<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended MARCH 31, 2000
OR
[ ] Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
COMMISSION FILE NUMBER: 0-24123
HORIZON GROUP PROPERTIES, INC.
------------------------------
(Exact name of Registrant as specified in its Charter)
MARYLAND 38-3407933
--------------------------------- ------------------------------------
(State or other jurisdiction (I.R.S. employer identification no.)
of incorporation or organization)
77 WEST WACKER DRIVE, SUITE 4200, CHICAGO, IL 60601
- --------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(312) 917-8870
--------------
(Registrant's telephone number, including area code)
NOT APPLICABLE
--------------
Former name, former address and former fiscal year,
if changed since last report.
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
NUMBER OF COMMON SHARES OUTSTANDING AT MAY 8, 2000 2,851,729
=========
1
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HORIZON GROUP PROPERTIES, INC.
Index to Form 10-Q
March 31, 2000
PAGE NO.
--------
Part I. Financial Information:
Item 1. Financial Statements (unaudited)
Condensed Consolidated Statements of Operations of the
Company for the Three Months Ended March 31, 2000 and
March 31, 1999 ..........................................................3
Condensed Consolidated Balance Sheets of the Company at
March 31, 2000 and December 31, 1999 ....................................4
Condensed Consolidated Statements of Cash Flows of the
Company for the Three Months Ended March 31, 2000 and
March 31, 1999 ..........................................................5
Notes to Condensed Consolidated Financial Statements ......................6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ....................................15
Item 3. Quantitative and Qualitative Disclosure of Market
Risk ...................................................................19
Part II. Other Information:
Item 1. Legal Proceedings .................................................20
Item 2. Changes in Securities .............................................20
Item 3. Defaults Upon Senior Securities ...................................20
Item 4. Submission of Matters to a Vote of Security Holders ...............20
Item 5. Other Information .................................................20
Item 6. Exhibits or Reports on Form 8-K ...................................21
Signatures .................................................................23
2
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HORIZON GROUP PROPERTIES, INC.
Condensed Consolidated Statements of Operations
(unaudited)
Three months ended Three months ended
March 31, 2000 March 31, 1999
------------------ ------------------
(thousands, except per share data)
REVENUE
Base rent $ 5,058 $ 5,520
Percentage rent 42 30
Expense recoveries 1,302 1,515
Other 373 439
------- -------
Total revenue 6,775 7,504
------- -------
EXPENSES
Property operating 1,574 1,621
Real estate taxes 348 865
Land leases and other 508 616
Depreciation and amortization 1,313 1,199
General and administrative 1,049 1,254
Interest 2,412 2,168
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Total expenses 7,204 7,723
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Loss from joint ventures -- (306)
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Loss before minority interests (429) (525)
Minority interests (56) (90)
------- -------
Net loss $ (373) $ (435)
======= =======
PER COMMON SHARE - BASIC AND DILUTED:
Net loss - basic and diluted $ (0.13) $ (0.16)
======= =======
Weighted average common shares
outstanding
Basic 2,848 2,791
======= =======
Diluted 3,389 3,389
======= =======
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
3
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HORIZON GROUP PROPERTIES, INC.
Condensed Consolidated Balance Sheets
(unaudited)
March 31, December 31,
2000 1999
--------- ------------
(thousands)
ASSETS
Real estate - at cost:
Land $ 13,105 $ 13,094
Buildings and improvements 136,082 135,479
Less accumulated depreciation (8,421) (7,154)
-------- --------
Total net real estate 140,766 141,419
-------- --------
Cash and cash equivalents 3,348 4,955
Restricted cash 3,365 3,757
Tenant accounts receivable 1,488 1,351
Deferred costs (net of accumulated
amortization of $466 and $372 at March
31, 2000 and March 31, 1999, respectively) 1,880 1,810
Other assets 1,682 1,708
-------- --------
Total assets $152,529 $155,000
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Mortgages and other debt $106,542 $107,128
Accounts payable and accrued expenses 4,107 5,229
Prepaid rents and other tenant liabilities 1,475 1,795
Other liabilities 887 901
-------- --------
Total liabilities 113,011 115,053
MINORITY INTERESTS 6,304 6,419
SHAREHOLDERS' EQUITY:
Common shares ($.01 par value, 50,000 shares
authorized, 2,849 and 2,845 issued and
outstanding at March 31, 2000 and
December 31, 1999, respectively) 29 29
Additional paid-in capital 34,114 34,056
Retained earnings (deficit) (929) (557)
-------- --------
Total shareholders' equity 33,214 33,528
-------- --------
Total liabilities and shareholders' equity $152,529 $155,000
======== ========
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
4
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HORIZON GROUP PROPERTIES, INC.
