60601
Attention: James D. Burton
<PAGE>
A notice shall be deemed to have been given: in the case of hand delivery,
at the time of delivery; in the case of registered or certified mail, when
delivered or the first attempted delivery on a Business Day; or in the case of
expedited prepaid delivery, upon the first attempted delivery on a Business Day.
13. Promptly upon the filing thereof, Guarantor shall provide copies of all
registration statements and annual, quarterly, monthly or other reports and any
other public information which the Guarantor or any of its respective
subsidiaries file with the Securities and Exchange Commission and such other
information (including without limitation, financial statements and
non-financial information) as the Lender from time to time reasonably requests.
Together with the quarterly and annual reports required hereunder, Guarantor
shall provide a compliance certificate in form and substance satisfactory to
Lender signed by the Chief Financial Officer or Chief Accounting Officer of the
REIT, showing the calculations and computations necessary to determine
compliance with the covenants contained in Paragraph 14(b) hereof.
14. During the term of this Guaranty, unless the Lender should otherwise
consent in writing:
(a) The REIT shall at all times cause its common stock to be listed on a
nationally recognized stock exchange, and the REIT shall remain qualified as a
real estate investment trust under the Code.
(b) The REIT shall at all times either directly or indirectly hold 100% of
the general partnership interest in the Operating Partnership.
15. The occurrence of any one or more of the following events shall
constitute an event of default under this Guaranty and under each of the other
Loan Documents:
(a) The breach of any of the terms or provisions of Paragraph 14 of this
Guaranty.
(b) Any representation or warranty made by Guarantor to the Lender under or
in connection with this Guaranty, or any material certificate or information
delivered in connection with this Guaranty or any other Loan Document shall be
materially false on the date as of which made.
(c) The breach by Guarantor of any of the other terms and provisions of
this Guaranty which is not remedied within 15 days after written notice from the
Lender.
16. In order to induce Lender to make the Loan, Guarantor makes the
representations and warranties to Lender set forth in this Paragraph 16.
Guarantor acknowledges that but for the truth and accuracy of the matters
covered by the following representations and warranties, the Lender would not
have agreed to make the Loan.
<PAGE>
A. The statements contained in the Recitals to this Guaranty regarding
Guarantor's relationship to Borrowers and to the Properties are true and
correct.
B. Guarantor has been duly organized and is validly existing and in good
standing with requisite power and authority to own its properties and to
transact the businesses in which it is now engaged. Guarantor is duly qualified
to do business and is in good standing in each jurisdiction where it is required
to be so qualified in connection with its properties, businesses and operations.
Guarantor possesses all rights, licenses, permits and authorizations,
governmental or otherwise, necessary to entitle it to own its properties and to
transact the businesses in which it is now engaged.
C. Guarantor has taken all necessary action to authorize the execution,
delivery and performance of this Guaranty and the other Loan Documents to which
it is a party. This Guaranty and such other Loan Documents have been duly
executed and delivered by or on behalf of Guarantor.
D. Any and all balance sheets, net worth statements, and other financial
data with respect to Guarantor which have heretofore been given to Lender by
Guarantor fairly and accurately present the financial condition of Guarantor as
of the respective dates thereof, and, since the respective dates thereof, there
has been no materially adverse change in the financial condition of Guarantor.
E. The execution, delivery, and performance by Guarantor of this Guaranty
do not and will not contravene or conflict with (i) any existing agreement
between Guarantor (or any affiliate of Guarantor) and the Borrowers, (ii) any
law, order, rule, regulation, writ, injunction, or decree now in effect of any
government, governmental instrumentality or court having jurisdiction over
Guarantor, (iii) any organizational document of Guarantor or (iv) any
contractual restriction binding on or affecting Guarantor or Guarantor's
property or assets.
F. Except as disclosed in writing to Lender, there is no action,
proceeding, or investigation pending or, to the knowledge of Guarantor,
threatened or affecting Guarantor, which is reasonably likely to materially and
adversely affect Guarantor's ability to fulfill Guarantor's obligations under
this Guaranty. There are no judgments or orders for the payment of money
rendered against Guarantor for an amount in excess of $500,000 in any instance
or $1,000,000 in the aggregate, which have been undischarged for a period of ten
(10) or more consecutive days and the enforcement of which is not stayed by
reason of a pending appeal or otherwise. Guarantor is not in default under any
agreements to which Guarantor is a party, which defaults could materially
adversely affect Guarantor's ability to perform its obligations under this
Guaranty.
G. All statements set forth in the Recitals are true and correct.
<PAGE>
Guarantor hereby agrees to indemnify and hold Lender free and harmless from
and against all loss, cost, damage, and expense, including attorney's fees and
costs, which Lender may sustain by reason of the inaccuracy or breach of any of
the foregoing representations and warranties as of the date the foregoing
representations and warranties are made and are deemed remade.
17. This Guaranty and the obligations of Guarantor hereunder shall
terminate if at any time Horizon Group Properties, Inc. or Horizon Group
Properties, L.P. completes an offering of at least $50,000,000 of public equity
or private equity from one or more investors approved by Lender (such approval
not to be unreasonably withheld ) and in connection therewith, partially prepays
the Loan by at least $50,000,000.
18. Guarantor shall, within five business days after receipt thereof,
deliver to Lender copies of any notices of default served on Guarantor pursuant
to the terms of any other agreement to which Guarantor is a party, which
defaults could materially affect Guarantor's obligations to perform their
obligations under this Guaranty.
19. This Guaranty shall be binding upon the successors and assigns of
Guarantor, and shall inure to the benefit of Lender's successors and assigns.
20. This Guaranty shall be construed and enforced under the internal laws
of the State of Illinois.
21. This Guaranty may be executed in two or more counterparts all of which
shall together constitute a single original.
[Remainder of page left blank]
<PAGE>
IN WITNESS WHEREOF, Guarantor has delivered this Guaranty as of the date
first written above.
PRIME RETAIL, L.P.
By: Prime Retail, Inc., its general partner
By: _______________________________________
Name: _______________________________________
Title: _______________________________________
PRIME RETAIL, INC. is signing below to
evidence its agreement to the covenants
contained in Paragraph 14
PRIME RETAIL, INC.
By:___________________________________
Name:________________________________
Title:________________________________
<PAGE>
STATE OF ILLINOIS)
) SS.
COUNTY OF COOK )
I, the undersigned, a Notary Public, in and for said County, in the State
aforesaid, DO HEREBY CERTIFY, that , personally known
to me to be the same person whose name is subscribed to the foregoing
instrument, appeared before me this day in person and acknowledged that he
signed and delivered the said instrument as his own free and voluntary act as
____________ of Prime Retail, Inc., on behalf of said corporation and on behalf
of Prime Retail, L.P., for the uses and purposes therein set forth.
GIVEN under my hand and Notarial Seal, this day of June, 1998.
_______________________
, Notary Public
My Commission Expires:__________
EXHIBIT 10.6
GUARANTY AND INDEMNITY AGREEMENT
THIS AGREEMENT (this "Agreement") is entered into as of this 15th day of
June, 1998 by and among Horizon Group Properties, Inc., a Maryland corporation
("HGP"), Horizon Group Properties, L.P. a Delaware limited partnership ("HGP
LP"), Prime Retail, Inc., a Maryland corporation ("Prime"), and Prime Retail,
L.P., a Delaware limited partnership ("Prime LP").
Recitals:
A. Certain affiliates of HGP and HGP LP have borrowed funds pursuant to
that certain Loan Agreement dated as of June 15, 1998 (as amended from time to
time in accordance with the terms thereof and hereof, the "Loan Agreement")
among Indiana Factory Shops, L.L.C., Nebraska Crossing Factory Shops, L.L.C.,
and Third Horizon Group Limited Partnership (collectively, the "Borrowers") and
Nomura Asset Capital Corporation, a Delaware corporation (the "Lender").
B. Pursuant to that certain Guaranty dated as of June 15, 1998 (as amended
from time to time in accordance with the terms thereof (the "Guaranty"), Prime
LP has agreed, jointly and severally, to guarantee certain obligations arising
under the Loan Documents.
C. Prime LP has caused certain funds to be deposited with the Lender (or
its agent) pursuant to the Loan Agreement for the benefit of the Borrowers.
D. Prime LP, as the successor to Horizon/Glen Outlet Centers Limited
Partnership ("Horizon/Glen LP"), is jointly and severally liable with HGP for
any and all obligations arising under (i) that certain promissory note by
Horizon/Glen LP in favor of First of America Bank - Michigan, N.A. ("First of
America") dated December 28, 1995 in the original principal amount of $2,800,000
and (ii) that certain promissory note by Horizon/Glen LP in favor of First of
America dated December 28, 1995 in the original principal amount of $650,000
(collectively, the promissory notes described in (i) and (ii) above, as same may
be amended from time to time, shall be referred to, together with any other
documents or instruments executed and/or delivered in connection with or
otherwise related to such notes (collectively, the "First of America Loan
Documents").
E. Pursuant to that certain Reaffirmation of Guaranty dated as of June 15,
1998 (the "LaSalle Guaranty" and collectively with the Guaranty, the
"Guarantees"), Prime LP, as the successor to Horizon/Glen LP, has reaffirmed its
guaranty of the obligations of MG Patchogue II Limited Partnership ("MG
Patchogue II") arising under that certain Loan Agreement dated December 23, 1997
between MG Patchogue and LaSalle National Bank (collectively, and as the same
may be amended from time to time, together with any other documents or
instruments executed and/or delivered in connection with or otherwise related to
such agreement, the "LaSalle Loan Documents").
