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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
HORIZON GROUP PROPERTIES, INC.
(Exact name of registrant as specified in its charter)
MARYLAND 0-24123 38-3407933
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
77 WEST WACKER DRIVE, SUITE 3900
CHICAGO, ILLINOIS 60601
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (312) 917-1500
5000 HAKES DRIVE
NORTON SHORES, MICHIGAN 49449
(Former name or former address, if changed since last report)
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Item 2. ACQUISITION OR DISPOSITION OF ASSETS.
On June 15, 1998, Horizon Group Properties, Inc. (the "Company")
completed a debt financing with Nomura Asset Capital Corporation ("NACC")
consisting of a secured credit facility pursuant to which a $108,205,000 loan
(the "Loan") was made by NACC to a limited partnership and two limited
liability companies indirectly wholly-owned by the Company. The Loan is (i)
collateralized by first mortgages on twelve factory outlet centers and one
power center; (ii) bears a variable rate of interest equal to one-month LIBOR
plus 1.90%; (iii) matures in three years; and (iv) requires monthly interest
and principal payments. An additional principal payment of $2.2 million is
due on September 1, 1998.
The Company and Horizon Group Properties, L.P. are guarantors of
the Loan and Prime Retail, L.P. is a guarantor with respect to approximately
$12.2 million of obligations under the Loan.
An excerpt of the press release announcing the Loan is attached hereto
as Exhibit 99.1.
Item 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits.
Number Description
------ -----------
10.1 Loan Agreement dated as of June 15, 1998 by and among Third
Horizon Group Limited Partnership, Nebraska Crossing Factory
Shops, L.L.C., and Indiana Factory Shops, L.L.C. and Nomura
Asset Capital Corporation
10.2 Form of Deed of Trust, Assignment of Leases and Rents and
Security Agreement with Nomura Asset Capital Corporation
10.3 Form of Mortgage, Assignment of Leases and Rents and
Security Agreement by and between Horizon Group Properties,
Inc. and Nomura Asset Capital Corporation
10.4 Form of Assignment of Leases and Rents by and between
Horizon Group Properties, Inc. and Nomura Asset Capital
Corporation
10.5 Guaranty dated as of June 15, 1998 by Horizon Group
Properties, Inc.
2
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and Horizon Group Properties, L.P. to and for the benefit
of Nomura Asset Capital Corporation
10.6 Guaranty and Indemnity Agreement dated 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.
99.1 Excerpt of Press Release issued by Horizon Group Properties,
Inc. on June 15, 1998 announcing the completion of the debt
financing with Nomura Asset Capital Corporation
3
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
HORIZON GROUP PROPERTIES, INC.
(Registrant)
Date: June 30, 1998
By: /s/ Gary J. Skoien
Name: Gary J. Skoien
Title: President and Chief Executive Officer
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EXHIBIT INDEX
Number Description
------ -----------
10.1 Loan Agreement dated as of June 15, 1998 by and among Third
Horizon Group Limited Partnership, Nebraska Crossing Factory
Shops, L.L.C., and Indiana Factory Shops, L.L.C. and Nomura
Asset Capital Corporation
10.2 Form of Deed of Trust, Assignment of Leases and Rents and
Security Agreement with Nomura Asset Capital Corporation
10.3 Form of Mortgage, Assignment of Leases and Rents and Security
Agreement by and between Horizon Group Properties, Inc. and
Nomura Asset Capital Corporation
10.4 Form of Assignment of Leases and Rents by and between Horizon
Group Properties, Inc. and Nomura Asset Capital Corporation
10.5 Guaranty dated as of June 15, 1998 by Horizon Group Properties,
Inc. and Horizon Group Properties, L.P., to and for the benefit
of Nomura Asset Capital Corporation
10.6 Guaranty and Indemnity Agreement dated 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.
99.1 Excerpt of Press Release issued by Horizon Group Properties,
Inc. on June 15, 1998 announcing the completion of the debt
financing with Nomura Asset Capital Corporation
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EXHIBIT 10.1
LOAN AGREEMENT
Dated as of June 15, 1998
Between
THIRD HORIZON GROUP LIMITED PARTNERSHIP,
NEBRASKA CROSSING FACTORY SHOPS, L.L.C.,
AND
INDIANA FACTORY SHOPS, L.L.C.
as Borrowers
AND
NOMURA ASSET CAPITAL CORPORATION,
as Lender
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TABLE OF CONTENTS
Page
I. DEFINITIONS; PRINCIPLES OF CONSTRUCTION . . . . . . . . . . . . . . . . 1
Section 1.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.2 Principles of Construction . . . . . . . . . . . . . . . . 12
II. GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 2.1 The Loan . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.1.1 Commitment. . . . . . . . . . . . . . . . . . . . . . . . . 12
2.1.2 Disbursement to Borrower. . . . . . . . . . . . . . . . . . 13
2.1.3 The Note. . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.1.4 Use of Proceeds of Loan . . . . . . . . . . . . . . . . . . 13
2.1.5 Amendment to Loan In Connection With Prepayment
During First Four Months. . . . . . . . . . . . . . . . . . 13
2.1.6 Release of Prime Guaranties . . . . . . . . . . . . . . . . 13
Section 2.2 Interest; Monthly Payments . . . . . . . . . . . . . . . . 14
2.2.1 Generally . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.2.2 Default Rate. . . . . . . . . . . . . . . . . . . . . . . . 14
Section 2.3 Loan Repayment . . . . . . . . . . . . . . . . . . . . . . 14
2.3.1 Repayment . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.3.2 Mandatory Prepayments . . . . . . . . . . . . . . . . . . . 14
Section 2.4 Release of Property. . . . . . . . . . . . . . . . . . . . 14
2.4.1 Release of Properties . . . . . . . . . . . . . . . . . . . 14
2.4.2 Release on Payment in Full. . . . . . . . . . . . . . . . . 15
2.4.3 Out-Parcel Severance. . . . . . . . . . . . . . . . . . . . 15
Section 2.5 Payments and Computations. . . . . . . . . . . . . . . . . 16
2.5.1 Making of Payments. . . . . . . . . . . . . . . . . . . . . 16
2.5.2 Computations. . . . . . . . . . . . . . . . . . . . . . . . 16
2.5.3 Late Payment Charge . . . . . . . . . . . . . . . . . . . . 16
Section 2.6 Cash Management Arrangements . . . . . . . . . . . . . . . 16
Section 2.7 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
III. CONDITIONS PRECEDENT. . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 3.1 Conditions Precedent to the Loan . . . . . . . . . . . . . 17
IV. REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . 20
Section 4.1 Borrower Representations . . . . . . . . . . . . . . . . . 20
Section 4.2 Survival of Representations. . . . . . . . . . . . . . . . 28
V. AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 5.1 Borrower Covenants . . . . . . . . . . . . . . . . . . . . 28
VI. NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 6.1 Borrowers' Negative Covenants. . . . . . . . . . . . . . 34
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VII. CASUALTY; CONDEMNATION; ESCROWS . . . . . . . . . . . . . . . . . . . . 36
Section 7.1 Insurance; Casualty and Condemnation.. . . . . . . . . . . 36
7.1.1 Insurance.. . . . . . . . . . . . . . . . . . . . . . . . . 36
7.1.2 Casualty and Application of Proceeds. . . . . . . . . . . . 39
7.1.3 Condemnation. . . . . . . . . . . . . . . . . . . . . . . . 40
Section 7.2 Required Repair; Required Repair Funds . . . . . . . . . . 42
7.2.1 Required Repairs; Deposits. . . . . . . . . . . . . . . . . 42
7.2.2 Grant of Security Interest. . . . . . . . . . . . . . . . . 42
7.2.3 Release of Required Repair Funds. . . . . . . . . . . . . . 42
7.2.4 Failure to Perform Required Repairs . . . . . . . . . . . . 43
Section 7.3 Tax and Insurance Escrow Fund. . . . . . . . . . . . . . . 43
7.3.1 Tax and Insurance Escrow Fund . . . . . . . . . . . . . . . 43
7.3.2 Grant of Security Interest. . . . . . . . . . . . . . . . . 44
7.3.3 Application of Tax and Insurance Escrow Fund. . . . . . . . 44
Section 7.4 Capital Reserve Fund . . . . . . . . . . . . . . . . . . . 44
7.4.1 Capital Reserve Fund. . . . . . . . . . . . . . . . . . . . 44
7.4.2 Grant of Security Interest. . . . . . . . . . . . . . . . . 44
7.4.3 Application of Capital Reserve Fund . . . . . . . . . . . . 45
7.4.4 Payment of Capital Expenses . . . . . . . . . . . . . . . . 45
Section 7.5 Intentionally Deleted. . . . . . . . . . . . . . . . . . . 45
Section 7.6 Payment of Approved Operating Expenses.. . . . . . . . . . 46
VIII. DEFAULTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 8.1 Event of Default . . . . . . . . . . . . . . . . . . . . . 47
Section 8.2 Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 8.3 Remedies Cumulative . . . . . . . . . . . . . . . . . . . . 49
IX. SPECIAL PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 9.1 Sale of Note and Securitization. . . . . . . . . . . . . . 50
Section 9.2 Securitization Indemnification . . . . . . . . . . . . . . 50
Section 9.3 Rating Surveillance. . . . . . . . . . . . . . . . . . . . 50
Section 9.4 Exculpation. . . . . . . . . . . . . . . . . . . . . . . . 50
Section 9.5 Termination of Manager . . . . . . . . . . . . . . . . . . 50
Section 9.6 Retention of Servicer. . . . . . . . . . . . . . . . . . . 51
X. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 10.1 Survival . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 10.2 Lender's Discretion. . . . . . . . . . . . . . . . . . . . 51
Section 10.3 Governing Law . . . . . . . . . . . . . . . . . . . . . . 51
Section 10.4 Modification, Waiver in Writing . . . . . . . . . . . . . 52
Section 10.5 Delay Not a Waiver. . . . . . . . . . . . . . . . . . . . 52
Section 10.6 Notices . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 10.7 Trial by Jury . . . . . . . . . . . . . . . . . . . . . . 54
Section 10.8 Headings. . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 10.9 Severability. . . . . . . . . . . . . . . . . . . . . . . 54
Section 10.10 Preferences. . . . . . . . . . . . . . . . . . . . . . . 54
Section 10.11 Waiver of Notice . . . . . . . . . . . . . . . . . . . . 54
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Section 10.12 Remedies of Borrowers. . . . . . . . . . . . . . . . . . 54
Section 10.13 Expenses; Indemnity. . . . . . . . . . . . . . . . . . . 54
Section 10.14 Exhibits Incorporated. . . . . . . . . . . . . . . . . . 56
Section 10.15 Offsets, Counterclaims and Defenses. . . . . . . . . . . 56
Section 10.16 No Joint Venture or Partnership. . . . . . . . . . . . . 56
Section 10.17 Publicity. . . . . . . . . . . . . . . . . . . . . . . . 56
Section 10.18 Waiver of Marshalling of Assets. . . . . . . . . . . . . 56
Section 10.19 Waiver of Counterclaim . . . . . . . . . . . . . . . . . 56
Section 10.20 Conflict; Construction of Documents. . . . . . . . . . . 56
Section 10.21 Brokers and Financial Advisors . . . . . . . . . . . . . 56
Section 10.22 No Third Party Beneficiaries . . . . . . . . . . . . . . 57
Section 10.23 Prior Agreements . . . . . . . . . . . . . . . . . . . . 57
Section 10.24 Contribution Among Borrowers . . . . . . . . . . . . . . 57
SCHEDULES
Schedule 1 - Matters Regarding Representations
Schedule 2 - Rent Roll
Schedule 3 - Required Repairs
Schedule 4 - Intentionally Deleted
Schedule 5 - Description of Properties
Schedule 6 - Allocated Loan Amounts
EXHIBITS
Exhibit A - Form of Note
Exhibit B - Securitization Indemnification Agreement
Exhibit C - Rate Lock Agreement
Exhibit D - Officer's Certificate
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LOAN AGREEMENT
LOAN AGREEMENT dated as of June 15, 1998, among THIRD HORIZON
GROUP LIMITED PARTNERSHIP, a Delaware limited partnership ("HORIZON
BORROWER"), NEBRASKA CROSSING FACTORY SHOPS, L.L.C., a Delaware limited
liability company ("NEBRASKA BORROWER"), INDIANA FACTORY SHOPS, L.L.C., a
Delaware limited liability company ("INDIANA BORROWER") (collectively, the
"BORROWERS"), each having an address c/o Horizon Group Properties, L.P., 5000
Hakes Drive, Norton Shores, Michigan 49441 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, Each of the Borrowers owns one or more of the
Properties identified in Schedule 5;
WHEREAS, the Borrowers desire to obtain a loan in the amount of
$108,205,000 (the "LOAN"), which Loan shall be secured by, among other
things, each of the Properties;
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:
I. DEFINITIONS; PRINCIPLES OF CONSTRUCTION
SECTION 1.1 DEFINITIONS. 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.
"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, prepayment or as otherwise expressly provided herein, the
Allocated Loan Amount 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
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(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 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 prepay 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 as a result of the
receipt by Lender of Loss Proceeds or partial prepayments made in accordance
with Section 2.3 hereof related to a specific Property, the Allocated Loan
Amount for the Property with respect to which the Loss or prepayments 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 the amount of any such prepayment 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 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 were applied.
"ALTA" shall mean American Land Title Association, or any
successor thereto.
"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).
"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 either (A) the
relevant line item for the entire year covered by the approved Capital Budget
for such Property to be exceeded by more than 5% or (B) 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, or (iii) have been approved by the Lender.
"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
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5.1(u) and the applicable provisions of the Mortgage encumbering such
Property, including brokerage commissions, tenant improvements and other
inducements, which expenses are (a) approved by Lender in connection with
approving the applicable Lease, or (b) otherwise 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
either (A) the relevant line item for the entire year covered by the approved
Operating Budget or (B) the total of such approved Operating Budget for the
Current Month and all prior months covered by such approved Operating Budget
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.
"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.
"BORROWERS" shall have the meaning set forth in the initial
Paragraph of this Agreement. "Borrower" shall mean any one or more of the
Borrowers 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 or Chicago are required
or permitted to not be 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.
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"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.
"CASUALTY/CONDEMNATION PREPAYMENTS" shall have the meaning set
forth in Section 2.3.2.
"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).
"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 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.
"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, 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
fraction in which (a) the numerator is the Net Operating Income (determined
in accordance with the adjustments provided for in the
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definition of Operating Revenues and Operating Expenses) 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 for such period based upon the greater of (i) a
debt service constant of 10.09%, and (ii) a debt service constant based upon
an interest rate equal to the Treasury Rate as of such date and a 25 year
amortization schedule.
"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.
"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.
"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.
"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.
"GUARANTORS" shall mean Prime Retail L.P., Horizon Group
Properties, Inc., and Horizon Group Properties, L.P.
"GUARANTY" shall mean each guaranty of the Loan (subject to the
limits set forth therein, if any) executed and delivered by the Guarantors.
"HGP" shall mean Horizon Group Properties, Inc.
"HGPLP" shall mean Horizon Group Properties, L.P.
"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).
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"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 1.30.
"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 floating rate of interest equal to
LIBOR plus 1.90%.
"KNOWLEDGE" shall mean, when used to modify a representation or
warranty, actual knowledge of the executive officers of HGP after diligent
inquiry and investigation.
"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 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 and 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
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and other similar liens and encumbrances.
"LOAN" shall mean the loan made to Borrowers by Lender pursuant
hereto in the original principal amount of $108,205,000 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, the Cash Collateral Account Agreements and all other documents,
agreements and instruments executed and delivered by a Borrower or any
Affiliate of a Borrower evidencing or securing the Loan.
"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, which
management agreement may be contained in the organizational documents of such
Borrower.
"MANAGER" shall mean HGPLP or any successor manager of the
Properties approved by Lender.
"MATERIAL ADVERSE EFFECT" shall mean any event or condition
that has a material adverse effect on (a) the Properties, (b) the business,
prospects, profits, operations or condition (financial or otherwise) of the
Properties or Borrowers, taken as a whole, (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 (July 11, 2001), by declaration of acceleration,
or otherwise.
"MORTGAGES" shall mean each of the mortgages and deeds of trust
executed by the applicable Borrower for the benefit of Lender, 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 Revenue 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 determined by Lender.
"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
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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.
"OFFICER'S CERTIFICATE" shall mean a certificate delivered to
Lender by the Borrowers which is signed by a senior executive officer 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, 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), (c) a management fee of at least 4%
of gross revenues, if actual is less than 4%, and (d) any other matters that
may have a material impact on Operating Expenses in Lender's reasonable
opinion. Operating Expenses will not include debt service, capital expenses,
non-cash items such as depreciation and amortization and any extraordinary
one-time expenditures not considered operating expenses under GAAP.
"OPERATING REVENUE" 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 Revenue
shall be subject to adjustment by Lender (a) for a vacancy allowance at the
greater of the market vacancy rate, the actual vacancy rate or 5%, (b) for
any tenants operating under bankruptcy protection whose leases have not been
assumed, (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 that may have a material impact on Operating Revenue in
Lender's reasonable opinion. Operating Revenue 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 Revenue
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 or (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
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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.
"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.
"OUT-PARCEL" shall have the meaning as forth in Section
"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 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 not yet payable
or delinquent or being contested in good faith and by appropriate proceedings
in accordance with Section 5.1(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 and (f) such other title and survey exceptions as Lender has
approved or may approve in writing in Lender's sole discretion.
"PERMITTED INDEBTEDNESS" shall mean (a) the Debt, and (b)
normal and customary trade debt customarily payable within thirty (30) days.
"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.
"PREMISES" shall, with respect to a Property, have the meaning
set forth in the Granting Clause of the Mortgage encumbering such Property.
"PRI" shall mean Prime Retail, Inc., a Delaware corporation.
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"PRLP" shall mean Prime Retail, L.P., a Delaware limited
partnership.
"PROPERTIES" shall mean, collectively, the properties described
on Schedule 5 attached hereto 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 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
agreement relating thereto 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 time of
determination
"PRUDENT MANAGER STANDARD" shall mean the 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 and other types of retail
properties 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.
"RELEASE PRICE" shall have the meaning set forth in Section
"REMAINING REALTY" shall have the meaning set forth in Section
2.4.3.
"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.
"RENT ROLL" shall have the meaning set forth in Section
"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.
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"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).
"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.
"SECURITIES ACT" shall have the meaning set forth in Section
9.2(a).
"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).
"STATE" shall mean the State of Illinois.
"STATED MATURITY DATE" shall mean July 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.
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"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, at any time of determination, a
rate per annum equal to 200 basis points plus 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 most recent week ending
prior to the date of determination, of U.S. Treasury constant maturities with
maturity dates (one longer and one shorter) most nearly approximating a term
of ten years from the Stated Maturity Date.
"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 1.2 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 2.1 THE LOAN.