Condensed Consolidated Statements of Cash Flows
(unaudited)
Three months Three months
ended ended
March 31, 2000 March 31, 1999
-------------- --------------
(thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (373) $ (435)
Adjustments to reconcile net loss
to net cash provided by (used in)
operating activities:
Loss from joint ventures - 306
Minority interests in net loss (56) (90)
Depreciation 1,269 1,167
Amortization 90 77
Changes in assets and liabilities:
Restricted cash 392 378
Tenant accounts receivable (137) 416
Deferred costs and other assets (136) (476)
Accounts payable and accrued expenses (1,122) (980)
Other liabilities (14) 58
Prepaid rents and other tenant
liabilities (320) (220)
------- -------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES (407) 201
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for real estate and
improvements (614) (1,101)
------- -------
CASH USED IN INVESTING ACTIVITIES (614) (1,101)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on mortgages and other
debt (586) (1,446)
Proceeds from borrowings - 1,000
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NET CASH USED IN FINANCING ACTIVITIES (586) (446)
------- -------
NET DECREASE IN CASH AND CASH EQUIVALENTS (1,607) (1,346)
CASH AND CASH EQUIVALENTS:
BEGINNING OF PERIOD 4,955 2,686
------- -------
END OF PERIOD $ 3,348 $ 1,340
======= =======
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
5
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HORIZON GROUP PROPERTIES, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
NOTE 1 - FORMATION OF THE COMPANY
Horizon Group Properties, Inc. (together with its subsidiaries "HGP" or the
"Company") is a self-administered and self-managed Maryland corporation that was
established in connection with the merger of Horizon Group, Inc., a Michigan
corporation ("Horizon") with and into Prime Retail, Inc., a Maryland corporation
("Prime") which was consummated on June 15, 1998 ("the Merger"). HGP's initial
portfolio consisted of 14 factory outlet centers and one power center located in
12 states. Twelve of the factory outlet centers and the power center were
contributed to the Company by Horizon in connection with the consummation of the
Merger pursuant to a Contribution Agreement entered into in connection with the
Merger (the "Contribution Agreement") and two factory outlet centers were
purchased by the Company from Prime immediately subsequent to the consummation
of the Merger.
Also in connection with the Merger and pursuant to the Amended and Restated
Agreement and Plan of Merger dated as of February 1, 1998 by and among Prime,
Horizon, HGP and other parties thereto (the "Merger Agreement"), the shares of
Common Stock of the Company, $.01 par value per share (the "Common Stock"), were
distributed to the holders of Common Stock, Series B Preferred Stock, and Series
C Preferred Stock of Prime and the holders of Common Stock of Horizon in
accordance with the applicable exchange ratio for each such security as set
forth in the Merger Agreement.
The operations of the Company are primarily conducted through a subsidiary
limited partnership, Horizon Group Properties, L.P. ("HGP LP") of which the
Company is the sole general partner. As of March 31, 2000, HGP owned
approximately 84.1% of the partnership interests (the "Common Units") of HGP LP.
In connection with the Merger, the Common Units were distributed to the original
holders (other than Prime) of partnership interests of a limited partnership
affiliate of Prime and a limited partnership affiliate of Horizon, respectively,
in accordance with the exchange ratios set forth in the Merger Agreement. Common
Units are exchangeable for shares of Common Stock on a one-for-one basis at any
time (or for an equivalent cash amount at the Company's election).