F. Prime LP, as the successor to Horizon/Glen LP, may have certain
continuing obligations for liabilities arising under (i) that certain promissory
note by MG Patchogue Limited Partnership
<PAGE>
("MG Patchogue") II in favor of Key Bank, N.A. dated August 23, 1991 in the
original principal amount of $550,000 and (ii) that certain Building Loan Note
by MG Patchogue in favor of Key Bank, N.A. dated August 23, 1991 in the original
principal amount of $11,000,000 (collectively, the notes described in (i) and
(ii) above, as the same may be amended from time to time, shall be referred to,
together with any other documents or instruments executed and or delivered in
connection with or otherwise related to such notes, the "ULICO Loan Documents").
G. Prime LP, as the successor to Horizon/Glen LP, is subject to certain
obligations under that certain letter agreement dated May 29, 1998 (the "PVH
Letter") among Horizon/Glen LP, various affiliates of Horizon/Glen LP and
Philips Van Heusen Corporation, the satisfaction of which will inure to the
benefit of HGP and HGP LP.
H. In consideration of the agreement of Prime Retail and Prime LP to
provide the foregoing accommodations, HGP and HGP LP, jointly and severally,
have agreed to make the undertakings contemplated by this Agreement for the
benefit of Prime and Prime LP.
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE ONE
DEFINITIONS
Capitalized terms used herein and not otherwise defined shall have the
meanings assigned to such terms in the Loan Agreement.
ARTICLE TWO
REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties of HGP and HGP LP. In order to induce
Prime Retail and Prime LP to enter into the Guaranty and this Agreement, HGP and
HGP LP jointly and severally represent and warrant, as of the date hereof, that:
(a) HGP is a Maryland corporation duly organized, validly existing and in
good standing under the laws of the state of its organization. HGP LP is a
Delaware limited partnership duly organized, validly existing and in good
standing under the laws of the state of its organization. Each of HGP and HGP LP
is qualified to do business and is in good standing under the laws of each
jurisdiction in which the nature of its business requires it to be so qualified,
(ii) has full power to own and lease its properties and to conduct its business
as
<PAGE>
now being conducted and as contemplated to be conducted in the future, and
(iii) has full power and authority and legal right, has taken all necessary
corporate and partnership action, as applicable, and has obtained all necessary
consents and approvals required by applicable law to permit it to execute,
deliver and perform its obligations under this Agreement. This Agreement has
been duly and validly authorized, executed and delivered by each of HGP and HGP
LP, and constitutes the legal, valid and binding obligations of each of HGP and
HGP LP, enforceable against each of HGP and HGP LP in accordance with its terms,
subject to applicable bankruptcy, insolvency, reorganization, moratorium and
similar laws affecting creditors rights generally, and to general principles of
equity.
(b) The execution, delivery and performance of this Agreement by each of
HGP and HGP LP do not (i) conflict with or violate the Amended and Restated
Articles of Incorporation or other charter documents or By-laws, limited
partnership agreement or other organizational documents, as the case may be, of
HGP or HGP LP, (ii) contravene or conflict with any law, statute, rule, or
regulation applicable to HGP or HGP LP, (iii) contravene or conflict with,
result in any breach of, or constitute a default under, any material agreement
or instrument binding on HGP or HGP LP, or to which any of their respective
properties or assets are subject, (iv) result in or require the creation or
imposition of any lien whatsoever upon any of the properties or assets of HGP or
HGP LP (other than the liens arising pursuant to this Agreement or any other
documents or instruments required or contemplated by this Agreement), or (vi)
require any approval of stockholders or partners or any approval or consent of
any Person under any agreement or instrument binding on HGP or HGP LP or to
which any of their respective properties or assets are subject which has not
already been obtained.
(c) To the best knowledge of HGP and HGP LP, no Default or Event of Default
has occurred and is continuing.
ARTICLE THREE
GUARANTY FEE
HGP and HGP LP, jointly and severally, agree to pay Prime LP an annual fee
of $400,000 which shall accrue from the date hereof until the date of the
termination and unconditional release of any and all obligations under the
Guaranty and be payable in equal quarterly installments in arrears on each March
31, June 30, September 30 and December 31, commencing June 30, 1998 (and on the
date of termination and release).
<PAGE>
ARTICLE FOUR
COVENANTS RELATING TO GUARANTEES
Each of HGP and HGP LP covenants and agrees with Prime Retail and Prime LP
as follows until the termination and unconditional release of any and all
obligations of Prime and Prime LP under the Guarantees, the First of America
Loan Documents and the ULICO Loan Documents.
4.1 Deliveries under Loan Documents. HGP will deliver copies to Prime LP of
any notices or other information delivered or received by HGP or HGP LP under
the Loan Documents, the First of America Loan Documents, the LaSalle Loan
Documents and the ULICO Loan Documents promptly following the delivery or
receipt of such notices or information. HGP and HGP LP will also provide to
Prime Retail and Prime LP such other data and information (financial and
otherwise) as Prime Retail or Prime LP, from time to time, may reasonably
request bearing upon or related to the financial condition, results of
operations and credit worthiness of HGP and HGP LP.
4.2 Amendments. Neither HGP nor HGP LP will amend, modify, grant, or permit
the amendment, modification, termination or grant of, or any waiver under (or
consent to, or permit or suffer to occur any action or omission which results
in, or is equivalent to, an amendment, modification, or grant of a waiver under)
the Loan Documents, the First of American Loan Documents, the LaSalle Loan
Documents or the ULICO Loan Documents without the prior written consent of Prime
Retail.
4.3 Refinancings and Releases.
(a) HGP and HGP LP hereby agree to use commercially reasonable efforts to
obtain the release of Prime and Prime LP from any and all obligations under the
First of America Loan Documents and the ULICO Loan Documents as promptly as
practicable.
(b) HGP and HGP LP hereby agree to use commercially reasonable efforts to
refinance the obligations under the LaSalle Loan Documents and obtain the
release of the LaSalle Guaranty as promptly as possible following the date
hereof. Without limiting the foregoing, HGP and HGP LP agree to use commercially
reasonable efforts to cause the properties pledged as collateral under the
LaSalle Loan Documents to be released therefrom and pledged as additional
collateral under a loan agreement with Nomura Asset Capital Corporation under
the terms contemplated by the original commitment letter relating to the Loan
Agreement
4.4 Application of Excess Proceeds. HGP and HGP LP hereby agree to apply or
to cause their subsidiaries to apply any Excess Proceeds to permanently reduce
indebtedness with respect to which Prime or Prime LP is or may be liable as a
guarantor, co-obligor or otherwise. "Excess Proceeds" shall mean the aggregate
amount of net cash proceeds (after transaction costs and expenses) received by
HGP or any of its subsidiaries, including HGP LP, with respect to (i) any sale,
transfer or other disposition of HGPs outlet center in Algondones, New Mexico
or (ii) the issuance of any equity interest; provided, however, that "Excess
Proceeds" shall not include any such proceeds applied to make mandatory payments
in respect of any indebtedness of HGP or HGP LP.
<PAGE>
ARTICLE FIVE
REMITTANCE OF FUNDS
5.1 Remittance. In accordance with Article VII of the Loan Agreement, funds
have been deposited (the "Closing Deposit") with the Lender (or its agent) on
the Closing Date for purposes of funding the Required Repair Fund and the Tax
and Insurance Escrow Fund (each as defined in the Loan Agreement and
collectively, the "Funds"). HGP and HGP LP hereby agree, jointly and severally,
to remit to Prime LP, promptly upon receipt, any and all monies released,
returned or disbursed to the Borrowers from the Funds and not otherwise required
by the Loan Agreement to be used to satisfy the obligations for which the Funds
have been established; provided, however, that in no event shall the aggregate
amount of funds so remitted to Prime LP (together with the amount paid to Prime
LP pursuant to the following sentence) exceed the amount of the Closing Deposit.
Without limiting the foregoing, HGP and HGP LP hereby agree, jointly and
severally, to pay to Prime on the first anniversary date of the Closing Date an
amount in cash equal to the amount, if any, by which the aggregate amount of
funds theretofore remitted to Prime LP from the Required Repair Fund is less
than $303,736.
ARTICLE SIX
REIMBURSEMENT OF PVH PAYMENTS
6.1 Reimbursement. HGP and HGP LP jointly and severally agree to reimburse
Prime LP, upon demand, for 50% of any payments made by Prime LP pursuant to
paragraph (5) of the PVH Letter; provided, however, that such reimbursement
obligation shall not apply with respect to the payment due pursuant to such
paragraph (5) upon the closing of the merger between Prime LP and Horizon/Glen
LP.
ARTICLE SEVEN
INDEMNITY
<PAGE>
7.1 Indemnity. HGP and HGP LP jointly and severally agree to indemnify,
defend, protect and hold Prime Retail and Prime LP and each of the their
respective officers, directors and affiliates (collectively, the "Indemnified
Parties") harmless from and against, and to pay within ten (10) days after
demand, any and all claims, damages, losses, liabilities, judgments, costs and
expenses of any kind or nature whatsoever which the Indemnified Parties may
incur or suffer by reason of, in connection with, or by virtue of any breach or
violation of this Agreement by HGP or HGP LP or by reason of the execution,
delivery or performance of, this Agreement, the Guaranty or any other credit
enhancement relating to the Loan Documents, the First of America Loan Documents,
or the LaSalle Loan Documents or the ULICO Loan Documents including, without
limitation, the reasonable fees and expenses of counsel for the Indemnified
Parties with respect thereto. Promptly after receipt by the Indemnified Parties
of notice of the commencement, or threatened commencement, of any action subject
to the indemnities contained in this Section, the Indemnified Parties shall
promptly notify HGP thereof, provided, however, that the failure of any
Indemnified Party so to notify HGP will not affect the obligation of HGP and HGP
LP to indemnify the Indemnified Parties with respect to such actions or any
other action pursuant to this Section except to the extent such obligation shall
have been incurred solely and as a direct consequence of such failure. The
obligations of HGP and HGP LP under this Section shall survive forever,
regardless of the termination of this Agreement or the payment in full of all of
HGP and HGP LP's obligations hereunder. To the extent that the undertaking to
indemnify, defend, protect and hold harmless set forth herein may be
unenforceable as violative of any law or public policy, HGP and HGP LP agree to
pay the maximum portion which is permitted to be paid under applicable law. Any
amounts unpaid following demand pursuant to this Section shall accrue interest
at a rate of 12% per annum.