2.1.1 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.
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2.1.2 DISBURSEMENT TO BORROWER. Borrowers may request and
receive only one borrowing hereunder in respect of the Loan, except to the
extent provided in Section 2.1.5. Borrowers shall receive the Loan 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, except to the extent
provided in Section 2.1.5.
2.1.3 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, shall be entitled to the benefits of this Agreement
and shall be secured by the Mortgages and the other Loan Documents.
2.1.4 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.
2.1.5 AMENDMENT TO LOAN IN CONNECTION WITH PREPAYMENT DURING
FIRST FOUR MONTHS. If within four months following the Closing Date, HGP or
HGPLP 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, then Lender agrees to permit the
modification of the Loan Documents to provide as follows:
(a) the Guaranty from PRLP will be released;
(b) Borrower shall have the right to reborrow the amounts
prepaid, subject to reasonable conditions to be determined by the parties at
the time of such amendment, including, reasonable corporate covenants and
financial tests (including without limitation tests regarding minimum debt
service coverage for the Borrowers and Guarantors, maximum debt to asset
value for the Borrowers and Guarantors, minimum net worth for the Guarantors
and minimum debt to market capitalization for the Guarantors), and a draw fee
of .25% on the amount reborrowed;
(c) the fixed monthly amortization payments required
pursuant to Section 2.3.2 shall be eliminated and amortization payments shall
only be required in connection with the sale of a Property;
(d) the Interest Rate set forth in the Note shall be reduced
to LIBOR plus 1.75%; and
(e) the parties shall negotiate in good faith the release or
modification of the obligation to hedge the Loan as described in Section
5.1(x) (Interest Rate Management).
None of the modifications described above shall become effective until
Borrower and Lender execute a Modification Agreement which amends the terms
of the Loan Documents.
2.1.6 RELEASE OF PRIME GUARANTIES. In the event that Borrowers
repay at least $50,000,000 from the proceeds of public or private equity
after the first four months of the term of the Loan, then Lender agrees to
release PRLP (but not any other guarantor) from any further obligations under
its Guaranty but Borrowers shall not be entitled to any of the other
modifications to the Loan Documents set forth in Section 2.1.5.
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SECTION 2.2 INTEREST; MONTHLY PAYMENTS.
2.2.1 GENERALLY. From the date hereof through but not
including the Stated Maturity Date, Borrowers shall pay interest on the
outstanding principal balance of the Loan at the Interest Rate on each
Payment Date.
2.2.2 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.
SECTION 2.3 LOAN REPAYMENT.
2.3.1 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.
2.3.2 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 on a Payment
Date and include all accrued and unpaid interest on the amount prepaid up to
but not including such Payment Date or, if not paid on a Payment Date,
include interest that would have accrued on the amount prepaid to but not
including the next 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.
(c) On each Payment Date Borrower shall pay to Lender
$125,000 (for the first 24 monthly Payment Dates) and $166,667 (for each
subsequent Payment Date) which shall be applied to reduce the outstanding
principal balance of the Loan.
(d) On or before September 1, 1998, Borrowers shall have
repaid $2,205,000 in addition to the payments required pursuant to Section
2.3.2(c).
SECTION 2.4 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.
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2.4.1 RELEASE OF PROPERTIES.
(a) Borrowers may in connection with arm's length sale of a
Property to an unrelated third party or a refinancing provided by NACC, from
time to time, provided no Default or Event of Default exists hereunder request
in writing a release of any Property from the Lien of the Mortgage on such
Property and the applicable Borrower in connection with a prepayment by an
amount (the "RELEASE PRICE") equal to the greater of (1) 100% of the Allocated
Loan Amount for such Property (and all properties held by the applicable
Borrower) or (2) 100% of the proceeds of sale of the Property net of customary
sales expenses consistent with sales of similar properties (or in the case of a
refinancing by NACC, 100% of the refinancing proceeds net of customary
refinancing expenses) Lender shall, upon satisfaction of all of the following
terms and conditions, permit a release of the Lien of the Mortgage on such
Property:
(i) Borrowers shall have prepaid the Loan by the amount
of the Release Price and the Property shall no longer be owned by one of
the Borrowers;
(ii) Lender shall have received from Borrowers evidence
in form and substance satisfactory to Lender that the Debt Service
Coverage Ratio (computed based on the amount of the Loan after
application of the Release Price and the Net Operating Income of the
remaining Properties) immediately following the release of such Property
is at least equal to the lesser of (A) the Initial DSCR and (B) the Debt
Service Coverage Ratio immediately prior to the release of such 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
hereunder or after application of the Release Price;
(iv) Borrowers shall have given at least thirty days
prior written notice of the contemplated prepayment; and
(v) If the member or general partner of the Borrower
being released is also a member or general partner of another Borrower,
Borrowers shall have taken such steps as may be required to assure that of the
release contemplated hereby does not affect the bankruptcy remote status of any
of the remaining Borrowers.
(b) In connection with the release of the Lien of a Mortgage,
Borrowers shall submit to Lender, not less than fourteen (14) 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 reasonable 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 is in compliance with
all Legal Requirements.
(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.
2.4.2 RELEASE ON PAYMENT IN FULL. Lender shall, upon the written
request and at the
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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 Liens of the Mortgages and the
other Loan Documents if not theretofore released.
2.4.3 OUT-PARCEL SEVERANCE.
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 if:
(i) Lender approves such transfer;
(ii) the Debt Service Coverage Ratio for the twelve months prior
to such release is 1.40; or
(iii) The Out Parcel is sold on an arm's length basis to an
unrelated Third Party and Lender receives 100% of the net sales proceeds
(after deduction for customary sales expenses consistent with sales of
similar properties) and such sale is not detrimental to the operation of
the remaining portion of such Property after the release and does not
constitute a violation of any Property Agreement or applicable law.
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 Property Agreements, required in connection
with the release of the Out Parcel.
SECTION 2.5 PAYMENTS AND COMPUTATIONS.
2.5.1 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 12:00 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.
2.5.2 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.
2.5.3 LATE PAYMENT CHARGE. If any principal, interest or any
other sums due under the Loan Documents is not paid by Borrowers on 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.
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SECTION 2.6 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 LaSalle National Bank or at such other bank or banks selected by
Borrowers (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 Collection Account. All other income or revenue received by
Borrowers or Manager in connection with the Properties will be deposited into
the Collection Account within three Business Days after the date of receipt.
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 an Event of Default, 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 2.7 FEES.
(a) Borrowers shall pay to Lender, on the Closing Date, a
structuring fee equal to .50% of the amount funded hereunder.
(b) Borrowers shall pay to Lender an exit fee (the "Exit Fee")
in the event that the Loan is repaid other than the payment due pursuant to
Section 2.3.2(d) and other than repayments with the proceeds of permanent
financing obtained from Lender. The Exit Fee shall be in an amount equal to 1%
prior to the first anniversary of the Closing Date and 2% thereafter of the
positive difference between (i) the amount of any repayment made hereunder
(regardless of whether such amount is available for reborrowing) and (ii) any
portion of such amount repaid from the proceeds of permanent debt financing
provided by Lender. The Exit Fee in respect of each repayment shall be payable
at the time of such repayment except that no payment of the Exit Fee shall be
required at the time of payment of monthly amortization due pursuant to Section
2.3.2(c) until there is a voluntary prepayment or payment of the Loan in full at
which time Borrower shall owe the accrued Exit Fee for the monthly payment
amounts previously made unless the Loan is refinanced at that time from proceeds
of permanent debt financing provided by NACC.
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III. CONDITIONS PRECEDENT
SECTION 3.1 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.
(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 monthly premiums then payable have been
made.
(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
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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
Guaranties.
(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 and Guarantor of all organizational
documentation related to such Borrower or Guarantor and/or the formation,
structure, existence, good standing and/or qualification to do business of such
Borrower or Guarantor, 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 COUNSEL. Lender shall have received opinions
of Borrowers' and Guarantors' 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 (i) the amount described in clause (b) of
Section 7.3.1, (ii) currently due Other Charges, and (iii) ground lease rents
which amounts shall be funded with proceeds of the Loan.
(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
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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 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 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 original principal balance of the
Loan 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.
(r) DELIVERY OF BUDGETS. Borrower shall have delivered to
Lender 1998 budgets for each of the Properties.
IV. REPRESENTATIONS AND WARRANTIES
SECTION 4.1 BORROWER REPRESENTATIONS. Each Borrower represents
and warrants as of the date hereof and as of the Closing Date, and as of any
date Lender makes a future Advance as contemplated in Section 2.1.5 hereof,
that, except as disclosed in Schedule 1:
(a) ORGANIZATION. Each Borrower and SPE 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 SPE is duly qualified to do business and is in
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good standing in each jurisdiction where it is required to be so qualified in
connection with its properties, businesses and operations. Each Borrower and
SPE 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 SPE 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
each 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
SPE 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. Except as disclosed in writing to Lender 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 best knowledge of Borrower
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after due inquiry, 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 5) to the real property
comprising part of the Property owned or leased by it, 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 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 SPE 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
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portion of its assets or property, and no Borrower or SPE 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, except as
previously disclosed to Lender, there are no contracts affecting any Property
which provide for payments of more than $50,000 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 except as referred to or reflected in said financial
statements or as otherwise disclosed in writing to Lender prior to the date
hereof and as required to be disclosed under GAAP. 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.
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(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, 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.
(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 best 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 primarily for
retail 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.
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(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.
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 and there are no offsets, claims or defenses to the enforcement thereof;
(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 and there is no claim or basis for a claim by the tenant
thereunder for an adjustment to the rent; (v) no tenant has made any claim
against the landlord under the Leases which remains outstanding and 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. 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 thereof which remains in effect as of the
date thereof. 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
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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 as shown
on Schedule 5, 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.
Except for mechanics' liens arising from Permitted
Indebtedness which are being contested in accordance with
the requirements of this Agreement, 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 other than to employees in the
ordinary course of business (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 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 in a manner which would adversely affect
such Borrower's existence as a single purpose entity.
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(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) Except as set forth in the Loan Documents, 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(dd) 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 who derives more than 10% of its purchases or
revenues from its activities with the Borrower, (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
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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 SPE (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 SPE.
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 Management Agreement delivered
to lender in connection with any of the Properties, if any, is in full force and
effect and there is no default, breach or violation existing thereunder by any
party thereto and no event has occurred (other than payments due but not yet
delinquent) that, with the passage of time or the giving of notice, or both,
would constitute a default, breach or violation by any party thereunder.
Neither the execution and delivery of the Loan Documents, Borrowers' performance
thereunder, the recordation of the Mortgages, nor the exercise of any remedies
by Lender, will adversely affect a Borrower's rights under any Management
Agreement.
SECTION 4.2 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
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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 5.1 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 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 make, or cause to be made, all reasonably necessary repairs,
renewals, replacements, betterments and improvements to the Properties thereto,
all as provided in the Mortgages.
(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 or request
that such Taxes and Other Charges be paid from amounts in the Tax and Insurance
Escrow Fund. 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). Other than for Permitted Encumbrances, 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.
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(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 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:
(i) 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
(ii) 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.
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(k) FINANCIAL REPORTING.
(i) Borrowers shall keep and maintain or shall 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, books,
records and accounts reflecting in reasonable detail all of the financial
affairs of Borrowers and all items of income and expense in connection with the
operation of the Property and in connection with any services, equipment or
furnishings provided in connection with the operation of each Property. Lender
shall have the right from time to time at all times during normal business hours
upon reasonable prior written notice to Borrowers to examine such books, records
and accounts at the office of Borrowers or other Person maintaining such books,
records and accounts and to make such copies or extracts thereof as Lender shall
desire. After the occurrence and during the continuance of an Event of Default
with respect to Borrowers or any Property, Borrower shall pay any costs and
expenses incurred by Lender to examine Borrowers' accounting records with
respect to such Property, as Lender shall reasonably determine to be necessary
or appropriate in the protection of Lender's interest.
(ii) Borrowers shall furnish to Lender annually, within 90 days
following the end of each Fiscal Year, a complete copy of Borrowers' operating
and financial statements audited by Ernst & Young (or any other certified public
accounting firm reasonably acceptable to Lender) in accordance with GAAP or such
other accounting basis reasonably acceptable to Lender consistently applied
covering Borrowers' financial position and results of operations, including
consolidated and consolidating balance sheets for each Property, for such Fiscal
Year and containing (v) a statement of revenues and expenses, (w) a statement of
assets and liabilities, (x) a statement of Borrowers' equity, (y) an exhibit
detailing capitalized expenses for such Fiscal Year and (z) for each Property
the amount of sales per square foot.
Together with Borrowers' annual financial statements, Borrowers shall furnish to
Lender an Officer's Certificate certifying as of the date thereof (x) that, to
the best of Borrowers' knowledge, the annual financial statements present fairly
in all material respects the results of operations and financial condition of
Borrowers all in accordance with GAAP consistently applied, and (y) whether
there exists an Event of Default or Default, and if such Event of Default or
Default exists, the nature thereof, the period of time it has existed and the
action then being taken to remedy same.
(iii) Borrowers shall furnish to Lender, within 45 days following
the end of each quarter of each Fiscal Year (x) unaudited operating and
financial statements with respect to Borrowers for that quarter, together with
an Officer's Certificate in substantially the form attached hereto as EXHIBIT D.
(iv) Borrowers shall furnish to Lender, within 30 days following
the end of each month, (x) property operating statements for each Property and
an Officer's Certificate certifying such property operating statements, and (y)
certified updated occupancy statements and rent rolls for each Property
identifying all Leases, including newly executed or unrenewed Leases, and in
forms reasonably acceptable to Lender.
(v) Borrowers shall furnish to Lender, within 15 Business Days
after request (which may be made not more than once a quarter), such further
information with respect to the operation of any Property and the financial
affairs of Borrowers as may be reasonably requested by Lender, PROVIDED,
HOWEVER, THAT any such information reasonably considered confidential by
Borrowers shall be delivered only upon receipt of a confidentiality agreement
reasonably acceptable to Borrowers.
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(vi) Borrowers shall furnish to Lender, within 15 Business Days
after request, such further information regarding any Plan or Multiemployer Plan
and any reports or other information required to be filed under ERISA as may be
reasonably requested by Lender.
(vii) Borrowers 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 primarily in the retail businesses presently conducted 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 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, (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 ten
(10) 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, and (D) 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
thirty (30) 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.
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(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 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
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 at least 45 days prior to
the end of each Fiscal Year, for approval by Lender, which approval shall not be
unreasonably withheld or delayed, a proposed pro forma budget for each Property
during the 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 twenty (20) 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 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, without Lender's
prior written consent, 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 (i) 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 20,000 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 if consistent with
the Prudent Manager Standard. 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 otherwise 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
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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 pursuant the Management Agreement. 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 and property improvement
plan received by it pursuant to 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) INTEREST RATE MANAGEMENT. Attached hereto as Exhibit C
is Lender's standard form of forward rate lock agreement (the "Rate Lock
Agreement"). The defined terms used in this Section 5.1(x) and not otherwise
defined herein shall have the meanings set forth in the Rate Lock Agreement.
If at any time during the term of the Loan the hypothetical loan constant
determined by using the Benchmark Treasury Rate, a loan spread of 200 basis
points, and assuming a twenty five year amortization schedule would exceed
10.09%, then Borrower will be required to immediately lock an interest rate
pursuant to the Rate Lock Agreement for an Anticipated Loan Amount equal to
the outstanding balance of the Loan, for an effective term of ten years, and
for a Rate Lock Period expiring no earlier than the Stated Maturity Date.
The "number of months forward" for purposes of the Rate Lock Agreement shall
be the number of months from the time of the rate lock to the Stated Maturity
Date. Borrowers agree to enter execute a Rate Lock Agreement reflecting the
terms of the rate lock upon notice from Lender but all references to a Rate
Lock Deposit shall be deleted and the fee shall be four basis points per
month rather than eight. Borrower hereby irrevocably designates NACC as its
attorney-in-fact to lock its interest rate in accordance with the foregoing
and do all things necessary and required in order to effectuate and
consummate the rate lock and such rate lock shall be governed by the terms of
the Rate Lock Agreement with the same effect as if Borrower and NACC had
actually executed it. Any such agreement shall be considered a Loan Document
hereunder and
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shall be secured by all the Mortgages and covered by the terms of the
Guaranties. Borrower acknowledges and agrees that although Lender has the
right to unilaterally lock the rate at any time the hypothetical debt service
constant exceeds 10.09%, Lender shall have no liability to Borrowers if it
does not lock such rate or if it does not lock the rate at the lowest
possible rate provided that Lender agrees to act in good faith to lock the
rate at a market rate at the time the rate lock occurs. Borrower further
acknowledges that the rate locked will affect the pricing on any permanent
financing that may be available from Lender in order to repay this Facility.
If Borrower obtains permanent financing from Lender the hedge position
pursuant to the Rate Lock Agreement can be used in connection with such
permanent financing. If Borrower repays the Loan and does not obtain
permanent financing from Lender, then Borrower acknowledges that the
corresponding hedge positions in connection with the Rate Lock Agreement will
need to be unwound and that any losses incurred shall be the responsibility
of Borrowers. If any gains are realized in connection with the unwinding of
such hedge position, then such gains will be applied by Lender to reduce the
outstanding balance of the Loan.
VI. NEGATIVE COVENANTS
SECTION 6.1 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 shall be released pursuant hereto,
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) of the type set forth above 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
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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) constitutes a Permitted Encumbrance.
(c) DISSOLUTION. Neither Borrower, nor HGP, nor HGPLP 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 which is to primarily be in the retail
rental 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 except in the ordinary course of business
and 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.
(h) ASSETS. No Borrower shall purchase or own any real
property other than the Property owned by it (as shown on Schedule 5).
(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 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 (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 sale or transfer of any securities of HGP
or the limited partnership interests in HGPLP or, as to any Borrower that is a
limited partnership, transfers of limited partnership interests in Borrower so
long as HGPLP 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 HGPLP and SPE collectively
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own at least 50.1% of the total membership interests of such Borrower. No
Transfer consented to by Lender pursuant to clause (ii) or (iii) above shall
be permitted unless Lender shall have received (a) 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 and (b) a
non-consolidation opinion satisfactory to Lender from the transferee's
counsel. 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 7.1 INSURANCE; CASUALTY AND CONDEMNATION.
7.1.1 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.
(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
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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
to the extent commercially available and generally obtained by owners of similar
properties, 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 Revenue 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 Revenue 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) 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
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be acceptable. Originals or certified copies of all insurance (or certificates
with such excerpts from the policies as Lender may request) 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, renewed 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.
7.1.2 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 the greater
of (A) 5% of the Allocated Loan Amount and (B) $300,000, 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.