Horizon's former administrative office building located in Norton Shores,
Michigan and the following centers were owned by Horizon prior to the Merger and
contributed to the Company pursuant to the Contribution Agreement (collectively,
such assets are referred to as the "Predecessor Properties" for periods prior to
the Merger):
Bellport Outlet Center in Bellport, New York
Dry Ridge Outlet Center in Dry Ridge, Kentucky
Holland Outlet Center in Holland, Michigan
Horizon Outlet Center-Laughlin in Laughlin, Nevada
Horizon Outlet Center-Monroe in Monroe, Michigan
Horizon Outlet Center-Traverse City in Traverse City, Michigan
Horizon Outlet Center-Tulare in Tulare, California
Lakeshore Marketplace in Norton Shores, Michigan
Medford Outlet Center in Medford, Minnesota
New Mexico Outlet Center in Algodones, New Mexico (vacant)
Sealy Outlet Center in Sealy, Texas
The Factory Shops at Georgian Place in Somerset, Pennsylvania
Warrenton Outlet Center in Warrenton, Missouri
The merger was accounted for under the purchase method of accounting under which
contributed assets acquired and liabilities assumed were recorded at their
relative fair values as of the date of the Merger. The condensed consolidated
financial statements include the accounts of the Company's subsidiary, HGP LP,
and other wholly owned subsidiaries. The Company accounts for its investments in
and advances to two joint ventures using the equity method of accounting. Under
this method of accounting, the net equity investment of the Company is reflected
on the balance sheet and the statements of operations include the Company's
share of the net income or loss from the joint ventures.
6
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HORIZON GROUP PROPERTIES, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
Immediately after the Merger, the Company acquired the two properties listed
below for total consideration of $26,015,000. Each property was purchased from
an affiliate of Prime.
Nebraska Crossing Factory Stores in Gretna, Nebraska
Indiana Factory Shops in Daleville, Indiana
The following summarizes the assets, liabilities and equity contributed to and
assumed by the Company pursuant to the Contribution Agreement including the
acquisition of the two centers from Prime as of June 15, 1998. The amounts
presented include purchase accounting adjustments made to the original
preliminary estimates during 1999. The net effect of these adjustments was a
$1,362,000 decrease in real estate, a $980,000 increase in other assets and a
$382,000 decrease in other liabilities.
(IN THOUSANDS)
Real estate $141,158
Other assets 21,258
--------
$162,416
========
Mortgages and other debt $115,514
Other liabilities 6,337
Minority interests 7,763
Shareholders' equity 32,802
--------
$162,416
========
Pursuant to the Contribution Agreement, the Company agreed to assume, undertake
to pay, satisfy and discharge when due in accordance with their terms certain
assumed liabilities (the "Assumed Liabilities"), which are defined to include
all liabilities of Horizon which arise from the ownership and operation of the
Predecessor Properties and include (i) all obligations to indemnify present and
former officers and directors of Horizon under certificates or articles of
incorporation, by-laws, partnership agreements, employment agreements,
indemnification agreements or otherwise, for any matter existing or occurring
after the Merger, (ii) all leases and related contracts, and service contracts,
relating to any Contributed Asset (as defined in the Contribution Agreement) and
(iii) certain other specified obligations.
Also pursuant to the Contribution Agreement, certain partnership interests in
three joint ventures, MG Patchogue Limited Partnership and MG Patchogue II
Limited Partnership, which own the Bellport Outlet Center, and MG Long Island
Limited Partnership, which owned vacant land, were transferred from an affiliate
of Horizon to HGP LP and an affiliate of HGP LP. These partnership interests
were subsequently transferred by the Company back to Prime on September 1, 1999
(see Note 7).
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INTERIM PERIOD FINANCIAL PRESENTATION
The condensed consolidated financial statements include the accounts of the
Company's subsidiary, HGP LP, and other wholly owned subsidiaries.
The accompanying unaudited condensed consolidated financial statements are
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements, and, therefore, should be read in conjunction with the
Company's Annual Report on Form 10-K for the year ended December 31, 1999.