Notwithstanding the foregoing, in the event the Chief Financial Officer of
HGP shall deliver a written notice (the "Deferral Notice") to Prime LP affirming
that neither HGP nor HGP LP have the liquidity or financial resources to satisfy
any demand for indemnity arising pursuant to this Section 7.1 on or prior to
September 15, 1998, the obligation to satisfy such demand shall be deferred to a
date not later than December 31, 1998; provided that any obligation or
obligations so deferred shell continue to accrue interest at the rate indicated
above.
ARTICLE EIGHT
MISCELLANEOUS
8.1 Modification of this Agreement. No amendment, modification or waiver of
any provision of this Agreement shall be effective unless the same shall be in
writing and signed by Prime, Prime LP, HGP and HGP LP. Any such waiver or
consent shall be effective only in the specific instance and for the purpose for
which given.
8.2 Waiver of Rights by Prime Retail and Prime Retail LP. No course of
dealing or failure or delay on the part of Prime Retail or Prime LP in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall a single or partial exercise thereof preclude any other or
further exercise or the exercise of any other right or privilege. The rights of
Prime Retail and Prime LP under this Agreement are cumulative and not exclusive
of any rights or remedies which Prime Retail or Prime LP would otherwise have,
including, without limitation, any rights of subrogation.
<PAGE>
8.3 Severability. In case any one or more of the provisions contained in
this Agreement should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby. The parties shall
endeavor in good faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.
8.4 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF MARYLAND, REGARDLESS OF THE LAWS THAT
MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICT OF LAWS THEREOF.
8.5 Notices
All notices or other communications required or permitted hereunder shall
be (i) in writing and shall be deemed to be given (A) when received, if
delivered in person, (B) three Business days after deposit in a receptacle of
the United States mail as registered or certified mail, postage prepaid, (C) the
Business Day after notice on which the party to whom such notice is addressed
refuses delivery by mail or by private courier service and (ii) addressed as
follows:
If to HGP or HGP LP Horizon Group Properties, Inc.
5000 Hakes Drive
Norton Shores, MI 49411
Attn: President
with a copy to: Winston & Strawn
35 W. Wacker Drive
Chicago, IL 60601
Attn: Wayne D. Boberg
If to Prime Retail or Prime Retail, Inc.
Prime Retail LP 100 East Pratt Street
19th Floor
Baltimore, MD 21202
Attn: C. Alan Schroeder
<PAGE>
with a copy to: Winston & Strawn
35 W. Wacker Drive
Chicago, IL 60601
Attn: Steven J. Gavin
8.6 Waiver of Offset and Counterclaim. HGP and HGP LP hereby waive any and
all rights of offset or counterclaim which HGP and HGP LP may otherwise have
against Prime and Prime LP in connection with the enforcement of their rights
hereunder.
8.7 Joint and Several Liability. The obligations of HGP and HGP LP
hereunder shall be joint and several. Neither Prime Retail nor Prime LP shall
not obligated to exercise any right or take any action against either HGP or HGP
LP prior to the enforcement of its rights against the other.
8.8 Enforcement. The parties agree that irreparable damage would occur in
the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any federal court located in
Maryland this being in addition to any other remedy to which they are entitled
at law or in equity. In addition, each of the parties hereto (a) consents to
submit itself (without making such submission exclusive) to the personal
jurisdiction of any federal court located in Maryland in the event any dispute
arises out of this Agreement or any of the transactions contemplated by this
Agreement and (b) agrees that it will not attempt to deny or defeat such
personal jurisdiction by motion or other request for leave from any such court.
[signature page follows]
<PAGE>
IN WITNESS WHEREOF the parties hereto have executed this instrument as of
the date and year first above written.
HORIZON GROUP PROPERTIES, INC.
By: /s/ Gary J. Skoien
Its: Chief Executive Officer and President
HORIZON GROUP PROPERTIES, L.P.
By: HORIZON GROUP PROPERTIES, INC.
By: /s/ Gary J. Skoien
Its:Chief Executive Officer and President
PRIME RETAIL, INC.
By: /s/ C. Alan Schroeder
Its: Executive Vice President, General Counsel
and Secretary
PRIME RETAIL, L.P.
By: PRIME RETAIL, INC.
By: /s/ C. Alan Schroeder
Its:Executive Vice President, General Counsel
and Secretary
CONTRIBUTION AGREEMENT, dated as of June 15, 1998 (this "Agreement"), by
and among Horizon Group, Inc., a Michigan corporation ("Horizon"), Sky Merger
Corp., a Maryland corporation ("Sky Merger"), Horizon/Glen Outlet Centers
Limited Partnership, a Delaware limited partnership ("Horizon Partnership"),
Horizon Group Properties, Inc., a Maryland corporation ("HGP"), and Horizon
Group Properties, L.P., a Delaware limited partnership ("HGP LP").
RECITALS
A. The Merger Transactions. Prime Retail, Inc., a Maryland corporation
("Prime"), Prime Retail, L.P., a Delaware limited partnership ("Prime
Partnership") and the parties hereto have entered into an Amended and Restated
Agreement and Plan of Merger, dated as of February 1, 1998 (the "Merger
Agreement"), providing for, among other things, (i) the merger of Horizon
Partnership with and into Prime Partnership, with Prime Partnership as the
surviving partnership (the "Partnership Merger"), (ii) the reincorporation of
Horizon as a Maryland corporation through the merger of Horizon with and into
Sky Merger, with Sky Merger as the surviving corporation (the
"Horizon/Subsidiary Merger"), and (iii) the merger of Prime with and into Sky
Merger, with Sky Merger as the surviving corporation (the "Prime/Horizon
Merger") (the Partnership Merger, the Horizon/Subsidiary Merger and the
Prime/Horizon Merger being, collectively, the "Mergers"). Pursuant to the
foregoing, Sky Merger will become subject to all of the rights and obligations
of Horizon under this Agreement, and Prime Partnership will become subject to
all of the rights and obligations of Horizon Partnership under this Agreement.
B. The Contribution. Immediately prior to the Partnership Merger, Horizon
and Horizon Partnership expect to contribute the Contributed Assets and the
Contributed Business (each as hereinafter defined) to HGP and HGP LP as a
capital contribution, and to cause HGP LP to assume the Assumed Liabilities (as
hereinafter defined) (the "Contribution").
C. Purpose. The purpose of the Contribution is to facilitate the Mergers by
providing for the transfer to HGP LP and/or HGP of certain properties,
businesses and operations which Prime and Prime Partnership are unwilling to
acquire pursuant to the Merger Agreement. This Agreement sets forth or provides
for certain agreements among the parties hereto in connection with such
transfer.
D. Successor to Horizon. Upon completion of the Prime/Horizon Merger, the
name of Sky Merger Corp. will be changed to "Prime Retail, Inc." and Prime, as
successor to Horizon, shall succeed to and become the beneficiary of all rights
of Sky Merger Corp. and Horizon under this Agreement.
NOW THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, the
parties hereto hereby agree as follows:
<PAGE>
ARTICLE I
DEFINITIONS
I.1 Definitions. As used in this Agreement, the following terms shall have
the following respective meanings (capitalized terms used but not defined herein
shall have the respective meanings ascribed thereto in the Merger Agreement):
"Action" shall mean any suit, claim, action, arbitration, inquiry,
proceeding or investigation by or before any court, arbitral tribunal,
administrative agency or commission or other governmental, regulatory or
administrative agPncy or commission.
"Assumed Liabilities" shall mean the Liabilities of Initial Horizon
Partnership Group which are PPnot Retained Liabilities, and which arise from the
ownership or operation of the Contributed Assets and shall include, without
limitation, (i) all obligations to indemnify present and former officers and
directors of Initial Horizon Partnership Group under certificates or articles of
incorporation, by-laws, partnership agreements, employment agreements,
indemnification agreements or otherwise, for any matter occurring after the
Prime/Horizon Merger Effective Time, (ii) all Liabilities relating to the loans
described on the Schedule of Debt, and (iii) all leases (whether as lessor,
lessee, sublessee, sublessor or otherwise) and related contracts, including
capitalized leases and land contracts and service contracts, relating to the
Contributed Assets.
"Contributed Assets" shall mean, collectively, (i) all business, assets,
properties, interests in property and rights of Initial Horizon Partnership
Group primarily related to the ownership and operation of the retail outlet
centers listed on Schedule 1.1(a) hereto, including but not limited to, all
capital stock, partnership interests and membership interests of Horizon and
Horizon Partnership in MG Long Island Limited Partnership, a Virginia limited
partnership; MG Patchogue Limited Partnership, a District of Columbia limited
partnership; MG Patchogue II Limited Partnership, a Virginia limited
partnership; Third HGI, Inc., a Delaware corporation; Third HGI, L.L.C., a
Delaware limited liability company; Algondones Outlet L.L.C., a Delaware limited
liability company and Third Horizon Group Limited Partnership, a Delaware
limited partnership; (ii) the Contributed Proprietary Name Rights (as
hereinafter defined); (iii) the capital stock of HGI Management Corp., a
Michigan corporation, and the rights to acquire any capital stock of such entity
and (iv) Horizon's administrative offices located at 5000 Hakes Drive, Norton
Shores, Michigan, including such equipment, furniture and computer software used
therein as shall be identified in writing by Horizon promptly after the Time of
Contribution.