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(ii) If an Insured Casualty shall equal or exceed the
greater of (A) 5% of the Allocated Loan Amount and (B) $300,000, Borrower may
settle and adjust any claim with the consent of Lender, and Lender may settle
and adjust any claim (without the consent of Borrowers) if there exists an Event
of Default, and agree with the insurance company or companies on the amount to
be paid on the loss. 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 50% 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 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), (iii) then, if no 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 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.
(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 either
to pay directly the costs incurred or to reimburse Borrower for such costs, 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
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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.
7.1.3 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 and during the continuance of an Event of
Default, in which case 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 the greater of (i) 5% of the
Allocated Loan Amount for such Property and (ii) $300,000 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
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then current economic conditions, applicable zoning laws, building
regulations and other applicable Legal Requirements and Property Agreements,
rentable facility of the same sort as existed prior to the condemnation, and,
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 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 reasonable 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. 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
(either to pay vendors directly or to reimburse Borrowers) 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.
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SECTION 7.2 REQUIRED REPAIR; REQUIRED REPAIR FUNDS.
7.2.1 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.
7.2.2 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.
7.2.3 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.
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7.2.4 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 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 7.3 TAX AND INSURANCE ESCROW FUND.
7.3.1 TAX AND INSURANCE ESCROW FUND. Borrowers shall pay to
Lender, with respect to each Property, (a) on each Payment Date, (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) ground lease rents 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 and the next required payment of
Insurance Premiums on the due date therefor and ground lease rents 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 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 provided there exists no
Default or Event of Default return any excess to Borrowers. 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.
7.3.2 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
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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.
7.3.3 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; 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 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 7.4 CAPITAL RESERVE FUND.
7.4.1 CAPITAL RESERVE FUND. Borrowers shall pay to Lender on each
Payment Date an amount with respect to each Property equal to one-twelfth
(1/12th) of the product obtained by multiplying the aggregate amount of square
feet of rentable space in each Property by the amount required per square foot
for such Property as set forth in Schedule 3 (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 Approved Capital Expenses
pursuant to the terms hereof, Lender shall 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.
7.4.2 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 Agreement is, among other things, intended by the parties to be a
security agreement for purposes of the Illinois Uniform Commercial Code.
7.4.3 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; 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
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on the investment of any funds constituting the Capital Reserve Fund.
7.4.4 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) no Event of Default shall have occurred and be continuing;
(B) such expenditure is for an Approved Capital Expense; and (C) 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 7.5 INTENTIONALLY DELETED.
SECTION 7.6 PAYMENT OF APPROVED OPERATING EXPENSES. Funds held
in the Cash Collateral Account may be used for Approved Operating Expenses,
provided that such use shall be in Lender's discretion if an Event of Default
has occurred and is continuing. Provided an Event of Default has not occurred
and is continuing, Borrowers may from time to time send a request for
disbursement of funds in the Cash Collateral Account for payment of Approved
Operating 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 principal and interest due in respect of the Loan on the
next Payment Date, such disbursements for Approved Operating Expenses shall be
made by the Lender so long as (A) no Event of Default shall have occurred and be
continuing; (B) such expenditure is for an Approved Operating Expense; and (C)
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 Operating Expenses and a description thereof, (x) that all
outstanding trade payables then due (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 Operating
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 Operating 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 Operating Expenses shall be made to
Borrowers on such Payment Date. If Borrowers shall fail to validly request a
disbursement for payment of Approved Operating 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 Operating 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 Operating 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.
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VIII. DEFAULTS
SECTION 8.1 EVENT OF DEFAULT.
(a) Each of the following events shall constitute an event of
default hereunder (each, an "EVENT OF DEFAULT"):
(i) if any portion of the Debt is not paid when due;
(ii) if any of the Taxes or other charges are not paid
prior to delinquency, subject to Borrowers' right to contest Taxes and other
charges as provided herein;
(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 in any report, certificate,
financial statement or other instrument, agreement or document furnished by a
Borrower 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 or Guarantor 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 any Guarantor or if any Borrower or Guarantor
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 Guarantor, or if any proceeding for the dissolution or
liquidation of a Borrower or Guarantor 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, a Guarantor or
a Property, or if any other such event shall occur or condition shall exist, if
the effect of such event or condition is to accelerate the maturity of any
portion of the Debt or to permit Lender to accelerate the maturity of all or any
portion of the Debt;
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(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.
(xiii) An Event of Default occurs under that certain Loan
Agreement between Lender and MG Patchogue II Limited Partnership bearing even
date herewith.
(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 8.2 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.
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(b) 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) 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 8.3 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 9.1 SALE OF NOTE 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.
SECTION 9.2 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 9.3 RATING SURVEILLANCE. Lender may retain the Rating
Agencies to provide rating surveillance services on any certificates issued in a
Securitization. The pro rata share (based on the size of the Loan relative to
the size of the pool of loans included in such Securitization) of such rating
surveillance will be at the expense of Borrowers.
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SECTION 9.4 INTENTIONALLY DELETED.
SECTION 9.5 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 Service Coverage Ratio for the Properties for such calendar quarter of not
less than 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 require that Borrowers retain 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 9.6 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 10.1 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 10.2 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.
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SECTION 10.3 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.
(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 AND LENDER HEREBY IRREVOCABLY
SUBMITS TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUIT, ACTION OR PROCEEDING.
EACH BORROWER DOES HEREBY DESIGNATE AND APPOINT CT CORPORATION SERVICES, INC. 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.
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SECTION 10.4 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 10.5 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 10.6 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, 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
52
<PAGE>
with a copy to:
Nomura Asset Capital Corporation
311 South Wacker Drive
Suite 5400
Chicago, Illinois 60601
Attention: David Murdoch
If to Borrowers:
c/o Horizon Group Properties, L.P.
5000 Hakes Drive
Norton Shores, Michigan 49441
Attention: Chairman and Chief Executive Officer
with a copy to:
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.
SECTION 10.7 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 10.8 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 10.9 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
53
<PAGE>
remaining provisions of this Agreement.
SECTION 10.10 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 10.11 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 10.12 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 10.13 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) Borrowers complying with any requests made pursuant to
Section 9.1 hereof (subject to the limitations contained in such section); (vi)
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; (vii) enforcing
or preserving any rights, in response to third party claims or the prosecuting
or defending of any action or proceeding or
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<PAGE>
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 (viii) 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.
(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, (ii) the use or
intended use of the proceeds of the Loan, or (iii) any information provided by
or on behalf of Borrowers, and in any way relating to the issuance, offering and
sale of the Securities (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 10.14 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 10.15 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 10.16 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 10.17 PUBLICITY. All news releases, publicity or
advertising by Borrowers or their Affiliates through any media intended to reach
the general public which refers to the Loan Documents or the financing evidenced
by the Loan Documents, to Lender, Nomura, the Loan purchaser, the Servicer or
55
<PAGE>
the trustee in a Securitization shall be subject to the prior written approval
of Lender.
SECTION 10.18 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 10.19 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 10.20 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 10.21 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 10.22 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 10.23 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.
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<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
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 hereunder 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
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<PAGE>
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.
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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:
THIRD HORIZON GROUP LIMITED PARTNERSHIP,
a Delaware limited partnership
By: Third HGI, L.L.C., a Delaware limited
liability company, its General Partner
By: Horizon Group Properties, L.P.,
a Delaware limited partnership,
its Managing Member
By: Horizon Group
Properties, Inc., a
Maryland corporation,
its General Partner
By: /s/ David R. Tinkham
--------------------------
Name: David R. Tinkham
Title: Chief Financial Officer
NEBRASKA CROSSING FACTORY SHOPS, L.L.C.,
a Delaware limited liability company
By: HGP Finance I, Inc., a Maryland
corporation, its Member
By: /s/ David R. Tinkham
---------------------------------
Name: David R. Tinkham
Title: Chief Financial Officer
59
<PAGE>
INDIANA FACTORY SHOPS, L.L.C., a Delaware
limited liability company
By: HGP Finance IV, Inc., a Maryland
corporation, its Member
By: /s/ David R. Tinkham
---------------------------------
Name: David R. Tinkham
Title: Chief Financial Officer
LENDER:
NOMURA ASSET CAPITAL CORPORATION
By: /s/ John Burke
----------------------------------------
Name: John Burke
Title: Director
60
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SCHEDULE 1
Matters Regarding Representations
61
<PAGE>
SCHEDULE 2
Rent Roll
See the certified Rent Roll delivered to Lender as of the Closing Date.
62
<PAGE>
SCHEDULE 3
Required Repairs
63
<PAGE>
SCHEDULE 4
Intentionally Deleted
64
<PAGE>
SCHEDULE 5
HORIZON BRIDGE LOAN
<TABLE>
<CAPTION>
PROPERTY BORROWER FEE OR
LEASEHOLD
<S> <C> <C>
Nebraska Crossing Factory Nebraska Crossing Factory Shops, L.L.C. Fee
Shops
Dry Ridge Third Horizon Group Limited Partnership Fee
Holland Third Horizon Group Limited Partnership Fee
Laughlin Third Horizon Group Limited Partnership Leasehold
Norton Shores Third Horizon Group Limited Partnership Fee
Sealy Third Horizon Group Limited Partnership Fee
Traverse City Third Horizon Group Limited Partnership Fee
Tulare Third Horizon Group Limited Partnership Fee
Warrenton Third Horizon Group Limited Partnership Fee
Indianapolis Factory Indiana Factory Shops, L.L.C. Fee
Shops
Monroe Third Horizon Group Limited Partnership Fee
Medford Third Horizon Group Limited Partnership Fee
Sommerset Third Horizon Group Limited Partnership Fee
</TABLE>
65
<PAGE>
SCHEDULE 6
HORIZON BRIDGE LOAN
<TABLE>
<CAPTION>
PROPERTY BORROWER FEE OR ALLOCATED
LEASEHOLD LOAN AMOUNT
<S> <C> <C> <C>
Nebraska Crossing Nebraska Crossing Factory Fee 9,419,620
Factory Shops Shops, L.L.C.
Dry Ridge Third Horizon Group Limited Fee 2,469,615
Partnership
Holland Third Horizon Group Limited Fee 2,169,615
Partnership
Laughlin Third Horizon Group Limited Leasehold 17,469,615
Partnership
Norton Shores Third Horizon Group Limited Fee 9,169,615
Partnership
Sealy Third Horizon Group Limited Fee 6,669,615
Partnership
Traverse City Third Horizon Group Limited Fee 4,769,615
Partnership
Tulare Third Horizon Group Limited Fee 8,669,615
Partnership
Warrenton Third Horizon Group Limited Fee 13,669,615
Partnership
Indianapolis Indiana Factory Shops, L.L.C. Fee 13,969,615
Factory Shops
Monroe Third Horizon Group Limited Fee 4,169,615
Partnership
Medford Third Horizon Group Limited Fee 10,669,615
Partnership
Sommerset Third Horizon Group Limited Fee 4,919,615
Partnership
</TABLE>
66
<PAGE>
EXHIBIT A
Form of Note
See Note executed by Borrowers bearing even date herewith.
67
<PAGE>
EXHIBIT B
Securitization Indemnification Agreement
INDEMNIFICATION AGREEMENT
This Indemnification Agreement is dated this 15th day of June, 1998, by
and among Nomura Asset Capital Corporation ("NACC"), Horizon Group Properties,
L.P. (the "OP"), Third Horizon Group Limited Partnership, Nebraska Crossing
Factory Shops, L.L.C., and Indiana Factory Shops, L.L.C., (collectively, the
"BORROWERS").
Reference is made to (i) that certain Loan Agreement of even date
herewith among the Borrowers and NACC pursuant to which NACC has agreed to make
a loan to Borrowers in the amount of $108,205,000 (the "Loan"), (ii) that
certain promissory note dated as of the date hereof by Borrowers in favor of
NACC (the "Note") and (iii) each of those certain mortgages, deeds of trust and
deeds to secure debt dated as of the date hereof by each Borrower securing the
obligations of Borrowers under the Loan (each, a "Mortgage"). Capitalized terms
used herein without definition have the meanings ascribed to them in the Loan
Agreement. In connection with the closing of the Loan, the parties wish to set
forth their respective rights and obligations in connection with the proposed
offering by NACC of securities collateralized in part by the obligations of
Borrowers under the Loan Agreement, the Note and the Mortgages. In
consideration of the mutual promises herein contained, as inducement to each
party to proceed with the closing of the Loan and as an inducement to Nomura
Securities International, Inc. ("NSI") to act as underwriter of the Securities
referred to below, the parties hereto agree as follows:
1. PUBLIC OFFERING. It is the intention of Nomura Asset Securities
Corporation ("NASC"), a subsidiary of NACC, to make a public offering of
securities (the "Securities") which will be collateralized, in part, by the
Mortgages (the "Securitization"). The parties hereby agree to work diligently
to complete the Securitization, including, in the case of the Borrowers,
participation in the preparation of disclosure material, for inclusion in a
prospectus, describing the Borrowers and the Mortgages, executing and furnishing
such documents and performing such acts as may be required by the Rating
Agencies, and paying certain expenses as set forth in paragraph 2 hereof;
PROVIDED that the actions which the Borrowers are required to undertake shall be
commercially reasonable and shall not materially increase the Borrowers'
obligations or materially decrease the Borrowers' rights in connection with the
Loan.
2. Intentionally deleted.
3. INDEMNIFICATION. (a) NACC agrees to indemnify and hold harmless
OP, each Borrower, each partner of OP, each partner of each Borrower and each
person who controls any Borrower within the meaning of either the Securities Act
of 1933, as amended (the "Act"), or the Securities Exchange Act of 1934, as
amended (the "Exchange Act") against any and all losses, claims, damages or
liabilities, joint or several, to which they or any of them may become subject
under the Act, the Exchange Act or other Federal or state statutory law or
regulation, at common law or otherwise, insofar as such losses, claims,
<PAGE>
damages or liabilities (or actions in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of a material
fact contained in the registration statement for the registration of the
Securities as originally filed or in any amendment thereof, or in the
Prospectus or any preliminary Prospectus, or in any amendment thereof or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; PROVIDED, HOWEVER, that NACC will
not be liable in any such case to the extent that any such loss, claim,
damage or liability arises out of or is based upon any such untrue statement
or alleged untrue statement or omission or alleged omission (i) that is made
therein in reliance upon and in conformity with written information (the
"Provided Information") furnished to NACC by or on behalf of any Borrower
specifically for inclusion therein or (ii) that relates to information in
respect of the mortgage loans (the "Other Mortgage Loans") in the
Securitization other than the Loan or the borrowers, mortgaged properties or
servicer related to the Other Mortgage Loans; PROVIDED, FURTHER, that in no
event will NACC be liable under this paragraph if any of the Borrowers or OP
is found to have any liability in respect of the subject matter giving rise
to any such loss, claim, damage or liability (or action in respect thereof).
NACC will reimburse each such indemnified party for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action for which they
are indemnified hereunder, but only after it is determined that the second
proviso in the preceding sentence does not preclude the liability of NACC in
respect thereof.
OP and each Borrower agree that they will prepare and deliver the
Provided Information in a timely manner for use in the preliminary Prospectus
and the Prospectus with the intention that the Provided Information contain
information necessary to determine that the information in the Prospectus
concerning OP, the Borrowers and the Loan satisfies the disclosure requirements
of the Act in respect of OP, the Borrowers and the Mortgages. Upon any
reasonable request by NACC, OP and each Borrower will promptly provide to NACC
additional information in respect of OP, each Borrower, the Properties and the
Mortgages to be included in the Provided Information that is reasonably
necessary to satisfy such disclosure requirements. The parties agree that the
Provided Information will be identified on the date of each Prospectus and each
other disclosure document referred to herein by delivery by Borrower of a
certificate, acknowledged by NACC, identifying such information.
(b) Each Borrower and OP jointly and severally agree to
indemnify and hold harmless NACC, each of its directors, NASC, each of its
directors, each of its officers who signs the registration statement for the
Securitization, each person who controls NACC or NASC within the meaning of
either the Act or the Exchange Act, NSI and each person who controls NSI within
the meaning of the Act or the Exchange Act against any and all losses, claims,
damages or liabilities, joint or several, to which they or any of them may
become subject under the Act, the Exchange Act or other Federal or state
statutory law or regulation, at common law or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of a material
fact contained in the registration statement for
2
<PAGE>
the registration of the Securities as originally filed or in any amendment
thereof, or in the Prospectus or any preliminary Prospectus, or in any
amendment thereof or supplement thereto, or arise out of or are based upon
the omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading, but only to
the extent that such untrue statement or alleged untrue statement or omission
or alleged omission is made therein in reliance upon and in conformity with
the Provided Information. Such indemnity with respect to the Prospectus or
any preliminary Prospectus shall not inure to the benefit of any such
indemnified person to the extent the person asserting any such loss, claim,
damage or liability purchased the Securities which are the subject thereof
did not receive a copy of the Prospectus (or the Prospectus as supplemented)
at or prior to the confirmation of the sale of such Securities to such person
in any case where (A) such delivery is required by the Act and (B) the untrue
statement or omission of a material fact contained in the Prospectus or any
preliminary Prospectus was corrected in the Prospectus (or the Prospectus as
supplemented).
(c) Promptly after receipt by an indemnified party under this
Section 3 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section 3, notify the indemnifying party in writing of the
commencement thereof; but the omission so to notify the indemnifying party
(i) will not relieve it from liability under paragraph (a) or (b) above unless
and to the extent it did not otherwise learn of such action and such failure
results in the forfeiture by the indemnifying party of substantial rights and
defenses and (ii) will not, in any event, relieve the indemnifying party from
any obligations to any indemnified party other than the indemnification
obligation provided in paragraph (a) or (b) above. The indemnifying party shall
be entitled to appoint counsel of the indemnifying party's choice at the
indemnifying party's expense to represent the indemnified party in any action
for which indemnification is sought (in which case the indemnifying party shall
not thereafter be responsible for the fees and expenses of any separate counsel
retained by the indemnified party or parties except as set forth below);
PROVIDED, HOWEVER, that such counsel shall be satisfactory to the indemnified
party. Notwithstanding the indemnifying party's election to appoint counsel to
represent the indemnified party in an action, the indemnified party shall have
the right to employ separate counsel (including local counsel), and the
indemnifying party shall bear the reasonable fees, costs and expenses of such
separate counsel, if (i) the use of counsel chosen by the indemnifying party to
represent the indemnified party would present such counsel with a conflict of
interest, (ii) the actual or potential defendants in, or targets of, any such
action include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be legal
defenses available to it and/or other indemnified parties which are different
from or additional to those available to the indemnifying party, (iii) the
indemnifying party shall not have employed counsel satisfactory to the
indemnified party to represent the indemnified party within a reasonable time
after notice of the institution of such action or (iv) the indemnifying party
shall authorize the indemnified party to employ separate counsel at the expense
of the indemnifying party. An indemnifying party will not, without the prior
written consent of the indemnified parties, settle or compromise or consent to
the entry of any judgment with respect to any pending or threatened claim,
action, suit or proceeding in
3
<PAGE>
respect of which indemnification or contribution may be sought hereunder
(whether or not the indemnified parties are actual or potential parties to
such claim or action) unless such settlement, compromise or consent includes
an unconditional release of each indemnified party from all liability arising
out of such claim, action, suit or proceeding.