7
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HORIZON GROUP PROPERTIES, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
The financial statements have been prepared in conformity with generally
accepted accounting principles which require management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
(including disclosure of contingent assets and liabilities) at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
In the opinion of management, all adjustments necessary for a fair statement of
the financial position and results of operations for the interim periods
presented have been included in these financial statements and are of a normal
and recurring nature. Certain amounts in prior periods have been reclassified to
conform to the current presentation.
Operating results for the three months ended March 31, 2000 are not necessarily
indicative of the results that may be achieved in future periods.
REAL ESTATE AND DEPRECIATION
For periods subsequent to the Merger, the Predecessor Properties are stated on
the books of the Company at fair value as of June 15, 1998, the date the
Predecessor Properties were contributed to the Company, less accumulated
depreciation. The two centers purchased from an affiliate of Prime are stated at
their purchase prices, less accumulated depreciation. Costs incurred for the
acquisition, development, construction and improvement of properties, as well as
significant renovations and betterments to the properties, are capitalized.
Maintenance and repairs are charged to expense as incurred. Interest costs
incurred with respect to qualified expenditures relating to the construction of
assets are capitalized during the construction period.
Amounts included under buildings and improvements on the condensed consolidated
balance sheets include the following types of assets and are depreciated on the
straight-line method over estimated useful lives which are:
Buildings and improvements 31.5 years
Tenant improvements 10 years or lease term, if less
Furniture, fixtures or equipment 3 - 7 years
Periodically, in the course of reviewing the performance of its properties,
management may determine that certain properties no longer meet the parameters
set forth for its properties and accordingly, such properties will be classified
as held for sale. As of March 31, 2000 and December 31, 1999, no properties were
classified as held for sale.
CASH EQUIVALENTS
The Company considers all liquid investments with a maturity of three months or
less when purchased to be cash equivalents.
RESTRICTED CASH
Restricted cash consists of amounts deposited in accounts with the Company's
primary lenders (see Note 6) and includes $1.1 million in capital improvement
and tenant allowance reserves, $1.2 million in real estate tax, insurance and
ground lease escrows, and $1.1 million for debt service and operating expenses
at March 31, 2000.
INVESTMENTS IN AND ADVANCES TO JOINT VENTURES
Prior to September 1, 1999, the Company owned a 50% partnership interest in MG
Patchogue Limited Partnership and a 45% partnership interest in and interest
bearing construction advances to MG Patchogue II Limited Partnership, which
partnerships own the Bellport Outlet Center. The Company also owned a 95%
interest in MG Long Island Limited Partnership which owned 14 acres of raw land.
Such interests were recorded at fair value upon formation of the Company based
on the estimated fair value of the Company's interests in the underlying real
estate and related advances. The Company accounted for such investments (in
consideration of its priority return position) under the equity method of
8
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HORIZON GROUP PROPERTIES, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
accounting reflecting the Company's attributable share of income and loss in the
statements of operations. On September 1, 1999, the Company transferred its
interests in these partnerships to Prime (see Note 7).
DEFERRED COSTS
Leasing and deferred financing costs are capitalized at cost. Amortization of
deferred leasing costs is recorded on the straight-line method over the life of
the lease. Amortization of deferred financing costs is recorded using a method
that approximates the effective interest method over the life of the related
debt and is included as a component of interest expense.
INCOME TAXES
The Company has elected to be taxed as a REIT under Sections 856 through 860 of
the Internal Revenue Code of 1986, as amended (the "Code"). A REIT is a legal
entity that holds real estate interests, and, through payments of dividends to
shareholders, receives a deduction for such dividends for federal income tax
purposes. As a REIT, HGP intends to distribute its REIT taxable income to its
shareholders and satisfy certain other requirements as defined in the Code so as
to reduce or eliminate federal income tax liability. Based on its taxable loss
generated since the Merger, the Company is not obligated to make any dividend
distributions to qualify as a REIT.
MINORITY INTERESTS
Minority interests represent the interests of unitholders of HGP LP, other than
the Company. The unitholder minority interest is adjusted at the end of each
period to reflect the ownership at that time. The unitholder minority interest
in HGP was approximately 15.9% at March 31, 2000. During the three months ended
March 31, 2000, 3,723 units were converted into shares of common stock.