"Contributed Business" shall mean all business and operations of Initial
Horizon Partnership Group relating to the Contributed Assets.
"Employee Benefits Agreement" shall have the meaning assigned thereto in
Section 4.6 hereof.
<PAGE>
"Guaranty and Indemnity Agreement" shall mean that certain Guaranty and
Indemnity Agreement dated as of June 15, 1998 by and among Sky Merger, Prime
Partnership, HGP and HGP LP.
"HGP Group" shall mean, collectively,P HGP and its direct and indirect
Subsidiaries, including HGP LP, after giving effect to the Contribution.
"Horizon Partnership Group" shall mean, collectively, Horizon, Horizon
Partnership and their Subsidiaries (other than HGP Group) after giving effect to
the Contribution.
"Indemnified Loss" shall mean, with respect to any claim by an Indemnified
Party for indemnification pursuant to Article IV hereof, any and all losses,
Liabilities, claims, damages, obligations, payments, costs and expenses
(including, without limitation, the costs and expenses of any and all Actions,
demands, assessments, judgments, settlements and compromises relating thereto
and reasonable costs of investigation and attorneys' fees and expenses in
connection therewith) suffered by such Indemnified Party with respect to such
claim.
"Initial Horizon Partnership Group" shall mean, collectively, Horizon,
Horizon Partnership and its Subsidiaries prior to giving effect to the
Contribution.
"Liabilities" shall mean, with respect to any Person, except as otherwise
provided herein, any and all liabilities and obligations of such Person, whether
absolute, accrued, contingent, reflected on a balance sheet (or in the notes
thereto) or otherwise, including, without limitation, those arising under any
law, rule, regulation, Action, order or consent decree of any governmental
entity or any judgment of any court of any kind or any award of any arbitrator
of any kind, and those arising under any contract, commitment or undertaking.
"Retained Assets" shall mean all business, assets, properties, interests in
property, and rights of Initial Horizon Partnership Group, except for the
Contributed Assets, and shall include, without limitation and notwithstanding
anything to the contrary in this agreement
(a) all membership and other interests in Finger Lakes Outlet Center,
L.L.C.;
(b) any and all of the business, assets, properties, interests in property
and rights, whether tangible or intangible, relating to the ownership and
operation of each of the retail outlet centers listed on Schedule 1.1(b) hereto;
(c) all corporate minute books and records, stock record books and employee
records;
(d) all audit and financial records, tax returns and tax records of Initial
Horizon Partnership Group; and
<PAGE>
(e) all cash and cash equivalents.
"Retained Business" shall mean all business and operations of Initial
Horizon Partnership Group, except for the business and operations primarily
related to the Contributed Assets.
"Retained Liabilities" shall mean all Liabilities of the Initial Horizon
Partnership Group other than the Assumed Liabilities and shall include, without
limitation, (i) all obligations to indemnify present and former officers and
directors of Initial Horizon Partnership Group under certificates or articles of
incorporation, by-laws, partnership agreements, employment agreements,
indemnification agreements or otherwise arising for any matter occurring at or
prior to the Prime/Horizon Merger Effective Time; (ii) all Liabilities relating
to the loans not described on the Schedule of Debt, and any other mortgage loans
secured by a Retained Asset incurred after the date hereof, and (iii) all leases
(whether as lessor, lessee, sublessee, sublessor or otherwise) and related
contracts, and service contracts, relating to the Retained Assets.
"Schedule of Debt" shall mean the Horizon Schedule of Debt attached as
Schedule 1.1(c) hereto.
"Tax Disaffiliation Agreement" shall have the meaning assigned thereto in
Article II hereof.
"Time of Contribution" shall mean the time of consummation of the
Contribution.
"Working Capital Facility" shall mean the credit facility evidenced by that
certain Business Loan Agreement dated August 1, 1996, as amended and extended,
by and between Huntington National Bank, as successor to FMB-Lumberman's Bank,
and Horizon Partnership.
ARTICLE II
TAX MATTERS
Prior to the Time of Contribution, Horizon and HGP shall enter into an
agreement relating to past and future tax sharing and certain issues associated
therewith in substantially the form attached hereto as Exhibit A (the "Tax
Disaffiliation Agreement").
ARTICLE III
CONTRIBUTION AND ASSUMPTION
III.1 Contribution of Assets.
(a) Subject to Section 3.1(c) and to the satisfaction or waiver of the
conditions set forth in Article V of this Agreement, each of Horizon and Horizon
Partnership shall transfer, assign and convey to HGP or HGP LP as a capital
contribution all of their respective right, title and interest in and to the
Contributed Assets and the Contributed Business in accordance with the documents
<PAGE>
executed pursuant to Section 3.3 hereof. It is the intent of the parties hereto
that the Contributed Assets shall include any and all land held or owned by
Horizon or any of its affiliates adjacent to any Horizon Outlet Centers which
are Contributed Assets.
(b) Notwithstanding Section 3.1(a), Initial Horizon Partnership Group shall
retain and not contribute to HGP or HGP LP any of its respective right, title,
or interest in and to the Retained Assets
(c) At the Time of Contribution, (i) HGP LP shall issue, directly or
indirectly, to Horizon Partnership, in partial consideration for the
Contribution, that number of common units of HGP LP (the "HGP LP Common Units")
which, when combined with the number of HGP LP Common Units then outstanding or
to be issued, is appropriate to consummate the transactions as contemplated by
the Merger Agreement and (ii) HGP shall issue, directly or indirectly, to
Horizon, in partial consideration for the Contribution, that number of shares of
common stock of HGP which, when combined with the number of shares of common
stock of HGP then outstanding or to be issued, is appropriate to consummate the
transactions as contemplated by the Merger Agreement.
III.2 Assumption and Characterization of Liabilities.
(a) Subject to Section 3.2(b) and effective as of the Time of Contribution,
HGP LP, in partial consideration for the Contribution, will, directly or
indirectly, unconditionally assume the Assumed Liabilities.
(b) Notwithstanding Section 3.2(a), Horizon Partnership Group shall retain,
and HGP and HGP LP shall not assume and shall have no liability with respect to,
the Retained Liabilities.
(c) The parties hereby agree that if and to the extent that any Liabilities
of the Initial Horizon Group arise from the ownership of operation of both
Contributed Assets and Retained Asset and it is otherwise impracticable to
ascertain the extent to which such liabilities constitute Assumed Liabilities
and Retained Liabilities, such Liabilities shall be allocated between Assumed
Liabilities and Retained Liabilities based on the aggregate amount of gross
leasable area contained in such Contributed Assets and Retained Assets,
respectively.
III.3 Transfer and Assumption Documentation. In furtherance of the
contribution, grant, conveyance, assignment, transfer and delivery of the
Contributed Assets and the assumption of the Assumed Liabilities set forth in
this Article III, at the Time of Contribution or as promptly as practicable
thereafter (i) Horizon and Horizon Partnership shall each execute and deliver,
and cause their respective Subsidiaries to execute and deliver, such deeds,
bills of sale, stock powers, certificates of title, assignments of leases and
contracts and other instruments of contribution, grant, conveyance, assignment,
transfer and delivery necessary to evidence such contribution, grant,
conveyance, assignment, transfer and delivery and (ii) HGP LP shall, or shall
<PAGE>
cause it subsidiaries to, execute and deliver such instruments of assumption as
and to the extent necessary to evidence such assumption.
III.4 Nonassignable Contracts. Anything contained herein to the contrary
notwithstanding and except for the transfer of the partnership interests in MG
Patchogue Limited Partnership ("MG I") and MG Patchogue II Limited Partnership
("MG II" and together with MG I, the "MG Partnerships"), this Agreement shall
not constitute an agreement to assign any lease, license agreement, contract,
agreement, sales order, purchase order, open bid or other commitment or asset if
an assignment or attempted assignment of the same without the consent of the
other party or parties thereto would constitute a breach thereof or in any way
impair the rights after the Contribution of Horizon Partnership Group or HGP
Group thereunder. Initial Horizon Partnership Group shall, prior to the Time of
Contribution, use reasonable best efforts (it being understood that such efforts
shall not include any requirement of the Initial Horizon Partnership Group to
expend money or offer or grant any financial accommodation) as requested by HGP
LP, and HGP LP shall cooperate in all reasonable respects with Initial Horizon
Partnership Group, to obtain all consents and waivers and to resolve all
impracticalities of assignments or transfers necessary to convey to HGP and HGP
LP the Contributed Assets. If any such consent is not obtained or if an
attempted assignment would be ineffective or would impair either group's rights
under any such lease, license agreement, contract, agreement, sales order,
purchase order, open bid or other commitment or asset so that HGP LP would not
receive all such rights, then Initial Horizon Partnership Group shall use
reasonable best efforts (it being understood that such efforts shall not include
any requirement of Initial Horizon Partnership Group to expend money or offer or
grant any financial accommodation) to provide or cause to be provided to HGP or
HGP LP, to the extent permitted by law, the benefits of any such lease, license
agreement, contract, agreement, sales order, purchase order, open bid or other
commitment or asset.
III.5 Use of Names.