(d) In the event that the indemnity provided in paragraph (a)
or (b) of this Section 3 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, NACC, on the one hand, and the Borrowers and
OP, on the other hand, agree to contribute to the aggregate losses, claims,
damages and liabilities (including legal or other expenses reasonably incurred
in connection with investigating or defending same) (collectively "Losses") to
which any indemnified party hereunder may be subject in such proportion as is
appropriate to reflect the relative benefits received by NACC and by the
Borrowers from the offering of the Securities. If the allocation provided by
the immediately preceding sentence is unavailable for any reason, NACC and the
Borrowers shall contribute in such proportion as is appropriate to reflect not
only such relative benefits but also the relative fault of NACC and of the
Borrowers in connection with the statements or omissions which resulted in such
Losses as well as any other relevant equitable considerations. Relative fault
shall be determined by reference to whether any alleged untrue statement or
omission relates to information provided by NACC (including information relating
to any borrower other than the Borrowers) or the Borrowers; the opportunity to
correct and prevent any statement or omission; and any other equitable
considerations appropriate in the circumstances. NACC and the Borrowers agree
that it would not be equitable if the amount of such contribution were
determined by pro rata or per capita allocation. Notwithstanding the provisions
of this paragraph (d), no person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. For
purposes of this Section 3, each person who controls a Borrower within the
meaning of either the Act or the Exchange Act shall have the same rights to
contribution as such Borrower, and each person who controls NACC or NSI within
the meaning of either the Act or the Exchange Act, each officer of NACC who
shall have signed the Registration Statement and each director of NACC shall
have the same rights to contribution as NACC, subject in each case to the
applicable terms and conditions of this paragraph (d).
4. RIGHTS AGAINST OTHER BORROWERS. NACC or NASC may have similar
indemnification rights from other borrowers under the Other Mortgage Loans
included in the Securitization ("Other Indemnification Rights"). So long as
(i) NACC and NASC have been made whole in respect of all claims that it may have
under Other Indemnification Rights from such a borrower, (ii) NACC's counsel
reasonably agrees with Borrower's counsel that NACC or NASC may successfully
pursue such Other Indemnification Rights to the benefit of such Borrower,
(iii) such Borrower pays, as incurred, the expenses (including without
limitation the reasonable fees and expenses of counsel) of NACC and NASC in
pursuing such Other Indemnification Rights for the benefit of the Borrower and
(iv) such pursuit does not unreasonably interfere with the performance by NACC's
or NASC's personnel of their jobs or create unfavorable publicity for NACC, then
NACC shall pursue and cause NASC to pursue, in a reasonable manner and at the
reasonable direction of the Borrower, such Other Indemnification Rights to the
benefit of such Borrower.
4
<PAGE>
5. RECOURSE. Without implying that any of the provisions of the Loan
Agreement apply to this Indemnification Agreement, the parties hereto
acknowledge that the nonrecourse provisions of the Loan Agreement do not apply
to this Indemnification Agreement.
6. NOTICES. All communications hereunder will be in writing and, if
sent to OP or a Borrower, will be mailed, delivered or telegraphed, and
confirmed to it as provided in the Loan Agreement; if sent to NACC, will be
mailed, delivered or telegraphed, and confirmed to it as provided in the Loan
Agreement.
7. COUNTERPARTS. This Indemnification Agreement may be executed in
any number of counterparts, each of which when so executed shall be deemed to be
an original, but all of such counterparts shall together constitute one
instrument.
8. GOVERNING LAW. THIS INDEMNIFICATION AGREEMENT SHALL BE CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
9. SUCCESSORS. This Indemnification Agreement will inure to the
benefit of and be binding upon the NACC, NASC, NSI, OP, each Borrower and their
respective successors and the officers and directors and controlling persons
referred to in Section 3 hereof, and no other person will have any right or
obligations hereunder.
10. SEVERABILITY OF PROVISIONS. Any covenant, provision, agreement or
term of this Indemnification Agreement that is prohibited or is held to be void
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof.
11. ENTIRE AGREEMENT. This Indemnification Agreement constitutes the
entire agreement and understanding of the parties hereto with respect to the
matters and transactions contemplated hereby and supersedes all prior agreements
and understandings whatsoever relating to such matters and transactions.
12. AMENDMENT. Neither this Indemnification Agreement nor any term
hereof may be changed, waived, discharged or terminated orally, but only by an
instrument in writing signed by the party against whom enforcement of the
change, waiver, discharge or termination is sought.
13. HEADINGS. The headings in this Indemnification Agreement are for
the purposes of reference only and shall not limit or otherwise affect the
meaning hereof.
14. COUNTERPARTS. This Indemnification Agreement may be executed by
each of the parties hereto in any number of counterparts, and by each of the
parties hereto on separate counterparts, each of which counterparts, when so
executed and delivered, shall be deemed to be an original, but all such
counterparts shall together constitute but one and
5
<PAGE>
the same instrument.
[Remainder of page left blank]
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have entered into this
Indemnification Agreement as of the date first above written.
NOMURA ASSET CAPITAL CORPORATION
By:
-----------------------------------------------
Name:
Title:
THIRD HORIZON GROUP LIMITED PARTNERSHIP,
a Delaware limited partnership
By: Third HGI, L.L.C., a Delaware limited
liability company, its General Partner
By: Horizon Group Properties, L.P.,
a Delaware limited partnership,
its Managing Member
By: Horizon Group Properties, Inc.,
a Maryland corporation, its
General Partner
By:
---------------------------------
Name:
Title:
NEBRASKA CROSSING FACTORY SHOPS, L.L.C.,
a Delaware limited liability company
By: HGP Finance I, Inc., a Maryland
corporation, its Member
By:
----------------------------------------
Name:
7
<PAGE>
Title:
8
<PAGE>
INDIANA FACTORY SHOPS, L.L.C., a Delaware
limited liability company
By: HGP Finance IV, Inc., a Maryland
corporation, its Member
By:
----------------------------------------
Name:
Title:
HORIZON GROUP PROPERTIES, L.P., a Delaware limited
partnership
By: Horizon Group Properties, Inc., a
Maryland corporation
By:
----------------------------------------
Name:
Title:
9
<PAGE>
EXHIBIT C
Rate Lock Agreement
Date~
Name~Title~
BorSponsor~
Address1~Address2~
City~, State~ PostalCode~
Re: INTEREST RATE LOCK AGREEMENT
Gentlemen:
BorSponsor~ ("Borrower's Sponsor") and Nomura Asset Capital
Corporation ("Lender") have entered into a Commitment Letter dated as of
CmtLtrDate~ (the "Commitment Letter") whereby Lender intends, subject to the
conditions set forth therein, to make a fixed rate permanent mortgage loan
(the "Loan") to a special purpose entity (the "Borrower") in the anticipated
principal amount of up to $PermLoanAmt~ (the "Anticipated Loan Amount")
secured by the real property and other assets (the "Property") set forth in
the Commitment Letter with an effective maturity of EffTerm~ years. Prior to
the closing of the Loan, Borrower's Sponsor has requested Lender to rate lock
(the "Rate Lock") an amount equal to the Anticipated Loan Amount and to lock
an interest rate (the "Locked Loan Rate") for the Loan prior to Lender's
completion of due diligence on the Property and prior to the satisfaction of
other conditions to closing set forth in the Commitment Letter. In order to
grant Borrower's Sponsor's request, Borrower's Sponsor and Lender agree as
follows:
1. Terms not otherwise defined herein or on Annex A attached hereto shall
have the meaning set forth in the Commitment Letter.
2. Borrower's Sponsor shall deposit with Lender an amount equal to two
percent (2%) of the Anticipated Loan Amount (the "Initial Rate Lock
Deposit"). Hereinafter, the term "Rate Lock Deposit" shall mean the
Initial Rate Lock Deposit and any Additional Rate Lock Deposit as
hereinafter defined. Subject to the conditions set forth below, the
Locked Loan Rate on the Anticipated Loan Amount shall be set at
(i) LoanSpread~% the ('' Loan Spread'') plus (ii) the "Benchmark
Treasury Rate". The "Benchmark Treasury Rate" shall be equal to the
Benchmark Swap Rate minus the Benchmark Swap Spread. The "Benchmark Swap
Spread" shall be the then prevailing bid side forward swap spread for
EffTerm~ year interest rate swaps MonthsFwd~ months forward.
The "Benchmark Swap Rate" shall be the then prevailing offer rate on a
forward interest rate swap beginning on ExpClosDate~ and maturing
on EffMaturDate~ versus 3 month LIBOR assuming semi-annual payments
calculated on a 30/360 basis. The Rate Lock shall be executed upon (i)
Borrower's Sponsor's deposit of the Initial Rate Lock Deposit and (ii) a
request via telephone by Borrower's Sponsor to Lender requesting Lender
to lock the interest rate in accordance with the terms of this Agreement.
Lender shall within three business days confirm in writing to Borrower's
Sponsor the Locked Loan Rate, the Benchmark Treasury Rate, the Benchmark
Swap Rate and the Benchmark Swap Spread. The Locked Loan Rate shall be
applicable with respect to the Anticipated
1
<PAGE>
Loan Amount only if the Loan is funded at any time from the date
hereof through the earlier of (i) 12:00 p.m. (New York Time)
ExpClosDate~ or (ii) the termination of the Commitment Letter (the "Rate
Lock Period"). In addition, during the term of this Agreement,
Borrower's Sponsor shall pay Lender in advance, a fee each month
equal to 8 basis points multiplied by the Anticipated Loan Amount.
3. (a) If, in the good faith opinion of Lender, at any time during the Rate
Lock Period, Lender determines that there are Losses hereunder equal to
or greater than 50% of the Rate Lock Deposit, Borrower's Sponsor will be
required, no later than 1:00 p.m. (New York Time) on the business day
following notice of any such Losses (the "Losses Payment Date") to
deposit with Lender (by wire transfer of immediately available funds) the
amount of such Losses which amount shall be known as an "Additional Rate
Lock Deposit". Borrower's Sponsor's failure to pay Lender the Additional
Rate Lock Deposit by 1:00 p.m. (New York Time) on the Losses Payment Date
will result in a default hereunder and under the Commitment Letter and
Lender may, at its sole discretion, at any time thereafter fully or
partially terminate the Rate Lock.
(b) If, in the good faith opinion of Lender, at any time, it appears that
the actual principal amount of the Loan will be less than the Anticipated
Loan Amount (such reduced amount, the "Revised Loan Amount"), Lender may
break the Rate Lock with respect to the difference between the
Anticipated Loan Amount and the Revised Loan Amount. In such event, the
Locked Loan Rate will not be applicable to such amount, and, in the event
that there are Losses on account of such breakage, Borrower's Sponsor
shall pay to Lender's Expenses, if any, via wire transfer within two
business days following delivery of notice by Lender of such Losses.
Failure of Borrower's Sponsor to pay such Lender's Expenses will result
in a default hereunder and under the Commitment Letter and/or the Loan
Documents.
4. In the event that the Loan is funded in an amount at least equal to the
Anticipated Loan Amount on or prior to the expiration of the Rate Lock
Period, neither Borrower, Borrower's Sponsor nor Lender will have any
obligation to the other with respect to the Rate Lock, other than
Lender's obligation to either return the Rate Lock Deposit to Borrower's
Sponsor or apply it to pay fees and expenses associated with the closing
of the Loan. In the event that the Loan is funded in an amount which is
less than the Anticipated Loan Amount, Lender may break the Rate Lock
with respect to such Breakage Principal and shall apply the Rate Lock
Deposit to Losses, if any, which may result therefrom and then to fees
and expenses associated with closing the Loan. In the event that (i) the
Rate Lock Period has expired and Lender has not yet funded the Loan or
(ii) there shall exist a default hereunder, under the Commitment Letter
and/or under the Loan Documents, Lender may break the entire Rate Lock
and Lender's only obligation to Borrower's Sponsor and/or Borrower shall
be to return the Rate Lock Deposit after setting off Lender's Expenses.
If the Rate Lock Deposit is not sufficient to pay Lender's Expenses
hereunder, Borrower's Sponsor shall pay Lender the difference within two
business days following termination of the Rate Lock. Lender's right to
fully or partially terminate the Rate Lock pursuant to the terms of the
Agreement is absolute and is not conditioned upon the giving of any
notice to Borrower or Borrower's Sponsor.
In the event that the Loan is funded in an amount which is greater than
the Anticipated Loan Amount, the Locked Loan Rate will not be applicable
to such excess amount and the final interest rate on the Loan will be
determined as set forth in the Commitment Letter and/or Loan Documents.
2
<PAGE>
5. Borrower's Sponsor acknowledges that Losses, if any, sustained due to
breaking the Rate Lock will be related, to a large extent, to movements
in the Breakage Benchmark Treasury Rate, as well as general movements in
the U.S. Treasury and related swap markets and any related changes to the
yield curve. Changes in the Breakage Benchmark Treasury Rate will be
subject to the then prevailing conditions of the U.S. Treasury market and
related swap markets which is subject to potentially rapid and extreme
price fluctuations and varying levels of liquidity. Therefore, any
action taken by Lender with respect to breaking the Rate Lock shall be
taken by Lender as promptly as practicable after taking into
consideration the circumstances surrounding the break of the Rate Lock,
including, but not limited to, the then prevailing conditions in the U.S.
Treasury market and the related swap markets. Because of the potentially
volatile nature of the U.S. Treasury market and the related swap markets,
Lender has been granted rights to act (or not act) in its sole
discretion. Borrower's Sponsor and Borrower acknowledge and accept
Lender's right to act (or not act) in its sole discretion as provided
herein and waives any potential claim or cause of action Borrower and/or
Borrower's Sponsor may have against Lender with respect to any action
taken (or not taken) by Lender pursuant to the provisions set forth
herein. Borrower's Sponsor and Borrower further acknowledge that based
upon market conditions, there can be no degree of certainty as to the
rate of the Breakage Benchmark Treasury Rate used to calculate Losses
until the Rate Lock is actually terminated by Lender. In addition,
Borrower's Sponsor and Borrower acknowledge that the Anticipated Loan
Amount is not a commitment by Lender regarding the final size of the
Loan. Such amount will be determined according to the terms of the
Commitment Letter and/or Loan Documents.
6. The obligations of Borrower's Sponsor and Lender pursuant to this
Agreement are independent of their obligations pursuant to the Commitment
Letter, even in the event of a termination of the Rate Lock. This
Agreement shall in no way be construed to be a commitment by Lender or
any affiliate to fund the Loan or purchase or sell any securities on
behalf of Borrower, Borrower's Sponsor and/or any third party. In
addition, this Agreement shall in no way be construed to reduce
Borrower's Sponsor and/or Borrower's obligations pursuant to the
Commitment Letter.
7. This Agreement shall terminate upon the earlier of (i) the expiration or
termination of the Rate Lock Period, (ii) any event which causes Lender's
commitment to fund the Loan to terminate, as set forth in the Commitment
Letter, (iii) any event which causes Lender to terminate the Rate Lock or
(iv) upon notice to Borrower and/or Borrower's Sponsor by Lender that it
does not intend to proceed with the Loan; provided, however, that this
Agreement shall survive until all obligations of the parties hereto have
been fully satisfied.
8. This Agreement shall be construed in accordance with and governed by the
laws of the State of New York applicable to agreements made and to be
performed therein, notwithstanding any choice-of-law rules to the
contrary. The parties hereto hereby waive any and all right to a trial
by jury in connection with any and all matters relating hereto.
9. This Agreement may be executed in any number or counterparts, each of
which when so executed shall be deemed to be an original, but all of
which together shall constitute one and the same instrument.
3
<PAGE>
10. Borrower's Sponsor and Borrower may not, without the prior written
consent of Lender, assign, transfer or set over to another, in whole or
in part, all or any part of their benefits, rights, duties and
obligations hereunder.
11. This Agreement may be amended, changed or modified by Borrower's Sponsor,
Borrower and Lender only by an instrument in writing setting forth the
terms of such change, modification or amendment, and signed by each
party.
12. All notices, demands, consents or requests that are either required or
desired to be given or furnished hereunder shall be in writing and shall
be sent to the appropriate party at the following address: (i) if to
Borrower and/or Borrower's Sponsor, at the address set forth on the first
page hereof, Attention: Name~ and (ii) if to Lender, at the address
set forth on the first page hereof, Attention: Banker~ with a copy
of such notice to the same address, Attention: Barry M. Funt, Esq.,
General Counsel. Any such notice sent by means of telecopy shall be
deemed to be received on the day such telecopy is sent once orally
confirmed by sender by telephone.
13. This Agreement constitutes the entire and final agreement between
Borrower's Sponsor and/or Borrower and Lender with respect to the subject
matter hereof, and there are no other agreements, understandings,
undertakings, representations or warranties among the parties hereto with
respect to the subject matter hereof except as set forth herein.
14. Each of Borrower's Sponsor and Borrower agrees to indemnify and hold
Lender and each of its affiliates (including its officers, directors,
partners, employees and agents) harmless against any and all losses,
claims damages, costs, expenses or liabilities in connection with,
arising out of or as a result of the transactions and matters referred to
or contemplated by this Agreement, except to the extent that it is
finally judicially determined that any such loss, claim, damage, cost,
expense or liability results primarily from the gross negligence or bad
faith of such indemnified party or any of its agents or representatives.
If the foregoing is in accordance with your understanding of our
Agreement, please sign and return to the undersigned a counterpart
hereof, whereupon this Agreement and your acceptance shall represent a
binding agreement by and among Borrower's Sponsor, Borrower and Lender.
Very truly yours,
NOMURA ASSET CAPITAL CORPORATION
By:___________________________
Name:
Title:
The foregoing Agreement is hereby confirmed
and accepted as of the date first written above.
BorSponsor~
on behalf if itself and Borrower
By:______________________
Name:
4
<PAGE>
Title:
5
<PAGE>
ANNEX A
"BENCHMARK SWAP SPREAD" shall mean, at the time of the Rate Lock, the
then prevailing bid side forward swap spread for EffTerm~ year interest
rate swaps MonthsFwd~ months forward.
"BENCHMARK SWAP RATE" shall mean, at the time of the Rate Lock, the
then prevailing offer rate on a forward interest rate swap beginning on
ExpClosDate~ and maturing on EffMaturDate~ versus 3 month LIBOR assuming
semi-annual payments calculated on a 30/360 basis.
"BENCHMARK TREASURY RATE" shall mean the Benchmark Swap Rate minus the
Benchmark Swap Spread.
"BREAKAGE AMOUNT" means an amount equal to the product of (i) the
Breakage Principal and (ii) the Price Difference.
"BREAKAGE BENCHMARK TREASURY RATE" shall mean the Spot Swap Rate minus
the Spot Swap Spread.
"BREAKAGE PRINCIPAL" means at the time of calculation, (A) in connection
with breakage associated with reductions to the Anticipated Loan Amount pursuant
to Section 3(b), the amount of such reductions or (B) in connection with
breakage associated with the closing of the Permanent Loan or the termination of
the Rate Lock, the difference of (i) the Anticipated Loan Amount minus (ii) any
reductions to the Anticipated Loan Amount pursuant to Section 3(b) minus (iii)
the Permanent Loan Amount.
"INTENDED PAYMENTS" means, for the purpose of the calculation of the
Price Difference, each and every payment of principal and/or interest that would
have been made with respect to the Loan had the Loan closed with a principal
amount equal to the Anticipated Loan Amount on the date breakage is calculated
with an interest rate equal to the Locked Loan Rate assuming that the principal
is repaid in full in EffTerm~ years and assuming that the Loan is
otherwise consistent with the terms of the Commitment Letter.
"LENDER'S EXPENSES" means the sum of (a) Losses, plus (b) all fees,
commissions and other expenses (including reasonable attorneys' fees) incurred
by Lender in connection with the closing out of all or any portion of the Rate
Lock or otherwise in connection with this Agreement.
"LOCKED LOAN RATE" means the Benchmark Treasury Rate plus the Loan
Spread.
"LOSSES" means the Breakage Amount if the Breakage Amount is a positive
number.
"PRICE DIFFERENCE" means, as of the time of calculation, the difference
obtained by subtracting (i) 1 from (ii) the quotient obtained by dividing (1)
the present value (as determined below) of the Intended Payments, determined as
if the Loan were funded on the day of calculation, by (2) the Anticipated Loan
Amount. The present value of the Intended Payments shall be calculated by
discounting the Intended Payments by the Breakage Benchmark Treasury Rate plus
the Loan Spread.
6
<PAGE>
The Price Difference can be either positive or negative.
"PERMANENT LOAN AMOUNT" means the actual funded amount of the Loan.
"SPOT SWAP SPREAD" means, at the time of calculation, the then prevailing
offer side swap spread for EffTerm~ year interest rate swaps.
"SPOT SWAP RATE" means, at the time of calculation, the then prevailing
bid rate on a EffTerm~ year interest rate swap versus 3 month LIBOR.
7
<PAGE>
EXHIBIT D
OFFICER'S CERTIFICATE
________________________________
________________________________
________________________________
________________________________
________________________________
Re: Loan Agreement as of June ____, 1998 (together with amendments, if
any, the "Loan Agreement") between Nomura Asset Capital
Corporation, as Lender, and ___________________________________ as
Borrowers ("Borrower")
The undersigned officer of , does hereby
certify on behalf of Borrower that for the monthly financial period ending
_______________.
1. No Event of Default or, to the best knowledge of Borrower, Default
has occurred or exists except NONE.
2. Tot he best knowledge of Borrower, the monthly financial
information delivered herewith is true, correct and complete.
3. All Operating Expenses and other expenses that had accrued as of
the last day of the period have been fully paid or otherwise
reserved or provided for.
4. Capitalized terms not defined herein shall have the meanings given
to such terms in the Loan Agreement.
Sincerely,
________________________________
By:________________________________
Its:________________________________
Dated this _____ day
of _______, 19__
8
<PAGE>
EXHIBIT 10.2
[___________________________________]
(Grantor)
to
(Trustee)
for the benefit of
NOMURA ASSET CAPITAL CORPORATION
(Beneficiary)
_______________________________________________
DEED OF TRUST, 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
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TABLE OF CONTENTS
Page
GENERAL PROVISIONS. . . . . . . . . . . . . . 4
1. PAYMENT OF DEBT AND INCORPORATION OF COVENANTS, CONDITIONS
AND AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2. INTENTIONALLY OMITTED. . . . . . . . . . . . . . . . . . . . . . . 4
3. INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4. PAYMENT OF TAXES, ETC. . . . . . . . . . . . . . . . . . . . . . . 4
5. CONDEMNATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
6. ASSIGNMENT OF LEASES AND RENTS . . . . . . . . . . . . . . . . . . 4
7. MAINTENANCE OF PROPERTY. . . . . . . . . . . . . . . . . . . . . . 5
8. TRANSFER OR ENCUMBRANCE OF THE PROPERTY. . . . . . . . . . . . . . 6
9. CHANGES IN LAWS REGARDING TAXATION . . . . . . . . . . . . . . . . 7
10. NO CREDITS ON ACCOUNT OF THE DEBT. . . . . . . . . . . . . . . . . 7
11. DOCUMENTARY STAMPS . . . . . . . . . . . . . . . . . . . . . . . . 7
12. CONTROLLING AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . 7
13. INTENTIONALLY OMITTED. . . . . . . . . . . . . . . . . . . . . . . 8
14. FURTHER ACTS, ETC. . . . . . . . . . . . . . . . . . . . . . . . . 8
15. RECORDING OF DEED OF TRUST, ETC. . . . . . . . . . . . . . . . . . 8
16. REPORTING REQUIREMENTS . . . . . . . . . . . . . . . . . . . . . . 8
17. EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . . . . . . . . 8
18. INTENTIONALLY OMITTED. . . . . . . . . . . . . . . . . . . . . . . 9
19. RIGHT TO CURE DEFAULTS . . . . . . . . . . . . . . . . . . . . . . 10
20. REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
21. RIGHT OF ENTRY . . . . . . . . . . . . . . . . . . . . . . . . . . 13
22. SECURITY AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . 13
23. ACTIONS AND PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . 14
24. WAIVER OF SETOFF AND COUNTERCLAIM. . . . . . . . . . . . . . . . . 14
25. RECOVERY OF SUMS REQUIRED TO BE PAID . . . . . . . . . . . . . . . 14
26. MARSHALLING AND OTHER MATTERS. . . . . . . . . . . . . . . . . . . 14
27. INTENTIONALLY OMITTED. . . . . . . . . . . . . . . . . . . . . . . 15
28. INTENTIONALLY OMITTED. . . . . . . . . . . . . . . . . . . . . . . 15
29. INTENTIONALLY OMITTED. . . . . . . . . . . . . . . . . . . . . . . 15
30. INTENTIONALLY OMITTED. . . . . . . . . . . . . . . . . . . . . . . 15
31. INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . . 15
32. NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
33. AUTHORITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
34. WAIVER OF NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . 19
35. INTENTIONALLY OMITTED. . . . . . . . . . . . . . . . . . . . . . . 19
36. SOLE DISCRETION OF BENEFICIARY AND TRUSTEE . . . . . . . . . . . . 19
37. NON-WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
38. NO ORAL CHANGE . . . . . . . . . . . . . . . . . . . . . . . . . . 20
39. LIABILITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
40. INAPPLICABLE PROVISIONS. . . . . . . . . . . . . . . . . . . . . . 20
41. HEADINGS, ETC. . . . . . . . . . . . . . . . . . . . . . . . . . . 20
42. DUPLICATE ORIGINALS. . . . . . . . . . . . . . . . . . . . . . . . 20
43. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
44. HOMESTEAD. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
45. ASSIGNMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
46. WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . . . . . . . . 21
47. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . 21
48. DEFEASANCE; RELEASE OF THIS DEED OF TRUST. . . . . . . . . . . . . 21
49. NO ELECTION OF REMEDIES. . . . . . . . . . . . . . . . . . . . . . 21
50. EXCULPATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
51. GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . 22
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52. TRUSTEE; SUCCESSOR TRUSTEE . . . . . . . . . . . . . . . . . . . . 23
53. STATE SPECIFIC RIDER . . . . . . . . . . . . . . . . . . . . . . . 23
EXHIBIT A
EXHIBIT B
ii
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THIS DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS AND SECURITY
AGREEMENT (the "DEED OF TRUST"), made as of June __, 1998, by
[________________________________] a _______________________________________,
having an address c/o Horizon Group Properties, Inc., 5000 Hakes Drive, Norton
Shores, Michigan 49441 ("GRANTOR"), to ____________ ________________, having an
address at _______________, as trustee ("Trustee"), in trust for the benefit of
Nomura Asset Capital Corporation, a Delaware corporation (together with its
successors and assigns, shall hereafter be referred to as "BENEFICIARY"), 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. Grantor 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. Beneficiary, Grantor and certain other entities affiliated with
Grantor (such affiliated entities and Grantor 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 Beneficiary 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, Beneficiary 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 Deed of Trust and the other Loan Documents (as hereinafter
defined).
D. To induce Beneficiary to make the Loan and to secure payment of
the Note, together with interest thereon, Grantor has agreed to the execution
and delivery of this Deed of Trust.
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 Beneficiary
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 Grantor to Beneficiary 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 Grantor to Beneficiary with respect to the
Premises (as such assignment may be amended from time to time, the "ASSIGNMENT
OF AGREEMENTS"); and this Deed of Trust (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 Grantor 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 Deed of Trust 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, Grantor has given, granted, bargained, sold,
alienated, enfeoffed, conveyed, confirmed, warranted, pledged, assigned, and
hypothecated and by these presents does hereby irrevocably, give, alien,
enfeoff, confirm, warrant,
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pledge, assign, hypothecate, GRANT, BARGAIN, SELL AND CONVEY UNTO TRUSTEE, IN
TRUST, with power of sale, for the benefit of Beneficiary, the Premises and
Improvements.
TOGETHER WITH: all right, title, interest and estate of Grantor 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 Grantor 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
Grantor, or in which Grantor 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 Grantor, or in which Grantor 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 Grantor 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 Deed of Trust;
(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 Grantor 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
any, from business interruption or other loss of income insurance (hereinafter
collectively referred to as the "RENTS"), together with all
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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 Grantor under any
liability insurance policy of Grantor) 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 Grantor, 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 Beneficiary 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 Grantor, pursuant to Section 552(b)(2) of the
Bankruptcy Code, the security interest granted by this Deed of Trust shall
automatically extend to all Rents acquired by the Grantor 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 Trustee and its successors and assigns, forever.
IN TRUST NEVERTHELESS to secure Beneficiary (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 Beneficiary 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 Grantor represents and warrants to and covenants and agrees with
Trustee and Beneficiary as follows:
GENERAL PROVISIONS
1. PAYMENT OF DEBT AND INCORPORATION OF COVENANTS, CONDITIONS AND
AGREEMENTS. Grantor shall pay the Debt at the time and in the manner provided
in the Note, the Loan
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Agreement and this Deed of Trust. 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 Deed of Trust to the same extent and
with the same force as if fully set forth herein.
2. INTENTIONALLY OMITTED.
3. INSURANCE. (a) Grantor, at its sole cost and expense, for the
mutual benefit of Grantor and Beneficiary, shall keep the Property insured and
obtain and maintain during the entire term of this Deed of Trust 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"), Grantor shall give prompt
notice thereof to Beneficiary. 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. Grantor 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 Grantor'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. Grantor shall promptly give Beneficiary 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 Beneficiary 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. Grantor does hereby absolutely
and unconditionally assign to Beneficiary, all of Grantor's right, title and
interest in all current and future Leases and Rents, it being intended by
Grantor that this assignment constitutes a present, absolute assignment and not
an assignment for additional security only. Such assignment to Beneficiary
shall not be construed to bind Beneficiary to the performance of any of the
covenants, conditions or provisions contained in any such Lease or otherwise
impose any obligation upon Beneficiary. Grantor agrees to execute and deliver
to Beneficiary such additional instruments, in form and substance satisfactory
to Beneficiary, as may hereafter be requested by Beneficiary to further evidence
and confirm such assignment. Nevertheless, subject to the terms of this
paragraph, Beneficiary grants to Grantor a revocable license to operate and
manage the Property and to collect the Rents. Grantor 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 Grantor herein shall automatically be revoked, and Beneficiary shall
immediately be entitled to possession of all Rents, whether or not Beneficiary
enters upon or takes control of the Property. Beneficiary is hereby granted and
assigned by Grantor 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) Grantor 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; (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
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portion thereof, to a condominium or cooperative form of ownership.
(b) Grantor 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. Grantor 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 Grantor 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, Grantor 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) Grantor 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 Grantor'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
Beneficiary'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, Grantor 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) Grantor 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 Grantor thereunder, equal to
not less than eighty-five percent (85%) of the Rent due under the Affected
Leases and Grantor shall have delivered a copy of such lease or leases to
Beneficiary, (c) Grantor shall have delivered to Beneficiary cash collateral or
an unconditional, irrevocable, clean sight draft letter of credit in form and
substance, and issued by a bank, acceptable to Beneficiary, 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
Beneficiary, 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.
Grantor hereby grants to Beneficiary a security interest in all of Grantor's
right, title and interest in the Renovation Funds and irrevocably authorizes
Beneficiary, 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 Beneficiary shall, in its sole discretion, determine, but without obligation
to do so. Following (X) delivery to Beneficiary 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 Grantor thereunder, Beneficiary shall return the balance of the Renovation
Funds not applied in accordance with the immediately preceding sentence, if any,
to Grantor.
(d) Grantor represents and warrants to Beneficiary 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 Grantor 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
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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 Deed of Trust and the Permitted Encumbrances. All rights, title and
interest of Grantor in and to all extensions, improvements, betterment,
renewals, appurtenances to, the Property hereafter acquired by, or released
to, Grantor or constructed, assembled or placed by Grantor 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 Beneficiary or Grantor, shall become subject to
the lien and security interest of this Deed of Trust as fully and completely,
and with the same effect, as though now owned by Grantor and specifically
described in this Deed of Trust, but at any and all times Grantor shall
execute and deliver to Beneficiary any documents Beneficiary may reasonably
deem necessary or appropriate for the purpose of specifically subjecting the
same to the lien and security interest of this Deed of Trust.
(e) Notwithstanding the provisions of this Deed of Trust to the
contrary, Grantor 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. Grantor 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, Grantor 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, Grantor shall
not, without the prior written consent of Beneficiary, 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) Beneficiary 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 Grantor's sale, conveyance,
alienation, mortgage, encumbrance, pledge or transfer of the Property without
Beneficiary's consent in instances where Beneficiary'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 Beneficiary has consented to any previous sale,
conveyance, alienation, mortgage, encumbrance, pledge or transfer of the
Property.
(c) Beneficiary's consent to one sale, conveyance, alienation,
mortgage, encumbrance, pledge or transfer of the Property shall not be deemed to
be a waiver of Beneficiary'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) Grantor agrees to bear and shall pay or reimburse
Beneficiary 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 Beneficiary in
connection with the review, approval and documentation of any such sale,
conveyance, alienation, mortgage, encumbrance, pledge or transfer which requires
Beneficiary'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 Deed of Trust which deducts the
Debt from the value of the Property for the purpose of taxation or which
imposes a tax, either directly or indirectly, on the Debt or Beneficiary's
interest in the Property, Grantor will pay such tax, with interest and
penalties thereon, if any. In the event Beneficiary is advised by counsel
chosen by it that the payment of such tax or interest and penalties
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by Grantor would be unlawful or taxable to Beneficiary or unenforceable or
provide the basis for a defense of usury, then in any such event, Beneficiary
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. Grantor 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 Grantor for real
estate tax purposes by reason of this Deed of Trust or the Debt. In the event
such claim, credit or deduction shall be required by law, Beneficiary 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 Deed of Trust, or impose any
other tax or charge on the same, Grantor 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 Grantor and Beneficiary at all times to comply with applicable
state law or applicable United States federal law (to the extent that it permits
Beneficiary 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 Deed of Trust 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 Beneficiary's exercise of the option to accelerate
the maturity of the Note, or if any prepayment by Grantor results in Grantor
having paid any interest in excess of that permitted by applicable law, then it
is Grantor's and Beneficiary's express intent that all excess amounts
theretofore collected by Beneficiary 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 Grantor), and the provisions of the
Note, this Deed of Trust 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 Beneficiary 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 Beneficiary 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, Grantor will, at the cost of Grantor and
without expense to Beneficiary, 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. Grantor grants to
Beneficiary an irrevocable power of attorney coupled with an interest for the
purpose of exercising and perfecting any and all rights and remedies available
to Beneficiary at law and in equity, including, without limitation, such rights
and remedies available to Beneficiary pursuant to this paragraph.
15. RECORDING OF DEED OF TRUST, ETC. Grantor forthwith upon the
execution and delivery of this Deed of Trust and thereafter, from time to time,
will cause this Deed of Trust, 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 Beneficiary in, the Property. Grantor will pay
all
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filing, registration or recording fees, and all expenses incident to the
preparation, execution and acknowledgment of this Deed of Trust, 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 Deed of Trust, 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. Grantor shall hold harmless and indemnify Beneficiary, its
successors and assigns, against any liability incurred by reason of the
imposition of any tax on the making and recording of this Deed of Trust.
16. REPORTING REQUIREMENTS. Grantor agrees to give prompt notice to
Beneficiary of the insolvency or bankruptcy filing of Grantor.
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 Grantor'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 Beneficiary's prior written consent, except as
permitted under the terms and provisions of the Loan Agreement, (A) Grantor
transfers or encumbers any portion of the Property or (B) any direct or indirect
interest in Grantor is transferred or assigned except as expressly permitted
under Section 6.1(j) of the Loan Agreement;
(e) if any representation or warranty of Grantor made herein or
in any other Loan Document or in any certificate, report, financial statement or
other instrument, agreement or document furnished by Grantor to Beneficiary in
connection with this Deed of Trust 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 Grantor shall make an assignment for the benefit of
creditors, or if Grantor shall generally not be paying its debts as they become
due;
(g) if a receiver, liquidator or trustee of Grantor shall be
appointed or if Grantor 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, Grantor or if any proceeding for the
dissolution or liquidation of Grantor shall be instituted; provided, however, if
such appointment, adjudication, petition or proceeding was involuntary and not
consented to by Grantor, upon the same not being discharged, stayed or dismissed
within sixty (60) days;
(h) if Grantor 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 Deed of Trust;
(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;
(j) except as permitted in this Deed of Trust, if Grantor
performs or permits the performance of any material demolition or removal of any
of the Improvements without the
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prior consent of Beneficiary;
(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 Grantor fails to cure a default under any other term,
covenant or provision of this Deed of Trust within ten (10) days after notice to
Grantor, 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
Grantor 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 Grantor 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, Beneficiary may, but without any obligation
to do so and without notice to or demand on Grantor and without releasing
Grantor from any obligation hereunder, make or do the same in such manner and to
such extent as Beneficiary may deem necessary to protect the security hereof.
Beneficiary 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 Deed of Trust 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 Beneficiary that such cost or expense was incurred to
the date of payment to Beneficiary, shall constitute a portion of the Debt,
shall be secured by this Deed of Trust and the other Loan Documents and shall be
due and payable to Beneficiary upon demand.