(a) Prior to the Contribution, Horizon Partnership and HGP LP shall
determine which of the names, trademarks, trade names and other proprietary
rights related to the Contributed Assets which HGP LP shall have the sole and
exclusive ownership of and right to use, as between HGP Group, on the one hand,
and Horizon Partnership Group, on the other hand, following the Time of
Contribution (the "Contributed Proprietary Name Rights"). Following the Time of
Contribution, Horizon Partnership Group shall have the sole and exclusive
ownership of and right to use, as between HGP Group on the one hand, and the
Horizon Partnership Group on the other hand, all names, trade marks, trade
names, service marks and other proprietary rights owned or used by Initial
Horizon Partnership Group immediately prior to the Time of Contribution other
than the Contributed Proprietary Name Rights (the "Retained Proprietary Name
Rights").
(b) Following the Contribution (i) HGP shall cause HGP Group to take all
action necessary to cease using, and change as promptly as practicable
(including by amending any charter documents), any corporate or other names
which are the same as or confusingly similar to any of the Retained Proprietary
Name Rights, and (ii) Horizon shall cause Horizon Partnership Group to take all
<PAGE>
action necessary to cease using, and change as promptly as practicable
(including by amending any charter documents), any corporate or other names
which are the same as or confusingly similar to any of the Contributed
Proprietary Name Rights. From and after the Closing Date, HGP shall cause HGP
Group to cease holding itself out as having an affiliation with Horizon
Partnership Group.
ARTICLE IV
CERTAIN COVENANTS
IV.1 Indemnity as between HGP LP and Horizon Partnership with respect to
Assumed Liabilities and Retained Liabilities.
(a) Effective upon the Contribution, HGP LP agrees to indemnify and hold
Horizon Partnership, its affiliates, successors and assigns and the officers,
directors, employees, agents, advisors and representatives of any of them,
harmless from and against any and all Indemnified Losses arising out of or
related to the Assumed Liabilities, including without limitation any liabilities
arising from the transfer of the partnership interests in the MG Partnerships.
(b) Effective upon the Contribution, Horizon Partnership agrees to
indemnify and hold HGP LP, its affiliates, successors and assigns and the
officers, directors, employees, agents, advisors and representatives of any of
them, harmless from and against any and all Indemnified Losses arising out of or
related to the Retained Liabilities.
IV.2 Procedure for Third Party Indemnification.
(a) If a party entitled to be indemnified hereunder (an "Indemnified
Party") shall receive notice of the assertion by a person who is not a party to
this Agreement of any claim or of the commencement by any such person of any
Action (a "Third Party Claim") with respect to which a party hereto is obligated
to provide indemnification (an "Indemnifying Party"), such Indemnified Party
shall give such Indemnifying Party prompt notice thereof after becoming aware of
such Third Party Claim; provided that the failure of any Indemnified Party to
give notice as provided in this Section 4.2 shall not relieve the related
Indemnifying Party of its obligations under this Article IV, except to the
extent that such Indemnifying Party is actually prejudiced by such failure to
give notice. Such notice shall describe the Third Party Claim in reasonable
detail, and, if practicable, shall indicate the estimated amount of the
Indemnified Loss that has been or may be sustained by such Indemnified Party.
(b) An Indemnifying Party may elect to defend, at such Indemnifying Party's
own expense and by such Indemnifying Party's own counsel, any Third Party Claim.
If an Indemnifying Party elects to defend a Third Party Claim, it shall, within
30 days of notice of such Third Party Claim (or sooner, if the nature of such
Third Party Claim so requires), notify the related Indemnified Party of its
<PAGE>
intent to do so and acknowledge its liability therefor, and such Indemnified
Party shall cooperate in the defense of such Third Party Claim. After notice
from an Indemnifying Party to an Indemnified Party of its election to assume the
defense of a Third Party Claim, such Indemnifying Party shall not be liable to
such Indemnified Party under this Article IV for any legal or other expenses
subsequently incurred by such Indemnified Party in connection with the defense
thereof as long as the Indemnifying Party pursues such defense diligently and in
good faith; provided that if, under applicable standards of professional conduct
(as advised by counsel to the Indemnifying Party), a conflict on any significant
issue between such Indemnified Party and such Indemnifying Party or between any
two or more Indemnified Parties may exist in respect of such claim, then the
Indemnifying Party shall pay the reasonable fees and expenses of one such
additional counsel as may be required to be retained in light of such conflict.
If an Indemnifying Party elects not to defend against a Third Party Claim, or
fails to notify an Indemnified Party of its election as provided in this Section
4.2 within the time period specified, or fails to pursue the defense of a Third
Party Claim diligently and in good faith, such Indemnified Party may defend,
compromise and settle such Third Party Claim. Notwithstanding the foregoing, (i)
neither an Indemnifying Party nor an Indemnified Party, as the party controlling
the defense of a Third Party Claim, may compromise or settle any claim or
consent to the entry of any judgment for other than monetary damages without the
prior written consent of the other; provided that (upon reasonable notice
thereof) consent to compromise or settlement or the entry of a judgment shall
not be unreasonably withheld or delayed, and (ii) no Indemnifying Party shall
consent to the entry of any judgment or enter into any compromise or settlement
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such Indemnified Party and all other Indemnified
Parties, as the case may be, subject to such Third Party Claim of a full and
final release from all liability in respect of such claim or Action.
IV.3 Adjustment for Insurance and Taxes. The amount which either HGP LP or
Horizon Partnership is required to pay to, for or on behalf of the other
pursuant to Sections 4.1 and 4.2, shall be adjusted (including, without
limitation, retroactively) (i) by any insurance proceeds actually recovered by
or on behalf of HGP Group, Horizon Partnership Group or the Indemnified Party,
as the case may be, in reduction of the related Indemnified Loss or Third Party
Claim and (ii) reduced by the net difference between (A) the present value of
the amount of any tax savings resulting from any tax benefit to HGP Group,
Horizon Partnership Group or the Indemnified Party, as the case may be, as a
result of the Indemnified Loss or Third Party Claim, and (B) the present value
of the amount of any tax due with respect to the receipt of the indemnification
payment itself. Amounts required to be paid, as so adjusted, are hereafter
sometimes called an "Indemnified Payment." If HGP Group, Horizon Partnership
Group or the Indemnified Party, as the case may be, shall have received or shall
have had paid on its behalf an Indemnified Payment in respect of an Indemnified
Loss or Third Party Claim and shall subsequently receive insurance proceeds in
respect of such Indemnified Loss or Third Party Claim, or realize any net tax
benefit (as computed in clause (ii) above) as a result of such Indemnified Loss
or Third Party Claim, then HGP Group, Horizon Partnership Group or the
Indemnified Party, as the case may be, shall pay to HGP Group, Horizon
Partnership Group or the Indemnified Party, as the case may be, the amount of
such insurance proceeds or net tax benefit, or if less, the amount of the
Indemnified Payment.
<PAGE>
IV.4 Risk of Contributed Assets. Each party understands and agrees that,
except as otherwise specifically provided herein, no party nor any of its
Subsidiaries is, in this Agreement or any other agreement or document,
representing or warranting to such party in any way as to the assets, business
or Liabilities transferred, retained or assumed as contemplated hereby or as to
any consents or approvals required in connection with the consummation of the
transactions contemplated by this Agreement, it being agreed and understood that
each party shall take or keep all of its assets "AS IS", "WHERE IS" and that it
shall bear the economic and legal risk that conveyance of such assets shall
prove to be insufficient or that the title to any assets shall be other than
good and marketable and free from encumbrances. ALL IMPLIED WARRANTIES,
INCLUDING WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE,
ARE HEREBY EXPRESSLY DISCLAIMED.
IV.5 Transfer of Employees. With respect to the personnel employed on-site
at the centers included in the Retained Business and such other employees of the
Contributed Business designated by Horizon Partnership not later than the
Closing Date as employees who will remain with Horizon Partnership Group
(collectively, the "Retained Employees"), except as otherwise specifically
provided in this Agreement, Horizon Partnership Group shall retain the
liabilities and obligations with respect to, and continue to be responsible for,
all liabilities and obligations whatsoever in connection with, claims made by or
on behalf of such persons in respect of salary, wages, benefits, severance pay,
salary continuation, COBRA continuation and similar obligations relating to the
continued employment, or the termination or alleged termination of such persons'
employment with Horizon Partnership Group by reason of the consummation of the
transactions contemplated in this Agreement or the Merger Agreement or otherwise
and neither HGP LP nor any member of HGP Group shall assume such liability.
Effective as of the Partnership Merger Effective Time, Horizon Partnership and
HGP LP shall cooperate to transfer to the employ of HGP Group, each person
employed by Horizon Partnership Group, other than the Retained Employees (such
employees and other persons who become employees of the HGP Group after the
Partnership Merger Effective Time in accordance with this Section 4.5 shall be
hereinafter referred to as the "Transferred Employees"). With respect to the
Transferred Employees, HGP Group shall assume the liabilities and obligations
with respect to, and continue to be responsible for all liabilities and
obligations whatsoever in connection with, claims made by or on behalf of such
persons in respect of salary, wages, benefits, severance pay, salary
continuation, COBRA continuation and similar obligations relating to the
continued employment, or the termination or alleged termination of such persons'
employment with the HGP Group by reason of consummation of the transactions
contemplated in this Agreement or the Merger Agreement or otherwise and Horizon
Partnership Group shall have no such liability.
IV.6 Certain Employee Benefits Plans. Promptly following the Partnership
Merger Effective Time, HGP LP and Horizon Partnership shall enter into an
agreement relating to the parties' responsibilities with respect to certain
employee benefit liabilities and obligations (the "Employee Benefits
Agreement").