20. REMEDIES. (a) Upon the occurrence of any Event of Default,
Beneficiary or Trustee, as the case may be, may take such action, without notice
or demand, as Beneficiary deems advisable to protect and enforce Beneficiary's
rights against Grantor and in and to the Property by Beneficiary or Trustee, as
the case may be, including, without limitation, the following actions, each of
which may be pursued concurrently or otherwise, at such time and in such order
as Beneficiary may determine, in its sole discretion, without impairing or
otherwise affecting the other rights and remedies of Beneficiary:
(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 Deed of Trust 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 Deed of Trust for the portion of the Debt then due
and payable, subject to the continuing lien of this
Deed of Trust for the balance of the Debt not then due;
(iv) execute a written notice of such Event of Default and
of the election to cause the Property to be sold to
satisfy the Debt. Trustee shall give
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and record such notice as the law then requires
as a condition precedent to a trustee's sale.
When the minimum period of time required by
law after such notice has elapsed, Trustee,
without notice to or demand upon Grantor except
as required by law, shall sell the Property at
the time and place of sale fixed by it in the notice of
sale, at one or several sales, either as a whole or in
separate parcels and in such manner and order, all as
Beneficiary in its sole discretion may determine, at
public auction to the highest bidder for cash, in
lawful money of the United States, payable at time of
sale. Neither Grantor nor any other person or entity
other than Beneficiary shall have the right to direct
the order in which the Property is sold. Subject to
requirements and limits imposed by law, Trustee 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 Deed of Trust 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 Deed of
Trust and all of the Debt has been paid and discharged
in full. Trustee shall deliver to the purchaser at
such sale a deed conveying the Property or portion
thereof so sold, but without any covenant or warranty,
express or implied. The recitals in the deed of any
matters or facts shall be conclusive proof of the
truthfulness thereof. Any person, including Trustee,
Grantor or Beneficiary 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 Deed of Trust;
(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 Grantor or of any person, firm or other
entity liable for the payment of the Debt;
(viii) enforce Beneficiary'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
Grantor and its agents and servants therefrom, and
thereupon Beneficiary 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
Beneficiary deems advisable; (C) make alterations,
additions, renewals, replacements and improvements to
or on the Property; (D) exercise all rights and powers
of Grantor with respect to the Property, whether in the
name of Grantor 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,
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insurance and other charges in connection with
the Property, as well as just and reasonable
compensation for the services of Beneficiary,
its counsel, agents and employees;
(ix) require Grantor to vacate and surrender possession to
Beneficiary of the Property or to such receiver and, in
default thereof, evict Grantor by summary proceedings
or otherwise or require Grantor to pay monthly in
advance to Beneficiary, 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 Grantor; or
(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 Grantor relating
to the Property.
In the event of a sale, by foreclosure or otherwise, of less than all of the
Property, this Deed of Trust 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 Beneficiary or
Trustee, as the case may be, under this Deed of Trust, whether under the
provisions of this paragraph or otherwise, shall be applied by Beneficiary to
the payment of the Debt in such priority and proportion as Beneficiary in its
sole discretion shall deem proper, except as otherwise required by law.
(c) Beneficiary or Trustee at the direction of Beneficiary, may
adjourn from time to time any sale by it to be made under or by virtue of this
Deed of Trust 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, Beneficiary or Trustee, 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,
Beneficiary or Trustee, 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. In addition to the powers granted to Trustee, Beneficiary is
hereby irrevocably appointed the true and lawful attorney of Grantor, 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 Beneficiary
may execute all necessary instruments of conveyance, assignment and transfer,
and may substitute one or more persons with like power, Grantor 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 Grantor in and to the
properties and rights so sold, and shall be a perpetual bar both at law and in
equity against Grantor and against any and all persons claiming or who may claim
the same, or any part thereof from, through or under Grantor.
(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, Beneficiary 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 Beneficiary is authorized to deduct under this Deed of
Trust.
(f) No recovery of any judgment by Beneficiary 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 Deed of
Trust upon the Property or any part thereof, or any
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liens, rights, powers or remedies of Trustee or Beneficiary hereunder, but
such liens, rights, powers and remedies of Trustee or Beneficiary shall
continue unimpaired as before.
(g) Beneficiary 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
Beneficiary's sole discretion and without prejudice to Beneficiary.
(h) Beneficiary may resort to any remedies and the security
given by the Note, this Deed of Trust or in any of the other Loan Documents in
whole or in part, and in such portions and in such order as determined by
Beneficiary'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 Deed of Trust or in any of the other Loan Documents. The failure of
Beneficiary to exercise any right, remedy or option provided in the Note, this
Deed of Trust 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 Deed of Trust or any of the other Loan Documents. No acceptance by
Beneficiary of any payment after the occurrence of any Event of Default and no
payment by Beneficiary of any obligation for which Grantor is liable hereunder
shall be deemed to waive or cure any Event of Default with respect to Grantor,
or Grantor's liability to pay such obligation. No sale of all or any portion of
the Property, no forbearance on the part of Beneficiary, and no extension of
time for the payment of the whole or any portion of the Debt or any other
indulgence given by Beneficiary to Grantor, shall operate to release or in any
manner affect the interest of Beneficiary in the remaining Property or the
liability of Grantor to pay the Debt. No waiver by Beneficiary shall be
effective unless it is in writing and then only to the extent specifically
stated. All costs and expenses of Beneficiary 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 Grantor
immediately upon notice from Beneficiary, with interest at the Default Rate for
the period after notice from Beneficiary and such costs and expenses shall
constitute a portion of the Debt and shall be secured by this Deed of Trust.
(i) The interests and rights of Beneficiary under the Note, this
Deed of Trust or any of the other Loan Documents shall not be impaired by any
indulgence, including (i) any renewal, extension or modification which
Beneficiary may grant with respect to any of the Debt, (ii) any surrender,
compromise, release, renewal, extension, exchange or substitution which
Beneficiary 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 Deed of Trust, Beneficiary and its agents shall have the
right after reasonable prior notice to Grantor to enter and inspect the Property
at any reasonable time during the term of this Deed of Trust. The reasonable
cost of such inspections or audits shall be borne by Grantor should Beneficiary
reasonably determine that an Event of Default exists, including the cost of all
follow up or additional investigations or inquiries deemed reasonably necessary
by Beneficiary. The reasonable cost of such inspections, if not paid for by
Grantor following demand, may be added to the principal balance of the sums due
under the Note and this Deed of Trust and shall bear interest thereafter until
paid at the Default Rate.
22. SECURITY AGREEMENT. This Deed of Trust 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 Grantor
in the Property. Grantor by executing and delivering this Deed of Trust has
granted and hereby grants to Beneficiary, 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").
Grantor hereby agrees with Beneficiary to execute and deliver to Beneficiary, in
form and substance satisfactory to Beneficiary, such financing statements and
such further assurances as Beneficiary may from time to time, reasonably
consider necessary to create, perfect, and preserve Beneficiary's security
interest herein granted. This Deed of Trust shall also constitute a "fixture
filing" for the purposes of the Uniform Commercial Code. As such, this Deed of
Trust covers all items of the Collateral that are or are to become fixtures.
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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 Deed of Trust. If an Event of Default shall occur, Beneficiary, 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
Beneficiary may deem necessary for the care, protection and preservation of the
Collateral. Upon request or demand of Beneficiary, Grantor shall at its expense
assemble the Collateral and make it available to Beneficiary at a convenient
place acceptable to Beneficiary. Grantor shall pay to Beneficiary on demand any
and all expenses, including attorneys' fees and disbursements, incurred or paid
by Beneficiary 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 Beneficiary with respect to the
Collateral sent to Grantor in accordance with the provisions hereof at least ten
(10) days prior to such action, shall constitute commercially reasonable notice
to Grantor. The proceeds of any disposition of the Collateral, or any part
thereof, may be applied by Beneficiary to the payment of the Debt in such
priority and proportions as Beneficiary in its sole discretion shall deem
proper. In the event of any change in name, identity or structure of any
Grantor, such Grantor shall notify Beneficiary thereof and promptly after
request shall execute, file and record such Uniform Commercial Code forms as are
necessary to maintain the priority of Beneficiary'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 Beneficiary shall require the filing
or recording of additional Uniform Commercial Code forms or continuation
statements, Grantor shall, promptly after request, execute, file and record such
Uniform Commercial Code forms or continuation statements as Beneficiary 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 Grantor's obligations under the Note,
this Deed of Trust and the other Loan Documents. Grantor hereby irrevocably
appoints Beneficiary 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 Beneficiary, as secured party, in connection with the
Collateral covered by this Deed of Trust.
23. ACTIONS AND PROCEEDINGS. If Grantor fails to act within a
reasonable time, Beneficiary 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 Beneficiary's name or, if required by law, in the name and on
behalf of Grantor, which Beneficiary, in its reasonable discretion, decides
should be brought to protect their interest in the Property. Beneficiary 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
Deed of Trust, the Note and the other Loan Documents shall be payable without
setoff, counterclaim or any deduction whatsoever. Grantor 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 Beneficiary is a
participant, or arising out of or in any way connected with this Deed of Trust,
the Note, any of the other Loan Documents, or the Debt.
25. RECOVERY OF SUMS REQUIRED TO BE PAID. Beneficiary 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 Beneficiary thereafter to bring an action of foreclosure, or any other
action, for a default or defaults by Grantor existing at the time such earlier
action was commenced.
26. MARSHALLING AND OTHER MATTERS. (a) Grantor 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, Grantor hereby expressly waives
any and all rights of redemption from sale under any order or decree of
foreclosure of this Deed of Trust on behalf of Grantor, and on behalf of each
and every person acquiring any interest in or title to the Property subsequent
to the date of this Deed of Trust and on behalf of all persons to the extent
permitted by applicable law.
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(b) Grantor acknowledges that this Deed of Trust secures the Debt.
Grantor agrees that the lien of this Deed of Trust shall be absolute and
unconditional and shall not in any manner be affected or impaired by any acts or
omissions whatsoever of Beneficiary and, without limiting the generality of the
foregoing, the lien hereof shall not be impaired by any acceptance by
Beneficiary of any other security for any portion of the Debt, or by any
failure, neglect or omission on the part of Beneficiary to realize upon or
protect any portion of the Debt or any collateral security therefor. The lien
of this Deed of Trust 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.
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 Deed of Trust or any other Loan Document, Grantor
shall protect, indemnify and save harmless Beneficiary, Trustee and their
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
Beneficiary, Trustee and their assigns, or any of their agents, employees,
officers or directors, by reason of (a) ownership of this Deed of Trust, 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 Grantor to perform or comply with any of the terms of
this Deed of Trust 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 Beneficiary or Trustee 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, Grantor shall have no
obligation to indemnify Beneficiary pursuant to this Section 31 for liabilities,
obligations, claims, damages, penalties, causes of action, costs and expenses
(1) which result from Beneficiary'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
Deed of Trust (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
Beneficiary of all or any part of its interest in this Deed of Trust, the Note,
the other Loan Documents or the Property, other than any such transfer either
required by this Deed of Trust or any other Loan Document or made while an Event
of Default shall have occurred and be continuing, (4) for Beneficiary'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. Beneficiary 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
Grantor or assigned to Beneficiary by Grantor.
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(b) In the event that any action, suit or proceeding shall be
brought against Beneficiary for which Beneficiary is indemnified herein,
Beneficiary shall notify Grantor of the commencement thereof, and Grantor shall
be entitled, at its sole cost and expense, acting through counsel reasonably
acceptable to Beneficiary, to participate in, and, to the extent that Grantor
desires to, assume and control the defense thereof; provided, however, that
Grantor shall have acknowledged in writing its obligation to fully indemnify
Beneficiary hereunder in respect of such action, suit or proceeding, and,
provided further, that Grantor shall not be entitled to participate in the
defense of any such action, suit or proceeding if (i) in the reasonable opinion
of Beneficiary, (x) such action, suit or proceeding involves any risk of
imposition of criminal liability or any risk of civil liability on Beneficiary
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 Grantor shall have posted a bond or other security satisfactory
to Beneficiary in respect to such risk except with respect to any risk of
imposition of criminal liability on Beneficiary as to which Grantor 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 Grantor which Grantor and Beneficiary 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 Deed of Trust and the other Loan
Documents and if determined adversely could be detrimental to the interests of
Beneficiary notwithstanding indemnification by Grantor. Beneficiary may
participate in a reasonable manner at its own expense and with its own counsel
in any proceeding conducted by Grantor 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, Grantor is not entitled to assume and control the defense of any
such action, suit or proceeding, Grantor shall be permitted to assume and
control such defense if Grantor either (i) delivers to Beneficiary an opinion
letter from counsel reasonably acceptable to Beneficiary or a certificate or
opinion from such other Person as shall be acceptable to Beneficiary 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)
Beneficiary's potential, uninsured liability would not exceed the Litigation
Threshold, which opinion or certificate shall be in form and substance
satisfactory to Beneficiary or (ii) Grantor executes and delivers an agreement
with Beneficiary, in form and substance satisfactory to Beneficiary, that
Grantor's liability for fully indemnifying Beneficiary in respect of such
action, suit or proceeding shall be a recourse obligation of Grantor not subject
to the provisions of Section 50 hereof.
(d) Each of Grantor and Beneficiary shall, at Grantor'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, Beneficiary 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 Grantor
unless Beneficiary waives its right to be indemnified under this Section 31 with
respect to such claim. Upon payment in full of any claim by Grantor pursuant to
this Section 31, to or on behalf of Beneficiary, Grantor, without any further
action, shall be subrogated to any and all claims that Beneficiary may have
relating thereto (other than claims in respect of insurance policies maintained
by Beneficiary at its own expense), and Beneficiary 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 Grantor and give such
further assurances as are reasonably necessary or advisable to enable Grantor to
pursue such claims vigorously. Any amount payable to Beneficiary pursuant to
this Section 31 shall be paid by Grantor 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, Grantor assumed and
controlled the defense thereof,
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or (ii) Grantor's receipt of a written demand therefor from Beneficiary,
accompanied by a written statement describing the basis for such indemnity
and the computation of the amount so payable.
Any amounts payable to Beneficiary 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 Deed of
Trust 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 Beneficiary:
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 Grantor:
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
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Winston & Strawn
35 West Wacker Drive
Chicago, Illinois 60601
Attention: Wayne D. Boberg
If to Trustee:
__________________________
__________________________
__________________________
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.
All notices to Trustee shall be deemed to have been properly given if personally
delivered or sent by U.S. registered or certified mail, return receipt
requested, postage prepaid, addressed to Trustee at the address of Trustee
hereinabove set forth or to such other address as Trustee shall have last
designated by written notice to Grantor and Beneficiary given as herein
required.
33. AUTHORITY. (a) Grantor (and the undersigned representative of
Grantor, 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 Deed of Trust, 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 Deed of Trust on Grantor's part to be performed; and (b) Grantor
represents and warrants that Grantor 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. Grantor shall not be entitled to any notices
of any nature whatsoever from Beneficiary except with respect to matters for
which this Deed of Trust or any other Loan Document specifically and expressly
provides for the giving of notice by Beneficiary to Grantor and except with
respect to matters for which Beneficiary is required by applicable law to give
notice. To the extent permitted by applicable law, Grantor hereby expressly
waives the right to receive any notice from Beneficiary with respect to any
matter for which this Deed of Trust or other Loan Document does not specifically
and expressly provide for the giving of notice by Beneficiary to Grantor.
35. INTENTIONALLY OMITTED.
36. SOLE DISCRETION OF BENEFICIARY AND TRUSTEE. Wherever pursuant to
this Deed of Trust, Beneficiary or Trustee exercise any right given to it to
consent or not consent or approve or disapprove, or any arrangement or term is
to be satisfactory to Beneficiary or Trustee, the decision of Beneficiary or
Trustee 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 Beneficiary and Trustee and shall be final and conclusive, except
as may be otherwise expressly and specifically provided herein.
37. NON-WAIVER. The failure of Beneficiary to insist upon strict
performance of any term hereof shall not be deemed to be a waiver of any term of
this Deed of Trust. Grantor shall not be relieved of Grantor's obligations
hereunder by reason of (a) the failure of Beneficiary to comply with any request
of Grantor to take any action to foreclose this Deed of Trust 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 Deed of Trust 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
Grantor liable for the Debt or any portion thereof, or (c) any agreement or
stipulation by Beneficiary extending the time of payment or otherwise modifying
or supplementing the terms of the Note, this Deed of Trust or any of the other
Loan Documents. Beneficiary may resort for the payment of the Debt to any other
security held by Beneficiary in such order and manner as Beneficiary, in its
sole discretion, may elect. Beneficiary may take action to recover the Debt, or
any portion thereof, or to enforce any covenant hereof without
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prejudice to the right of Trustee thereafter to foreclose this Deed of Trust.
The rights and remedies of Beneficiary or Trustee, as the case may be, under
this Deed of Trust shall be separate, distinct and cumulative and none shall
be given effect to the exclusion of the others. No act of Beneficiary or
Trustee, as the case may be, shall be construed as an election to proceed
under any one provision herein to the exclusion of any other provision.
Beneficiary 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.
38. NO ORAL CHANGE. This Deed of Trust, 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 Grantor,
Trustee or Beneficiary, 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 Grantor 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 Beneficiary's consent to
any transfer of the Property, this Deed of Trust shall be binding upon and inure
to the benefit of Grantor and Beneficiary and their respective successors and
assigns forever.
40. INAPPLICABLE PROVISIONS. If any term, covenant or condition of
the Note or this Deed of Trust is held to be invalid, illegal or unenforceable
in any respect, the Note and this Deed of Trust shall be construed without such
provision.
41. HEADINGS, ETC. The headings and captions of various paragraphs
of this Deed of Trust 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 Deed of Trust 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 Deed
of Trust may be used interchangeably in singular or plural form and the word
"GRANTOR" shall mean "each Grantor and any subsequent owner or owners of the
Property or any part thereof or any interest therein," the word "BENEFICIARY"
shall mean "Beneficiary and any subsequent holder of the Note," the word
"TRUSTEE" shall mean "Trustee and any substitute Trustee," the word "NOTE" shall
mean "the Note and any other evidence of indebtedness secured by this Deed of
Trust," 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 Deed of
Trust 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
Beneficiary 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. Grantor 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. Beneficiary shall have the right to assign or
transfer its rights under this Deed of Trust provided that no such assignment or
transfer shall increase, decrease or otherwise affect Grantor's obligations
under this Deed of Trust or the other Loan Documents. Any assignee or
transferee shall be entitled to all the benefits afforded Beneficiary under this
Deed of Trust.
46. WAIVER OF JURY TRIAL. GRANTOR AND, BY ITS ACCEPTANCE HEREOF,
BENEFICIARY, EACH HEREBY AGREES NOT TO ELECT A TRIAL BY JURY OF
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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 DEED OF TRUST, 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
GRANTOR AND BENEFICIARY, 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.
47. MISCELLANEOUS. (a) Any consent or approval by Beneficiary in
any single instance shall not be deemed or construed to be Beneficiary's consent
or approval in any like matter arising at a subsequent date, and the failure of
Beneficiary 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 Beneficiary be estopped from exercising such right,
power, remedy, consent or approval at a later date. Any consent or approval
requested of and granted by Beneficiary 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
Beneficiary a venturer or partner with Grantor nor shall privity of contract be
presumed to have been established with any such third party. If Beneficiary
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, Grantor shall reimburse Beneficiary for all costs
reasonably incurred in connection with the employment of such persons, firms or
corporations.
(b) Grantor covenants and agrees that during the term of this
Deed of Trust, unless Beneficiary shall have previously consented in writing,
(i) Grantor 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) Grantor 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 Beneficiary its written assumption of the obligations of this covenant.
(c) The Loan Documents contain the entire agreement between
Grantor and Beneficiary 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 DEED OF TRUST. This Deed of Trust
will be satisfied and discharged of record by Beneficiary or Trustee, as the
case may be 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 Beneficiary in this Deed of Trust or the other Loan
Documents, in the case of an Event of Default (i) Beneficiary shall have the
right to pursue all of its rights and remedies under this Deed of Trust 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 Beneficiary, in its
sole and absolute discretion, shall determine from time to time, (ii)
Beneficiary 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
Beneficiary or Trustee, as the case may be, of any remedies against any one item
of Property will not impede Beneficiary from subsequently or simultaneously
exercising remedies against any other item of Property, (iv) all liens and other
rights, remedies or privileges provided to Beneficiary herein shall remain in
full force and effect until Beneficiary 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) Beneficiary may resort for
the payment of the Debt to any security held by Beneficiary in such order and
manner as Beneficiary, in its discretion, may
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elect and Beneficiary may take action to recover the Debt, or any portion
thereof, or to enforce any covenant hereof without prejudice to the right of
Beneficiary thereafter to foreclose this Deed of Trust.
(b) Without notice to or consent of Grantor and without
impairment of the lien and rights created by this Deed of Trust, Beneficiary
may, at any time (in its sole and absolute discretion, but Beneficiary shall
have no obligation to), execute and deliver to Grantor a written instrument
releasing and reconveying all or a portion of the lien of this Deed of Trust as
security for any or all of the obligations of Grantor 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
Beneficiary or Trustee, at the direction of Beneficiary, to Grantor of any such
written instrument of release, this Deed of Trust shall no longer secure such
obligations of Grantor so released.
50. EXCULPATION. [Notwithstanding anything herein to the contrary,
Beneficiary shall not enforce the liability and obligations contained in the
Note, the Loan Agreement, this Deed of Trust 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 DEED OF TRUST, THIS DEED OF TRUST 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 DEED OF TRUST AND THE
OTHER LOAN DOCUMENTS AND ALL OF THE INDEBTEDNESS OR OBLIGATIONS ARISING
HEREUNDER OR THEREUNDER. GRANTOR, AND, BY ITS ACCEPTANCE HEREOF, BENEFICIARY,
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. GRANTOR, AND, BY ITS ACCEPTANCE HEREOF, BENEFICIARY,
EACH HEREBY WAIVES AND AGREES NOT TO ASSERT, AS A DEFENSE IN ANY ACTION, SUIT OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS DEED OF TRUST (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 DEED OF TRUST 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, GRANTOR,
AND, BY ITS ACCEPTANCE HEREOF, BENEFICIARY, 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. GRANTOR, AND, BY ITS
ACCEPTANCE HEREOF, BENEFICIARY, EACH HEREBY EXPRESSLY WAIVES ANY AND ALL RIGHTS
TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING RELATED TO THE ENFORCEMENT OF THIS
DEED OF TRUST.
52. TRUSTEE; SUCCESSOR TRUSTEE. Trustee shall not be liable for any
error of judgment or act done by Trustee, or be otherwise responsible or
accountable under any circumstances whatsoever, except if the result of
Trustee's gross negligence or willful misconduct. Trustee shall not be
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personally liable in case of entry by him or anyone acting by virtue of the
powers herein granted him upon the Property for debts contracted or liability or
damages or damages incurred in the management or operation of the Property.
Trustee shall have the right to rely on any instrument, document or signature
authorizing or supporting any action taken or proposed to be taken by him
hereunder or believed by him to be genuine. Trustee shall be entitled to
reimbursement for actual expenses incurred by him in the performance of his
duties hereunder. Grantor will, from time to time, reimburse Trustee for and
save and hold him harmless from and against any and all loss, cost, liability,
damage and reasonable expense whatsoever incurred by him in the performance of
his duties. All monies received by Trustee shall, until used or applied as
herein provided, be held in trust for the purposes for which they were received,
but need not be segregated in any manner from any other monies (except to the
extent required by law) and Trustee shall be under no liability for interest on
any monies received by him hereunder. Trustee may resign by giving of notice of
such resignation in writing to Beneficiary. If Trustee shall die, resign or
become disqualified from acting in the execution of this trust or shall fail or
refuse to exercise the same when requested by Beneficiary or if for any or no
reason and without cause Beneficiary shall prefer to appoint a substitute
trustee to act instead of the original Trustee named herein, or any prior
successor or substitute trustee, Beneficiary shall, without any formality or
notice to Grantor or any other person, have full power to appoint a substitute
trustee and, if Beneficiary so elects, several substitute trustees in succession
who shall succeed to all the estate, rights, powers and duties of the aforenamed
Trustee. Each appointment and substitution shall be evidenced by an instrument
in writing which shall recite the parties to, and the book and page of record
of, this Deed of Trust, and the description of the real property herein
described, which instrument, executed and acknowledged by Beneficiary and
recorded in the Official Records of the county in which this Deed of Trust is
recorded, shall (i) be conclusive proof of the proper substitution and
appointment of such successor Trustee or Trustees, (ii) duly assign and transfer
all the estates, properties, rights, powers and trusts of Trustee so ceasing to
act and (iii) be notice of such proper substitution and appointment to all
parties in interest. In addition, such Trustee ceasing to act shall duly
assign, transfer, and deliver any of the property and monies held by Trustee to
the successor Trustee so appointed in its or his place. The Trustee may act in
the execution of this trust and may authorize one or more parties to act on his
behalf to perform the ministerial functions required of him hereunder, including
without limitation, the transmittal and posting of any notices and it shall not
be necessary for any Trustee to be present in person at any foreclosure sale.
53. DECLARATION OF SUBORDINATION. At the option of Beneficiary, this
Deed of Trust 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 Beneficiary or Trustee 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.
54. STATE SPECIFIC RIDER. The provisions of the State Specific Rider
attached hereto as EXHIBIT B are hereby incorporated herein by reference.
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<PAGE>
IN WITNESS WHEREOF, Grantor has executed this instrument the day and
year first above written.
[_________________________], a Delaware [____________]
By: Horizon Group Properties, L.P., a Delaware limited
partnership, its [_________]
By: Horizon Group Properties, Inc., a Maryland
corporation, its general partner
By:________________________________
Name:
Title:
22
<PAGE>
STATE OF )
) ss.:
COUNTY OF )
This instrument has been acknowledged before me on this _____ day
of , 1998, by ____________, the __________ of Horizon Group
Properties, Inc., a Maryland corporation, in its capacity as the general
partner of Horizon Group Properties, 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]
23
<PAGE>
EXHIBIT A
LEGAL DESCRIPTION
<PAGE>
EXHIBIT B
RIDER
<PAGE>
EXHIBIT 10.3
[___________________________________]
(Mortgagor)
for the benefit of
NOMURA ASSET CAPITAL CORPORATION
(Mortgagee)
_______________________________________________
MORTGAGE, ASSIGNMENT OF LEASES
AND RENTS AND SECURITY AGREEMENT
_______________________________________________
Dated: As of June 15, 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 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
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<PAGE>
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, 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
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<PAGE>
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 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.
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<PAGE>
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. 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.
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<PAGE>
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; (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
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<PAGE>
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.
(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
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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 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,
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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.
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.
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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;
(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
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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;
(iv) sell or cause to be sold for cash or upon credit the
Property or any
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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;
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(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
(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.
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(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.
(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
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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 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.
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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.
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
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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, (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
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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.
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):
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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 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
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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
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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.
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
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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.
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
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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.
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
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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.
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IN WITNESS WHEREOF, Mortgagor has executed this instrument the day
and year first above written.
[_________________________], a Delaware
[____________]
By: Horizon Group Properties, L.P., a
Delaware limited partnership, its
[_________]
By: Horizon Group Properties, Inc.,
a Maryland corporation, its
general partner
By:________________________________
Name:
Title:
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<PAGE>
STATE OF )
) ss.:
COUNTY OF )
This instrument has been acknowledged before me on this _____ day
of , 1998, by ____________, the __________ of Horizon Group
Properties, Inc., a Maryland corporation, in its capacity as the general partner
of Horizon Group Properties, 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]
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<PAGE>
EXHIBIT A
LEGAL DESCRIPTION
<PAGE>
EXHIBIT B
RIDER
<PAGE>
EXHIBIT 10.4
THIS DOCUMENT PREPARED BY AND
RECORDING REQUESTED BY AND WHEN
RECORDED MAIL TO:
Sonnenschein Nath & Rosenthal
8000 Sears Tower
Chicago, IL 60606
Attention: Todd Stennes
ASSIGNMENT OF LEASES AND RENTS
Dated and effective as of June __, 1998
between
[______________________________________],
a Delaware [________________________]
as Assignor,
and
NOMURA ASSET CAPITAL CORPORATION,
a Delaware corporation,
as Assignee
<PAGE>
THIS ASSIGNMENT OF LEASES AND RENTS (this "ASSIGNMENT") dated and
effective as of the _____ day of June, 1998 made by [
], a _______________________ duly organized under the
laws of the State of __________________, having an office c/o Horizon Group
Properties, Inc., 5000 Hakes Drive, Norton Shores, Michigan 49441 ("ASSIGNOR")
to NOMURA ASSET CAPITAL CORPORATION, a corporation organized under the laws of
the State of Delaware, having an office at Two World Financial Center,
Building B, New York, New York 10281-1198 ("ASSIGNEE").
W I T N E S S E T H:
WHEREAS, Assignor is the owner of a fee simple title (1) to that
certain parcel of real property (the "PREMISES") described in EXHIBIT A attached
hereto, together with the buildings, structures, fixtures, additions,
enlargements, extensions, modifications, repairs, replacements and other
improvements now or hereafter located thereon (collectively, the "PROPERTY");
WHEREAS, Assignee, Assignor and certain other entities affiliated with
Assignor (such affiliated entities and Assignor 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 Assignee has agreed to make a secured mortgage loan to the
Borrowers.
WHEREAS, pursuant to the Loan Agreement, Assignee is making a Loan to
the Borrowers in the aggregate original principal amount of $
(the "LOAN") and the Borrowers have executed a promissory 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, that certain mortgage or deed of
trust, assignment of leases and rents and security agreement (as amended from
time to time, the "MORTGAGE") on the Premises and Property.
WHEREAS, it is a condition to the obligation of the Assignee to make
the Loan to the Borrowers pursuant to the Loan Agreement that Assignor execute
and deliver this Assignment;
WHEREAS, Assignor and Assignee contemplate that Assignee's interest in
and to, INTER ALIA, the Loan, the Note and this Assignment may be assigned by
Assignee to a trustee for the benefit of all holders of the Securities issued in
connection with the Securitization;
WHEREAS, this Assignment is being given as additional security for the
Loan; and
WHEREAS, capitalized terms used in this Assignment without definition
have the respective meanings assigned to such terms in the Loan Agreement or the
Mortgage as the case may be, the terms of each of which are specifically
incorporated by reference herein.
NOW, THEREFORE, for good and valuable consideration, receipt of which
by the parties hereto is hereby acknowledged, and additionally for the purpose
of additionally securing the Debt, Assignor hereby assigns, transfers, conveys
and sets over unto the Assignee, all right, title and interest of Assignor in
and to (i) all Leases (as hereinafter defined) and (ii) all Rents (as
hereinafter defined);
- -----------------------------------
(1) Revise for leasehold properties.
1
<PAGE>
TO HAVE AND TO HOLD the same unto the Assignee, and its successors and
assigns forever, upon the terms and conditions and for the uses hereinafter set
forth.
And Assignor hereby further agrees as follows:
Section 1. DEFINITIONS.
As used herein, the following terms shall have the following meanings:
(a) "LEASES" shall mean any and all leases, or, to the extent of the
interest therein of Assignor, subleases or sub-subleases, lettings, licenses,
concessions or other agreements (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 the Property, 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.
(b) "RENTS" shall mean all rents, rent equivalents, monies 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, proceeds, 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 Assignor or its agents or employees from any and all
sources arising from or attributable to the Property, 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
Property and proceeds, if any, from business interruption or other loss of
income insurance.
Section 2. CERTAIN REPRESENTATIONS, WARRANTIES AND COVENANTS.
Assignor represents, warrants and covenants to the Assignee that:
(a) The payment of the Rents to accrue under any Lease will not be
waived, released, reduced, discounted or otherwise discharged or compromised by
Assignor except as permitted in the Loan Agreement. Assignor waives any rights
of set off against any tenant under any Lease. Assignor agrees that it will not
assign any of the Rents except to a purchaser or grantee of the Property
permitted under the Loan Agreement;
(b) Assignor has not performed, and will not perform, any acts, and
has not executed, and will not execute, any instrument that would prevent
Assignee from exercising its rights under this Assignment; and
(c) Assignor hereby authorizes and directs any tenant under any of
the Leases and any successor to all or any part of the interests of any such
tenant to pay directly to the Collection Account Bank, in accordance with the
terms of the Collection Account Agreement, the Rents due and to become due under
the Leases and such authorization and direction shall be sufficient warrant to
the tenant to make future payments of Rents directly to the Collection Account
in accordance with the terms of the Collection Account Agreement without the
necessity for further consent by the Assignor.
Section 3. DEFERRED EXERCISE OF RIGHTS.
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(a) As part of the consideration for the indebtedness evidenced by
the Note, Assignor does hereby absolutely and unconditionally assign to Assignee
all right, title and interest of Assignor in and to all present and future
Leases and Rents, and this Assignment constitutes a present and absolute
assignment and is intended to be unconditional and not as an assignment for
additional security only. It is further intended that it not be necessary for
Assignee to institute legal proceedings, absent any requirements of law or
regulation to the contrary, to enforce the provisions hereof. Assignor hereby
authorizes Assignee or its agents to collect the aforesaid Rents in accordance
with the terms of the Cash Collateral Account Agreement and hereby directs each
tenant of the Property to pay such Rents directly to the Collection Account, in
accordance with the terms of the Cash Collateral Account Agreement; provided,
however, that so long as no Event of Default by Assignor hereunder or under any
of the other Loan Documents then exists, Assignor shall have a license (i) to
collect all of the Rents so long as Assignor shall cause all such Rents
collected to be deposited directly into the Collection Account in accordance
with the terms of the Loan Agreement; and (ii) to otherwise deal with, and enjoy
the rights of the lessor under, the Leases or in each of the foregoing cases, as
otherwise permitted by the Loan Agreement and other Loan Documents.
(b) Upon the occurrence and during the continuance of an Event of
Default, and without the necessity of Assignee entering upon and taking and
maintaining full control of the Property in person, by agent or by
court-appointed receiver, the license referred to in paragraph (a) above
shall immediately be revoked and Assignee shall have the right at its option,
to exercise all rights and remedies contained in the Loan Agreement or any of
the other Loan Documents, or otherwise available at law or in equity, except
as such right may be limited therein.
(c) Any Rents held or received by Assignor at any time shall be
deposited directly into the Collection Account in accordance with the terms of
the Loan Agreement.
Section 4. EFFECT ON RIGHTS UNDER OTHER DOCUMENTS.
Nothing contained in this Assignment and no act done or omitted by
Assignee pursuant to the powers and rights granted it hereunder shall be deemed
to be a waiver by Assignee of its rights and remedies under the Loan Agreement
or any of the other Loan Documents, and this Assignment is made and accepted
without prejudice to any of the rights and remedies possessed by Assignee under
the terms of the Loan Agreement or any of the other Loan Documents. The rights
of Assignee under the other Loan Documents may be exercised by Assignee either
prior to, simultaneously with, or subsequent to any action taken by it
hereunder. This Assignment is intended to be supplementary to and not in
substitution for or in derogation of any assignment of rents or grant of a
security interest contained in the Mortgage or in any of the other Loan
Documents.
Section 5. EVENT OF DEFAULT.
Upon or at any time after the occurrence and during the continuance of
an Event of Default, then in addition to and without limiting any of the
Assignee's rights and remedies hereunder and under any of the other Loan
Documents and as otherwise available at law or in equity:
(a) Assignee may, at its option, without waiving such Event of
Default and without regard to the adequacy of the security for the Debt, either
in person or by agent, without bringing any action or proceeding, or by a
receiver appointed by a court, without taking possession of the Property in its
own name, demand, sue for or otherwise collect and receive all Rents, including
those past-due and unpaid, for application to the payment of the Debt in
accordance with the terms of the Loan Agreement and Assignee may enter into, and
to the extent that Assignor would have the right to do so, cancel, enforce or
modify any Lease. The exercise by Assignee of the option granted it in this
Section and the collection of the Rents and the application thereof as herein
provided shall not be considered a waiver of
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any Event of Default by Assignor under the Loan Agreement or any other Loan
Document;
(b) Assignor hereby acknowledges and agrees that payment of any item
by a Person to the Assignee as hereinabove provided shall constitute payment in
full of such item of Rent by such Person, as fully and with the same effect as
if it had been paid to Assignor; and
(c) Assignee in respect of the Leases and Rents shall have all of the
rights and remedies of a secured party under the Uniform Commercial Code as in
effect in the State in which such rights and remedies are properly asserted as
described in Section 12(b) to the extent of such rights thereunder and
additional rights and remedies to which a secured party is entitled under the
laws in effect in any jurisdiction where any rights and remedies hereunder may
be properly asserted.
Section 6. APPLICATION OF RENTS AND PROCEEDS.
After the occurrence and during the continuance of an Event of
Default, rents received or held by Assignor or Assignee shall be applied in
accordance with the terms of the Loan Agreement.
Section 7. ATTORNEY-IN-FACT.
Upon the occurrence and during the continuance of any Event of
Default, Assignor hereby appoints Assignee the attorney-in-fact of Assignor to
take any action and execute any instruments that Assignor is obligated, or has
covenanted and agreed under the Loan Agreement or the other Loan Documents to
take or execute, which appointment as attorney-in-fact is irrevocable and
coupled with an interest. Without limiting the generality of the foregoing
provisions of this Section 7, upon the occurrence and during the continuance of
an Event of Default, Assignor does hereby irrevocably appoint the Assignee as
its attorney-in-fact with full power, in the name and stead of Assignor to
demand, collect, receive and give complete acquittance for any and all of the
Rents now due or that may hereafter become due, and at the Assignee's
discretion, to file any claim, to take any other action, to institute any
proceeding or to make any settlement of any claim, either in its own name or in
the name of Assignor or otherwise, which the Assignee may deem necessary or
desirable in order to collect and enforce the payment of Rents.