<PAGE>
IV.7 Insurance. The parties agree to cooperate with each other with respect
to the processing of any claims which are covered by any insurance policy in
existence prior to the Partnership Merger Effective Time. Without limiting the
generality of the foregoing, Horizon Partnership Group shall have the right to
process and pursue any claim for insurance (including negotiating with the
company issuing the insurance policy) in connection with any liability of
Horizon Partnership Group, regardless of whether the insurance policy under
which such claim is made is transferred to HGP LP pursuant to Section 3.1(a),
and HGP Group shall have the right to process and pursue any claim for insurance
(including negotiating with the company issuing the insurance policy) in
connection with any liability of HGP Group, regardless of whether the insurance
policy under which such claim is made is retained by Horizon Partnership Group
pursuant to Section 3.1(b)
IV.8 Transfer and Gains Taxes. HGP LP shall pay or cause to be paid the
Transfer and Gains Taxes imposed in connection with or as a result of the
Contribution.
ARTICLE V
CONDITIONS
The obligations of the parties to consummate the Contribution shall be
subject to (i) the fulfillment or waiver in accordance with the Merger Agreement
of each condition to the closing of the Merger set forth in Article VI of the
Merger Agreement (except for the conditions contained in Section 6.2(h) of the
Merger Agreement relating to the execution of, and consummation of the
transactions contemplated by, this Agreement) and (ii) the Tax Disaffiliation
Agreement and the Employee Benefits Agreement shall have been executed and
delivered by each of the parties thereto.
ARTICLE VI
ACCESS TO INFORMATION AND SERVICES
VI.1 Provision of Corporate Records. As promptly as possible after the Time
of Contribution, Horizon and Horizon Partnership shall cause Initial Horizon
Partnership Group to deliver, or cause to be delivered, to HGP Group all
corporate books and records which relate primarily to HGP Group, the Contributed
Assets, Contributed Business or the Assumed Liabilities, including, without
limitation, all active agreements, active litigation files and government
filings. The parties acknowledge that such corporate books and records are
located at Horizons offices in Muskegon, Michigan and Arlington, Virginia and
will be available to Horizon and Horizon Partnership at the Time of
Contribution. From and after the Time of Contribution, all such books, records
and copies shall be the property of HGP Group provided that Horizon shall be
permitted to retain a copy of each employee record delivered to HGP Group
pursuant to this Section.
VI.2 Access to Information. From and after the Time of Contribution (i)
Horizon and Horizon Partnership shall cause Horizon Partnership Group to afford
to HGP Group and its authorized accountants, counsel and other designated
representatives reasonable access (including, without limitation, using
reasonable efforts to give access to persons or firms possessing Information (as
defined below)) and duplicating rights during normal business hours to all
records, books, contracts, instruments, computer data and other data and
information (collectively, "Information") within Horizon Partnership Group's
possession relating to HGP Group, the Contributed Assets, the Contributed
Businesses or the Assumed Liabilities, insofar as such access is reasonably
required by HGP Group, and (ii) HGP shall cause HGP Group to afford to Horizon
Partnership Group and its authorized accountants, counsel and other designated
representatives reasonable access (including, without limitation, using
reasonable efforts to give access to persons or firms possessing Information)
and duplicating rights during normal business hours to all Information within
HGP Group's possession relating to Initial Horizon Partnership Group and the
<PAGE>
assets of Initial Horizon Partnership Group (including without limitation, the
Contributed Assets, the Contributed Businesses or the Assumed Liabilities),
insofar as such access is reasonably required by Horizon Partnership Group.
Information may be requested under this Section 6.2 for, without limitation,
audit, accounting, claims, litigation and tax purposes, as well as for purposes
of fulfilling disclosure and reporting obligations.
VI.3 Production of Witnesses. From and after the Time of Contribution, each
party shall use reasonable efforts to make available to the other party, upon
written request, its officers, directors, employees and agents as witnesses to
the extent that any such person may reasonably be required in connection with
any legal, administrative or other proceedings in which the requesting party may
from time to time be involved.
VI.4 Retention of Records. Except as otherwise required by law or agreed to
in writing, Horizon shall cause Horizon Partnership Group, and HGP shall cause
HGP Group each to retain, for a period of at least five years following the Time
of Contribution, all significant or mutual Information relating to the
Contributed Assets, Retained Assets, Assumed Liabilities, Retained Liabilities,
Contributed Business or the Retained Business. Notwithstanding the foregoing,
either Horizon Partnership Group or HGP Group may destroy or otherwise dispose
of any of such Information at any time, provided that, prior to such destruction
or disposal (a) Horizon or HGP, as the case may be, shall cause the Person
seeking to destroy or otherwise dispose of any Information to provide no less
than 90 days or more than 120 days' prior written notice to the parties hereto,
specifying the Information proposed to be destroyed or disposed of and (b) if
any party shall request in writing prior to the scheduled date for such
destruction or disposal that any of the Information proposed to be destroyed or
disposed of be delivered to the other party, such Person shall promptly arrange
for the delivery of such of the Information as was requested, at the expense of
the requesting party.
VI.5 Confidentiality. Each party shall hold, and shall cause its officers,
directors, employees, agents, consultants and advisors to hold, in strict
confidence, unless compelled to disclose by judicial or administrative process
or by other requirements of law or in order to comply with the requirements of a
<PAGE>
binding stock exchange listing application or agreement or applicable stock
exchange rules, all non-public Information concerning the other party furnished
it by such other party or its representatives or otherwise in its possession
(except to the extent that such Information can be shown to have been (a)
available to such party on a nonconfidential basis prior to its disclosure by
the other party, (b) in the public domain through no fault of such party or (c)
later lawfully acquired from other sources by the party to which it was
furnished), and each party shall not release or disclose such Information to any
other person, except its auditors, attorneys, financial advisors, bankers and
other consultants and advisors who have a need to know such Information and who
agree to be bound by the provisions of this Section 6.5.
ARTICLE VII
MISCELLANEOUS AND GENERAL
VII.1 Modification or Amendment. The parties hereto may modify or amend
this Agreement by written agreement executed and delivered by authorized
officers of the respective parties, provided Prime has consented in writing to
any such modification or amendment. The parties expressly agree that Prime shall
be a third party beneficiary of this Section 7.1.
VII.2 Counterparts. For the convenience of the parties hereto, this
Agreement may be executed in separate counterparts, each such counterpart being
deemed to be an original instrument, and which counterparts shall together
constitute the same agreement.
VII.3 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF MARYLAND, REGARDLESS OF THE LAWS THAT
MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICT OF LAWS THEREOF.
VII.4 Notices. Any notice, request, instruction or other document to be
given hereunder by any party to the other shall be in writing and shall be
deemed to have been duly given (i) on the date of delivery if delivered by
facsimile (upon confirmation of receipt) or personally, (ii) on the first
business day following the date of dispatch if delivered by Federal Express or
other reputable next-day courier service or (iii) on the third business day
following the date of mailing if delivered by registered or certified mail,
return receipt requested, postage prepaid. On and after the Partnership Merger
Effective Time, all notices hereunder shall be delivered as set forth below, or
pursuant to such other instructions as may be designated in writing by the party
to receive such notice.
If to HGP or HGP LP:
Horizon Group Properties, Inc.
5000 Hakes Drive
Norton Shores, MI 49441
Attention: Gary J. Skoien
Fax: No.: (616) 798 - 5100
<PAGE>
with a copy to:
Winston & Strawn
35 West Wacker Drive
Chicago, IL 60601
Attention: Wayne D. Boberg, Esq.
Fax No.:(312) 558-5700
If to Horizon, Horizon Partnership or Sky
Merger
Prime Retail, Inc.
100 East Pratt Street
19th Floor
Baltimore, Maryland 21202
Attention: Michael W. Reschke
C. Alan Schroeder
Fax No.:(410) 234-1703
With a copy to:
Winston & Strawn
35 W. Wacker Drive
Chicago, Illinois 60601
Attention: Wayne D. Boberg
Steven J. Gavin
Fax No.:(312) 558-5700
VII.5 Captions. All Article, Section and paragraph captions herein are for
convenience of reference only, do not constitute part of this Agreement and
shall not be deemed to limit or otherwise affect any of the provisions hereof.
VII.6 Assignment. Nothing contained in this Agreement or the agreements
referred to herein (except as otherwise expressly set forth therein) is intended
to confer on any person or entity other than the parties hereto and their
respective successors and permitted assigns any benefit, rights or remedies
under or by reason of this Agreement and such other agreements, except that the
provisions of Section 4.1 and 4.2 hereof shall inure to the benefit of the
Persons referred to therein. Notwithstanding the foregoing, the parties
acknowledge and agree that Prime, as successor to Horizon shall succeed to and
become the beneficiary of all rights of Sky Merger Corp. and Horizon under this
Agreement.
VII.7 Further Assurances. Subject to the terms and conditions hereof and,
as applicable, of the Merger Agreement, the parties will, and will cause their
respective affiliates to, do such additional things as are necessary or proper
<PAGE>
to carry out and effectuate the intent of this Agreement or any part hereof or
the transactions contemplated hereby. The parties agree that if, after the Time
of Contribution, a party holds assets or Liabilities which by the terms hereof
or of the Merger Agreement were intended to be assigned and transferred to, or
retained by, another party, such party shall promptly assign and transfer or
cause to be assigned and transferred such assets or Liabilities to the
applicable party.
VII.8 Attorney-Client Privilege; Work Product. Anything herein or in the
Merger Agreement notwithstanding, the transactions contemplated hereby and by
the Merger Agreement shall not be deemed to transfer to or vest in HGP Group any
right to waive, nor shall they be deemed to waive, any attorney-client privilege
between Horizon Partnership Group and its legal counsel, with respect to legal
advice concerning the business or operations of Horizon Partnership Group
including, without limitation, the Retained Liabilities or the transactions
contemplated hereby and by the Merger Agreement, in either case, concerning
privileged communications (or work product related thereto) at any time prior to
the Closing Date (as defined in the Merger Agreement). Horizon and Horizon
Partnership each shall assign to HGP Group, and cause each member of Horizon
Partnership Group to assign to HGP Group, its rights (if any) to any
attorney-client privilege with respect to legal advice concerning the business
or operations of HGP Group including, without limitation, the Assumed
Liabilities or the transactions contemplated hereby concerning privileged
communications (or work product related thereto) at any time prior the Closing
Date. Horizon Partnership Group and their successors and assigns shall not be
entitled to waive or have access, nor shall they attempt to waive or seek
access, to any privileged communications (or work product related thereto)
between HGP Group and its legal counsel with respect to legal advice concerning
the business or operations of HGP Group, including the Assumed Liabilities or
the transactions contemplated hereby.
VII.9 No Third-Party Beneficiaries. Except as provided in Section 4.1, 4.2
and 7.1 hereof, this Agreement, the Tax Disaffiliation Agreement and the
Employee Benefits Agreement, are not intended to confer upon any person other
than the parties hereto and thereto any rights or remedies hereunder or
thereunder.
VII.10 Entire Agreement; Conflicts. This Agreement constitutes the entire
agreement between the parties with respect to the matters contemplated hereby
and supersedes all other prior agreements and understandings, both written and
oral, between the parties with respect to the subject matter hereof.
Notwithstanding the foregoing, (a) in the event of any conflict between this
Agreement and the Tax Disaffiliation Agreement, the Tax Disaffiliation Agreement
shall control and (b) in the event of any conflict between this Agreement and
the Guaranty and Indemnity Agreement, the Guaranty and Indemnity Agreement shall
control.
7.11 Enforcement. The parties agree that irreparable damage would occur in
the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
<PAGE>
the terms and provisions of this Agreement in any federal court located in
Maryland this being in addition to any other remedy to which they are entitled
at law or in equity. In addition, each of the parties hereto (a) consents to
submit itself (without making such submission exclusive) to the personal
jurisdiction of any federal court located in Maryland in the event any dispute
arises out of this Agreement or any of the transactions contemplated by this
Agreement and (b) agrees that it will not attempt to deny or defeat such
personal jurisdiction by motion or other request for leave from any such court.
[signature page follows]
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the duly authorized officers of the parties hereto as of the date first
hereinabove written.
HORIZON GROUP, INC.
By: /s/ James S. Wassel
Name: James S. Wassel
Title: President
SKY MERGER CORP.
By: /s/ James S. Wassel
Name: James S. Wassel
Title: President
HORIZON/GLEN OUTLET CENTERS
LIMITED PARTNERSHIP
By: Horizon Group, Inc.,
its general partner
By: /s/ James S. Wassel
Name: James S. Wassel
Title: President
HORIZON GROUP PROPERTIES, INC.
By: /s/ Gary J. Skoien
Name: Gary J. Skoien
Title: Chief Executive
Officer and President
HORIZON GROUP PROPERTIES, L.P.
By: Horizon Group Properties, Inc.,
its general partner
By: /s/ Gary J. Skoien
Name: Gary J. Skoien
Title: Chief Executive
Officer and Presiden
<PAGE>
SCHEDULE 1.1(a)
to
CONTRIBUTION AGREEMENT
The Contributed Assets include, without limitation, the following retail
outlet centers designated on Initial Horizon Partnership Group's books and
records by location and owner as:
Location Owner
Algondones Algondones Outlet, L.L.C.
Dry Ridge Third Horizon Group Limited Partnership
Holland Third Horizon Group Limited Partnership
Laughlin Third Horizon Group Limited Partnership
Medford Third Horizon Group Limited Partnership
Monroe Third Horizon Group Limited Partnership
Sealy Third Horizon Group Limited Partnership
Somerset Third Horizon Group Limited Partnership
Traverse City Third Horizon Group Limited Partnership
Tulare Third Horizon Group Limited Partnership
Warrenton Third Horizon Group Limited Partnership
Norton Shores Third Horizon Group Limited Partnership
Patchogue--Bellport (Phase I) MG Patchogue Limited Partnershp
Patchogue--Bellport (Phase II & III) MG Patchogue II Limited Partnership
<PAGE>
SCHEDULE 1.1(b)
to
CONTRIBUTION AGREEMENT
The Retained Assets include, without limitation, the following retail
outlet centers designated on Initial Horizon Partnership Group's books and
records by location and owner as:
Location Owner
Birch Run Horizon/Glen Outlet Centers Limited Partnership
Conroe Horizon/Glen Outlet Centers Limited Partnership
Edinburgh Horizon/Glen Outlet Centers Limited Partnership
Jeffersonville Horizon/Glen Outlet Centers Limited Partnership
Vero Beach Horizon/Glen Outlet Centers Limited Partnership
Williamsburg Horizon/Glen Outlet Centers Limited Partnership
Woodbury Horizon/Glen Outlet Centers Limited Partnership
Burlington First Horizon Group Limited Partnership
Fremont First Horizon Group Limited Partnership
Kenosha First Horizon Group Limited Partnership
Oshkosh First Horizon Group Limited Partnership
Hillsboro Second Horizon Group Limited Partnership
Pismo Beach Second Horizon Group Limited Partnership
Queenstown Second Horizon Group Limited Partnership
Tracy Second Horizon Group Limited Partnership
Perryville H/G Perryville Limited Partnership
Calhoun The Prime Outlets at Calhoun Limited Partnership
Gilroy Phases III & IV The Prime Outlets at Gilroy Limited Partnership
Lee The Prime Outlets at Lee Limited Partnership
Michigan City The Prime Outlets at Michigan City Limited
Partnership
Silverthorne Indianapolis Factory Shops Limited Partnership
Gilroy Phase V HGL Outlet Associates (General Partnership)
<PAGE>
SCHEDULE 1.1(c)
to
CONTRIBUTION AGREEMENT
Indebtedness under the Working Capital Facility
Indebtedness owed to The Union Labor Life Insurance Company, as assignee,
and evidenced by the certain Promissory Note of MG Patchogue Limited Partnership
dated July 29, 1991 and that certain Building Loan Note of MG Patchogue Limited
Partnership dated August 23, 1991
Indebtedness owed to First of America Bank-Michigan, N.A. evidenced by the
Promissory Notes dated December 22, 1995
<PAGE>
EXHIBIT A
to
CONTRIBUTION AGREEMENT
TAX DISAFFILIATION AGREEMENT
TAX DISAFFILIATION AGREEMENT, dated as of June __, 1998, among HORIZON
GROUP, INC., a Michigan corporation ("Horizon"), SKY MERGER CORP., a Maryland
corporation ("Sky Merger"), and Horizon Group Properties, Inc., a Maryland
corporation ("HGP").
WHEREAS, upon the terms and subject to the conditions set forth herein,
after the formation of Horizon Group Properties, L.P., a Delaware limited
partnership ("HGP LP"), it is contemplated that immediately prior to the
declaration of the Prime Partnership Special Distribution on the Closing Date
(as hereinafter defined), Horizon and Horizon/Glen Outlet Centers Limited
Partnership, a Delaware limited partnership ("Horizon Partnership") shall each
contribute to HGP LP certain of their respective assets subject to the
obligations and liabilities relating to such assets, all as provided in the
Contribution Agreement;
WHEREAS, upon the terms and subject to the conditions set forth herein, on
the Closing Date and immediately after the consummation of the Partnership
Merger, Prime Partnership shall declare a distribution of all of the units of
HGP LP ("HGP LP Common Units") to the record holders of certain partnership
interests in Prime Partnership immediately after the consummation of the
Partnership Merger;
WHEREAS, upon the terms and subject to the conditions set forth herein,
after the consummation of the Prime Partnership Common Distribution, Prime shall
contribute to HGP all of the HGP LP Common Units that it receives pursuant to
the Prime Partnership Common Distribution and all of the HGP Common Shares held
by Prime as a result of the Prime/Horizon Merger, and HGP shall issue to Prime
shares of HGP common stock (each an "HGP Common Share");
WHEREAS, upon the terms and subject to the conditions set forth herein,
after the consummation of the Prime Corporate Contribution, Prime shall declare
and make a distribution of the HGP Common Shares to the record holders of Prime
Common Shares, Prime Series B Preferred Shares and Prime Series C Preferred
Shares (each as defined below) immediately after the consummation of the
Prime/Horizon Merger; and
WHEREAS, Horizon, Sky Merger and HGP desire on behalf of themselves, their
Subsidiaries, and their successors to set forth their rights and obligations
with respect to matters affecting their reporting of, and liability for, Taxes
(as defined below).
Section 1. Definitions. Unless otherwise defined herein, for purposes of
this Tax Disaffiliation Agreement (the "Agreement") the following terms will
have the following definitions:
<PAGE>
"Subsidiary" shall mean a current or former corporation, partnership, joint
venture, or other business entity in which 50 percent or more of the outstanding
equity or voting power is owned directly or indirectly by HGP or Horizon;
provided, however, that HGP and any Subsidiary of HGP shall not be considered a
Subsidiary of Horizon (including, but not limited to, HGP LP) for purposes of
the Tax Sharing Obligations in Section 3 hereof.
"Tax" shall mean all taxes, charges, fee, levies, imposts, duties and other
assessments imposed by any governmental authority, including, without
limitation, income, gross receipts, excise, property, sales, use, ad valorem,
value added, withholding, employment, payroll, occupation, license, franchise,
transfer, and windfall profits taxes, fees and charges, and any interest, fines,
penalties, additions to tax, or other additional amounts imposed by any
governmental authority with respect to any tax, charge, fee, levy, impost, duty,
or other assessment.
"Tax Return" shall mean all returns or reports to be filed or that may be
filed with respect to any Tax.
"Underpayment Rate" shall mean the rate specified in Section 6621(a)(2) of
the Code.