Section 8. TERMINATION.
The Assignee, by the acceptance of this Assignment, agrees that this
Assignment shall terminate (i) when all of the Debt shall have been paid or
defeased in full, and (ii) as to any portion of the Property that is released
from the Mortgage, and the Assignee shall execute and deliver to Assignor, upon
such termination such instruments of re-assignment and Uniform Commercial Code
termination statements, all without recourse and without any representation or
warranty whatsoever, as shall be reasonably necessary to evidence such
termination or as otherwise reasonably requested by Assignor.
Section 9. EXPENSES.
Assignor agrees to pay to the Assignee all actual and reasonable
out-of-pocket expenses (including reasonable expenses for attorneys' fees and
costs of every kind) of, or incident to, the enforcement of any of the
provisions of this Assignment or performance by the Assignee of any
obligation of Assignor hereunder which Assignor has failed or refused to
perform.
Section 10. FURTHER ASSURANCES.
Assignor agrees that, from time to time upon the reasonable written
request of the Assignee, it will give, execute, deliver, file and/or record any
financing statements, notice, document,
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agreement or other instrument and do such other acts and things that may be
necessary and desirable (in the reasonable judgment of the Assignee) to
create, preserve, perfect or validate this Assignment, to enable Assignee to
exercise and enforce its rights hereunder with respect to this Assignment or
to otherwise carry out the purposes and intent of this Assignment.
Section 11. NO OBLIGATION BY THE ASSIGNEE.
(a) By virtue of this Assignment, the Assignee shall not be obligated
to perform or discharge, nor does it hereby undertake to perform or discharge,
any obligation, duty or liability under any of the Leases.
(b) This Assignment shall not operate to place responsibility for the
control, care, management or repair of the Property upon the Assignee, nor shall
it operate to make the Assignee responsible or liable for any waste committed on
the Property by any tenant or other party in possession or for any dangerous or
defective condition of the Property or for any negligence in the management,
upkeep, repair or control thereof.
Section 12. MISCELLANEOUS.
(a) No failure on the part of the Assignee or any of its agents to
exercise, and no course of dealing with respect to, and no delay in exercising,
any right, power or remedy hereunder shall operate as a waiver thereof; nor
shall any single or partial exercise by the Assignee or any of its agents of any
right, power or remedy hereunder preclude any other or further exercise thereof
or the exercise of any other right, power or remedy. The remedies herein are
cumulative and are not exclusive of any remedies provided by law.
(b) WITH RESPECT TO MATTERS RELATING TO THE CREATION, PERFECTION AND
PROCEDURES RELATING TO THE ENFORCEMENT OF THIS ASSIGNMENT, THIS ASSIGNMENT SHALL
BE GOVERNED BY, AND BE CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE IN
WHICH THE PROPERTY IS LOCATED, IT BEING 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 ASSIGNMENT AND THE OTHER PROPERTY LOAN DOCUMENTS AND ALL OF THE
INDEBTEDNESS OR OBLIGATIONS ARISING HEREUNDER OR THEREUNDER. ALL PROVISIONS OF
THE LOAN AGREEMENT INCORPORATED HEREIN BY REFERENCE SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF ILLINOIS, AS SET FORTH IN
THE GOVERNING LAW PROVISION OF THE LOAN AGREEMENT.
(c) All rights and remedies set forth in this Assignment are
cumulative, and the Assignee may recover judgment thereon, issue execution
therefor, and resort to every other right or remedy available at law or in
equity, without first exhausting and without affecting or impairing the security
of any right or remedy afforded hereby; and no such right or remedy set forth in
this Assignment shall be deemed exclusive of any of the remedies or rights
granted to the Assignee in any of the Loan Documents. Nothing contained in this
Assignment shall be deemed to limit or restrict the rights and remedies of the
Assignee under the Loan Agreement or any of the other Loan Documents.
(d) Assignor represents that it: (i) has been advised that Assignee
engages in the business of real estate financings and other real estate
transactions and investments which may be viewed as adverse to or competitive
with the business of Assignor or its affiliates; (ii) is represented by
competent counsel and has consulted counsel before executing this Assignment;
and (iii) has relied solely
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on its own judgment and on its counsel and advisors in entering into the
transaction(s) contemplated hereby without relying in any manner on any
statements, representations or recommendations of Assignee or any parent,
subsidiary or affiliate of Assignee.
Section 13. NO ORAL CHANGE.
This Assignment may not be amended except by an instrument in writing
signed by Assignor and Assignee.
Section 14. SUCCESSORS AND ASSIGNS.
Assignor may not assign its rights under this Assignment except as
permitted under the Loan Agreement. Subject to the foregoing, this Assignment
shall be binding upon, and shall inure to the benefit of, Assignor and Assignee
and their respective successors and assigns.
Section 15. NOTICES.
All notices, requests and other communications provided for herein
shall be given or made in writing in the manner specified in the Loan Agreement.
Section 16. EXCULPATION.
[Notwithstanding anything herein to the contrary, Assignee shall not
enforce the liability and obligations contained in the Note, the Loan Agreement,
this Assignment or the other Loan Documents except as provided in Section 9.4 of
the Loan Agreement.] [THIS PARAGRAPH WILL BE DELETED IN BRIDGE LOAN DOCUMENTS.]
Section 17. CONFLICTS.
In the event the terms of this Assignment conflict with the terms of
the Loan Agreement, the terms of the Loan Agreement shall control.
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IN WITNESS WHEREOF, this Assignment has been duly executed by the
Assignor as of the day and year first above written.
[_________________________], a [_____________________]
By: Horizon Group Properties, L.P., a Delaware limited
partnership, its [_________]
By: Horizon Group Properties, Inc., a Maryland
corporation, its general partner
By:_______________________________
Name:
Title:
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STATE OF )
) ss.:
COUNTY OF )
This instrument has been acknowledged before me on this _____ day of
, 1998, by ____________, the __________ of Horizon Group Properties,
Inc., a Maryland corporation, in its capacity as the general partner of Horizon
Group Properties, 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]
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"EXHIBIT A"
Description of Property
1
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EXHIBIT 10.5
GUARANTY
This Guaranty made as of the 15th day of June, 1998, by HORIZON GROUP
PROPERTIES, INC. a Maryland corporation (the "REIT") and HORIZON GROUP
PROPERTIES, L.P. a Delaware limited partnership (the "Operating
Partnership"), jointly and severally (each a "Guarantor" and collectively,
"Guarantors"), 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 one or more notes
of even date in the aggregate principal amount of $108,205,000.00 as evidence
of their indebtedness to Lender (collectively, the "Note"). To secure
payment of the Note, Borrower has executed and delivered to Lender the
Mortgages and various other Loan Documents.
C. Each Guarantor owns an indirect interest in each Borrower.
Accordingly, Guarantors will derive financial benefit from the Loan. The
execution and delivery of this Guaranty by Guarantors is a condition
precedent to Lender making the Loan.
AGREEMENTS
NOW, THEREFORE, Guarantors, 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. Guarantors absolutely, unconditionally, and irrevocably guarantee to
Lender:
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(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).
All debts, liabilities, and payment obligations described in subparagraphs (a)
and (b) of this Paragraph 1 are referred to herein as the "Indebtedness." All
of the obligations, undertakings, representations, warranties, and liabilities
of each of the Guarantors shall be joint and several.
2. In the event of any default by Borrower in making payment of the
Indebtedness, as aforesaid, Guarantors agree, 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, Mortgages and 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 Borrower may have against Lender or the holder of the
Note and (ii) any defense, right of set-off or claims which Guarantors or either
of them may have against Lender or the holder of the Note.
3. Each 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 such 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 such 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 Guarantors with liability, and
(iv) any failure by Lender to inform Guarantors of any facts Lender may now
or hereafter know about Borrower, 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 each Guarantor is fully
responsible for being and remaining informed by the Borrower 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
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Borrower without notice to or authorization from Guarantors, regardless of
the financial or other condition of the Borrower at the time of any such
grant or continuation. Lender shall have no obligation to disclose or
discuss with Guarantors its assessment of the financial condition of
Borrower. Guarantors acknowledge that no representations of any kind
whatsoever have been made by Lender to Guarantors. 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. Guarantors further agree that any exculpatory language contained in
the Loan Agreement, Note or the Mortgages shall in no event apply to this
Guaranty, and will not prevent Lender from proceeding against Guarantors to
enforce this Guaranty.
4. Guarantors further agree that Guarantors' liability as guarantors
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
Guarantors 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 Borrower, or by any change or modification in
the Loan Agreement, Note, 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 Guarantors 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, Mortgages and 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. Guarantors further understand and agree that Lender may at any time
enter into agreements with Borrower to amend and modify the Note, Loan
Agreement, Mortgages or other Loan Documents, or any thereof, and may waive
or release any provision or provisions of the Note, Loan Agreement, Mortgages
and 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 Borrower 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 Guarantors' obligations hereunder.
5. This is an absolute, present and continuing guaranty of payment and not
of collection. Guarantors agree 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, Loan
Agreement, Mortgages or any of the other Loan Documents through foreclosure
proceedings under the Mortgages or
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otherwise, or resorting to any other guaranties, and Guarantors hereby waive
the right to require Lender to join Borrower in any action brought hereunder
or to commence any action against or obtain any judgment against Borrower or
to pursue any other remedy or enforce any other right. Guarantors further
agree 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, Loan Agreement, 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 Guarantors'
obligations hereunder, it being the purpose and intent of the Guarantors that
the obligations of such Guarantors hereunder shall be absolute, independent
and unconditional under any and all circumstances whatsoever. Neither
Guarantors' 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 Borrower under the Loan Agreement, Note,
Mortgages or other Loan Documents or by reason of Borrower's bankruptcy or by
reason of any creditor or bankruptcy proceeding instituted by or against
Borrower. In the event of the foreclosure of the Mortgages and of a
deficiency, each Guarantor hereby promises and agrees forthwith to pay the
amount of such deficiency notwithstanding the fact that recovery of said
deficiency against Borrower would not be allowed by applicable law. Without
in any manner limiting the foregoing, Lender may elect to enforce this
Guaranty against, and to recover all or any part of the Indebtedness from,
either one or both of the parties constituting the Guarantors hereunder,
either concurrently or sequentially, as Lender may elect in its sole
discretion, and in no event shall any determination by Lender to proceed at
any time against one of such parties be deemed to waive, limit, or otherwise
affect Lender's rights and remedies under this Guaranty, except to the extent
of the Indebtedness or portion thereof actually paid to Lender (subject to
the provisions of the next sentence). 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, 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
Guarantors 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 all or a
portion of Lender's rights under the Loan Documents.
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,
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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 Guarantors shall pay to
Lender upon demand all 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 Borrower to either Guarantor now or hereafter
existing is hereby subordinated to the Indebtedness. Guarantors agree that,
until the entire Indebtedness has been paid in full, Guarantors will not
seek, accept, or retain for Guarantors' own account, any payment from
Borrower on account of such subordinated debt. Any payments to Guarantors on
account of such subordinated debt shall be collected and received by
Guarantors in trust for Lender and shall be paid over to Lender on account of
the Indebtedness without impairing or releasing the obligations of Guarantors
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 Lender may from time to
time elect.
11. The Guarantors hereby submit to personal jurisdiction in the State of
Illinois
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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. Guarantors hereby consent 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. Guarantors hereby agree 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
Guarantors 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, (c) telecopier (with answer back acknowledged), 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
Telecopier: 212-667-1567
with a copy to:
Nomura Asset Capital Client Services LLC
600 East Las Colinas Blvd.
Suite 1300
Irving, Texas 75039
Attention: Legal Department
Telecopier: 972-401-8554
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with a copy to:
Sonnenschein Nath & Rosenthal
8000 Sears Tower
Chicago, Illinois 60606
Attention: Mark F. Mehlman
Telecopier: 312-876-7934
If to Guarantors:
5000 Hakes Drive
Norton Shores, Michigan 49441
Attention: Chairman and Chief Executive Officer
Telecopier: 616-798-5100
with copies to:
Winston & Strawn
35 West Wacker Drive
Chicago, Illinois 60601
Attention: Wayne D. Boberg
Telecopier: 312-558-5700
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 and telecopy, upon the first attempted delivery on a
Business Day.
13. Promptly upon the filing thereof, Guarantors shall provide copies
of all registration statements and annual, quarterly, monthly or other
reports and any other public information which the Guarantors or any of their
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,
Guarantors 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:
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(a) The REIT shall at all times cause its common stock to be listed on
NASDAQ, 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 of Guarantors 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 Guarantors 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, Guarantors make the
representations and warranties to Lender set forth in this Paragraph 16.
Guarantors acknowledge 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 Guarantors' relationship to the Borrower and to the Properties
are true and correct.
B. Each 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. Each
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. Each 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. Each Guarantor has taken all necessary action to authorize the
execution, delivery and performance of this Guaranty and the other Loan
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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 each
Guarantor which is a party thereto and constitute legal, valid and binding
obligations of each such Guarantor enforceable against such Guarantor 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).
D. Any and all balance sheets, net worth statements, and other
financial data with respect to Guarantors which have heretofore been given
to Lender by Guarantors fairly and accurately present the financial
condition of Guarantors as of the respective dates thereof, and, since the
respective dates thereof, there has been no materially adverse change in
the financial condition of Guarantors.
E. The execution, delivery, and performance by Guarantors of this
Guaranty do not and will not contravene or conflict with (i) any existing
agreement between a Guarantor (or any affiliate of a 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 Guarantors, (iii) any organizational
document of a Guarantor or (iv) any contractual restriction binding on or
affecting a Guarantor or such 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 Guarantors,
threatened or affecting Guarantors, which is reasonably likely to
materially and adversely affect Guarantors' ability to fulfill Guarantors'
obligations under this Guaranty. There are no judgments or orders for the
payment of money rendered against Guarantors for an amount in excess of
$50,000 in any instance or $100,000 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. Guarantors are not in default under any agreements to which
Guarantors are a party, which defaults could materially adversely affect
Guarantors' ability to perform their obligations under this Guaranty.
G. All statements set forth in the Recitals are true and correct.
Guarantors hereby agree to indemnify and hold Lender free and harmless from and
against all loss, cost, damage, and expense, including attorney's fees and
costs, which
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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. Guarantors shall, within five business days after receipt thereof,
deliver to Lender copies of any notices of default served on Guarantors pursuant
to the terms of any other agreement to which a Guarantor is a party, which
defaults could materially affect Guarantors' obligations to perform their
obligations under this Guaranty.
18. GUARANTORS AND LENDER EACH HEREBY WAIVE ANY RIGHT TO A TRIAL BY JURY
IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHT UNDER THIS GUARANTY
OR ANY OTHER LOAN DOCUMENT OR RELATING THERETO OR ARISING FROM THE LENDING
RELATIONSHIP WHICH IS THE SUBJECT OF THIS GUARANTY AND AGREE THAT ANY SUCH
ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
19. This Guaranty shall be binding upon the successors and assigns of
Guarantors, and shall inure to the benefit of Lender's successors and assigns.
20. Notwithstanding any provision herein or in any of the other Loan
Documents to the contrary, except as set forth in this Section, Lender shall not
enforce the liability and obligation of any Guarantor to perform and observe the
obligations contained in this or the other Loan Documents by an action or
proceeding wherein a money judgment shall be sought against any director,
officer, employee, partner, member or stockholder of any Guarantor, or of its
general partners unless such party is also a Guarantor.
21. This Guaranty shall be construed and enforced under the internal laws
of the State of Illinois.
22. This Guaranty may be executed in two or more counterparts all of which
shall together constitute a single original.
IN WITNESS WHEREOF, Guarantors have delivered this Guaranty as of the date
first written above.
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<PAGE>
HORIZON GROUP PROPERTIES, INC.
By: /s/ Gary J. Skoien
---------------------------------------------
Name: Gary J. Skoien
Title: President and Chief Executive Officer
HORIZON GROUP PROPERTIES, L.P.
By: Horizon Group Properties, Inc., its
general partner
By: /s/ Gary J. Skoien
---------------------------------------------
Name: Gary J. Skoien
Title: President and Chief Executive Officer
12
<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 Gary J. Skoien, 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 President and Chief
Executive Officer of Horizon Group Properties, Inc., on behalf of said
corporation and on behalf of Horizon Group Properties, L.P., for the uses and
purposes therein set forth.
GIVEN under my hand and Notarial Seal, this 15TH day of June, 1998.
______________________________________________
, Notary Public
_______________,_________________
My Commission Expires:__________
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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"),
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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 ("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.
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<PAGE>
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 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
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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).
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.
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<PAGE>
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 HGP's 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.
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
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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
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.
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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.
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.
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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
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
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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]
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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/ David R. Tinkham
-------------------------------------------
Its: Secretary
HORIZON GROUP PROPERTIES, L.P.
By: HORIZON GROUP PROPERTIES, INC.
By: /s/ David R. Tinkham
-------------------------------------------
Its: Secretary
PRIME RETAIL, INC.
By: /s/ William H. Carpenter, Jr.
-------------------------------------------
Its: President
PRIME RETAIL, L.P.
By: PRIME RETAIL, INC.
By: /s/ William H. Carpenter, Jr.
-------------------------------------------
Its: President
<PAGE>
EXHIBIT 99.1
FOR IMMEDIATE RELEASE FOR MORE INFORMATION CALL
JUNE 15, 1998 INVESTORS: David Tinkham
Chief Financial Officer
(312) 917-4288
MEDIA: Pam Mettler
Director of Public Relations
(616) 798-9195
HORIZON GROUP PROPERTIES, INC.
HORIZON GROUP PROPERTIES, INC. COMPLETES $108.2 MILLION OF DEBT FINANCING
CHICAGO, IL (June 15, 1998) --
# # #
HGP also announced today that it completed a $108.2 million debt
financing from Nomura Asset Capital Corporation. This credit facility, which
is fully guaranteed by HGP and HGP LP, has a term of three years and bears
interest at one month LIBOR plus 1.90% per annum. The facility is
cross-collateralized by mortgages on 13 of HGP's properties. The facility
requires monthly payments of interest and annual principal installments
totaling $1.5 million, $1.5 million and $2.0 million payable in equal monthly
installments during the first, second and third years, respectively. An
additional principal payment of $2.2 million is due on September 1, 1998.
Nomura has committed to provide additional financing of up to $14.0 million
to HGP in the event that a portion of HGP's outlet center in Bellport, New
York is mortgaged as additional collateral and certain other conditions are
satisfied. HGP's ability to provide this collateral is subject to the
consent of its joint venture partners at such property. There can be no
assurance that such consent will be obtained.
# # #