Other capitalized terms not defined herein have the meaning set forth in
that certain Amended and Restated Agreement and Plan of Merger, dated as of
February 1, 1998 by and among Prime Retail, Inc., a Maryland corporation, Prime
Retail, L.P., a Delaware limited partnership, Horizon, Sky Merger, HGP, HGP LP
and Horizon Partnership.
Section 2. Tax Returns and Tax Payments.
(a) Obligations to File Tax Returns.
(i) HGP shall timely file, or caused to be filed, all Tax Returns that
relate to HGP, or any of its Subsidiaries, for any taxable period that ends
after the Closing Date.
(ii) Horizon shall timely file, or caused to be filed, all Tax Returns that
relate to Horizon, or any of its Subsidiaries, for any taxable period, and for
HGP and any of its Subsidiaries, for any taxable period of HGP that ends on or
before the Closing Date.
(b) Obligations to Pay Taxes. Horizon and HGP shall remit, or caused to be
remitted, any Taxes due in respect of any Tax for which it is required to file a
Tax Return.
Section 3. Tax Sharing Obligations.
(a) Obligations of HGP. HGP shall be liable and hold Horizon, and all of
Horizons Subsidiaries, harmless against any liability for Taxes arising from
the operations of HGP or any of its Subsidiaries or because of HGP's ownership
of any Subsidiary or any other corporation, partnership, joint venture, or other
business entity.
<PAGE>
(b) Obligations of Horizon. Horizon shall be liable and hold HGP, and all
of HGPs Subsidiaries harmless against any liability for Taxes arising from the
operations of Horizon or any of its Subsidiaries or because of Horizon's
ownership of any Subsidiary or any other corporation, partnership, joint
venture, or other business entity.
(c) Payments. To the extent that either party (the "Payor") owes money to
another party (the "Payee") pursuant to this Section 3 of the Agreement, the
Payor shall pay the Payee no later than 15 days after the date the Payor makes a
demand for payment, which is accompanied with appropriate calculations, of the
amount the Payor is required to indemnify the Payee under this Section 3 of the
Agreement.
(d) Interest. Any payments required by this Agreement that are not made on
or before the date provided shall bear interest after such date at the
Underpayment Rate.
Section 4. Tax Audits.
(a) Responsibility. HGP and Horizon shall have sole responsibility for all
audits or other proceedings with respect to Tax Returns that it is required to
file under Section 2 of this Agreement.
(b) Cooperation. HGP and Horizon shall cooperate with each other in the
conduct of any audit (and in the filing of any Tax Return) and each shall
execute and deliver such powers of attorney and make available such other
documents and employees as are necessary to carry out the intent of this
Agreement.
Section 5. Retention of Records.
(a) Maintenance. HGP and Horizon shall maintain until the expiration of the
relevant statute of limitations all records, documents, accounting data, and
other information necessary for the preparation and filing of all Tax Returns of
HGP and Horizon or for the audit of such Tax Returns.
(b) Access. HGP and Horizon shall provide each other reasonable access to
any records, documents, accounting date, and other information and to its
personnel and premises for purposes of a review or audit of such information to
the extent it is relevant to a obligation or liability of a party under this
Agreement.
Section 5. Horizon/Subsidiary Merger.
Upon the Horizon/Subsidiary Merger, Sky Merger shall assume all obligations
of Horizon under this Agreement.
Section 6. Miscellaneous Provisions.
<PAGE>
(a) Notices and Governing Law. All notices required to permitted to be
given pursuant to this Agreement shall be given, and the applicable law
governing the interpretation of this Agreement, shall be determined by reference
to the Contribution Agreement.
(b) Binding Effect. This Agreement shall be binding on, and shall inure to
the benefit of, the parties and their respective successors and assigns.
(c) Entire Agreement. This Agreement constitutes the entire agreement of
the parties concerning the subject matter hereof and supersedes all prior
agreements, whether or not written, concerning the subject matter. This
Agreement may not be amended except by an agreement in writing, signed by all
parties.
(d) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be an original and all of which shall
constitute together the same document.
[signature page follows]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date first written above.
HORIZON GROUP, INC.
By: ________________________________
Name:
Title:
SKY MERGER CORP.
By: ________________________________
Name:
Title:
HORIZON GROUP PROPERTIES, INC.
By: ________________________________
Name:
Title:
EXHIBIT 99.1
------------
FOR IMMEDIATE RELEASE FOR MORE INFORMATION CALL
June 15, 1998 Investors: Robert P. Mulreaney
Chief Financial Officer
(410) 234-0782
Media: Brian J. Lewbart
Director, Public Relations
(410) 234-1755
PRIME RETAIL, INC. AND HORIZON GROUP, INC. COMPLETE MERGER
Prime Retail Completes $292.0 Million of Debt Financing in Connection With the
Merger
BALTIMORE, MD (June 15, 1998) -- Prime Retail, Inc. (NYSE: PRT, PRT.PRA,
PRT.PRB) and Horizon Group, Inc. (NYSE: HGI) today announced that they have
completed the merger of the two companies. The combined company, Prime Retail,
Inc., integrates 22 of Horizon's top performing outlet centers into Prime
Retail's existing portfolio and establishes Prime Retail as the largest
owner/operator and developer of factory outlet centers in the world, with 49
centers totaling approximately 13.7 million square feet of gross leasable area
(GLA) in 26 states.
"This merger propels Prime Retail into the top 15% of all public REITs with
a total market capitalization of more than $2.0 billion," said Prime Retail
Chief Executive Officer Abraham Rosenthal. "We expect a smooth transfer of all
the properties and are extremely excited about the future of Prime Retail."
Under the terms of the merger, HGI shareholders will receive 0.20 of a
share of Series B Preferred Stock and 0.597 of a share of Common Stock of Prime
Retail for each share of HGI Common Stock. Each Horizon/Glen Outlet Centers
Limited Partnership unitholder will receive 0.9193 of a Common Unit of Prime
Retail, L.P. in exchange for each HGI unit. Horizon stock will be delisted after
the close of trading today. Stock of the combined company, Prime Retail, Inc.,
will continue trading under Prime Retails existing ticker symbols.
<PAGE>
As previously announced, concurrent with the closing of the merger a
special cash distribution of $0.50 per share/unit is being made to holders of
Prime Retail's Series C Preferred Securities, Common Stock and common units of
limited partnership interest, and a special cash distribution of $0.60 per share
is being made to holders of Prime Retail's Series B Preferred Stock.
Shareholders of HGI will not participate in these distributions. In accordance
with NYSE procedures, due bills representing the right to receive such special
cash distributions must accompany shares of Common Stock and Series B Preferred
Stock delivered until June 16, 1998 when the shares of Common Stock and Series B
Preferred Stock will commence trading "ex" such special cash distributions.
Also as previously announced, the common equity of Horizon Group
Properties, Inc. (HGP) (NASDAQ: HGPI), which initially will own and operate 15
properties being spun-off from Prime Retail and HGI, will be distributed to the
convertible preferred and common shareholders and unitholders of Prime Retail
and the shareholders and limited partners of Horizon based on their ownership of
Prime Retail immediately following the merger.
Pursuant to this distribution, one share of Common Stock of HGP will be
distributed for every 20 shares of Common Stock, Common Units or Series C
Preferred Stock of Prime Retail and 1.196 shares of Common Stock of HGP will be
distributed for every 20 shares of Series B Preferred Stock held in Prime
Retail. The distribution will occur on June 18, 1998. In accordance with NYSE
procedures, due bills representing the right to receive the share distribution
must accompany shares of Prime Retail's Common Stock and Series B Preferred
Stock delivered after June 15, 1998 until June 19, 1998 when such shares
commence trading "ex" such share distribution.
In connection with the merger, Prime Retail also announced today that it
completed a $292.0 million debt financing with Nomura Asset Capital Corporation
("NACC"). The financing consists of (i) a $180.0 million nonrecourse permanent
loan (the "Permanent Loan") and (ii) a $112.0 million full recourse bridge loan
(the "Bridge Loan"). The Permanent Loan is (i) collateralized by first mortgages
on four factory outlet centers, (ii) bears a fixed rate of interest of 6.99% and
(iii) requires monthly principal and interest payments pursuant to an
approximate 26-year amortization schedule. The Bridge Loan is (i) collateralized
by first mortgages on six factory outlet centers, (ii) bears a variable rate of
interest equal to 30-day LIBOR plus 1.35%, (iii) matures in three years, and
(iv) requires monthly interest-only payments.
Following the spin-off of HGP, Prime Retail will be a guarantor or
otherwise obligated with respect to approximately $42 million of HGP's
indebtedness, including $12.2 million of obligations under HGP's $108.2 million
three-year secured credit facility with NACC and $11.8 million of mortgage debt
that is scheduled to mature August 14, 1998. Prime Retail and HGP are continuing
to seek the consent of certain parties to the assumption by HGP or its
affiliates of $14.3 million of indebtedness in connection with the spin-off.
<PAGE>
Baltimore-based Prime Retail is a self-administered, self-managed real
estate investment trust engaged in the ownership, development, acquisition,
leasing, marketing and management of factory outlet centers throughout the
United States. Prime Retail's outlet centers are recognized in the industry for
their larger size, highly accessible locations, larger and more diverse
merchandising mix, extensive food and recreational amenities, and quality
architecture and landscaping, all of which create an upscale environment in
which to showcase merchandise and encourage shopping. Prime Retail has been a
developer of factory outlet centers since 1988. For additional information,
visit Prime Retail's web site at www.primeretail.com.
Some of the information contained herein which are not historical facts are
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995 which reflect managements current views with
respect to future events and financial performance and, accordingly, such
statements are subject to various risks and uncertainties.
# # #