REVENUE RECOGNITION
Leases with tenants are accounted for as operating leases. Minimum annual
rentals are generally recognized on a straight-line basis over the terms of the
respective leases. As a result of recording rental revenue on a straight-line
basis, tenant accounts receivable include $523,000 and $437,000 of accrued
straight line rents at March 31, 2000 and December 31, 1999, respectively, which
are expected to be collected over the remaining lives of the leases. Rents which
represent basic occupancy costs, including fixed amounts and amounts computed as
a function of sales, are classified as base rent. Amounts which may become
payable in addition to base rent and which are computed as a function of sales
in excess of certain thresholds are classified as percentage rents. Percentage
rents are accrued on the basis of reported tenant sales only after the sales
exceed the thresholds above which such rent is due. Expense recoveries based on
common area maintenance expenses and certain other expenses are accrued in the
period in which the related expense is incurred.
OTHER REVENUE
Other revenue consists primarily of interest income, income related to marketing
services that is recovered from tenants pursuant to lease agreements and income
from tenants with lease terms of less than one year.
SHARE OPTIONS
The Company has elected to follow Accounting Principles Board Opinion No. 25
"Accounting for Stock Issued to Employees" ("APB 25"), in accounting for its
options on common shares. Under APB 25, no compensation expense is recognized
because the exercise price of the Company's employee share options equals or
exceeds the market price of the underlying shares at the date of grant.
9
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HORIZON GROUP PROPERTIES, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
NOTE 3 - SUMMARIZED FINANCIAL INFORMATION
Historical condensed combined financial information of the joint ventures which
owned the Bellport Outlet Center in Bellport, New York, in which the Company
held interests prior to September 1, 1999 (see Note 7), is summarized as
follows:
Three months ended
March 31, 1999
------------------
(IN THOUSANDS)
Total revenue $ 960
Net loss (580)
Total assets 30,892
Total liabilities 32,758
NOTE 4 - EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per
share:
Three months Three months
ended ended
March 31, 2000 March 31, 1999
-------------- --------------
NUMERATOR:
Net loss - basic $ (373) $ (435)
Minority interests of unitholders (56) (90)
--------- ---------
Net loss - diluted $ (429) $ (525)
========= =========
DENOMINATOR:
Weighted average shares outstanding -
basic 2,848 2,791
Effect of converting units to shares 541 598
--------- ---------
Weighted average shares outstanding -
diluted 3,389 3,389
========= =========
Net loss per share - basic and diluted $ (0.13) $(0.16)
========= =========
Outstanding stock options and the potential conversion of units to shares were
excluded in computing diluted earnings per share because the effect of such
items was anti-dilutive for the periods presented.
NOTE 5 - LONG TERM STOCK INCENTIVE PLAN
The Company has adopted the HGP 1998 Long Term Stock Incentive Plan (the "HGP
Stock Plan") to advance the interests of the Company by encouraging and enabling
the acquisition of a financial interest in the Company by key employees and
directors of the Company and its subsidiaries through equity awards. The Company
reserved 338,900 common shares for issuance pursuant to the HGP Stock Plan.
10
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HORIZON GROUP PROPERTIES, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
NOTE 6 - MORTGAGE DEBT AND OTHER LIABILITIES
On June 15, 1998, certain wholly owned affiliates of the Company entered into a
credit facility (the "HGP Credit Facility") with Nomura Asset Capital
Corporation, succeeded by Capital Corporation of America, ("Nomura") providing
for initial borrowings of $108.2 million. The outstanding balance equaled $56.7
million and $57.1 million as of March 31, 2000 and December 31, 1999,
respectively. On July 9, 1999, the Company refinanced six of the centers
originally securing the HGP Credit Facility and repaid $46.8 million of
principal related to those centers. The HGP Credit Facility is guaranteed by HGP
and HGP LP. The HGP Credit Facility matures in July 2001 and bears interest at
the 30-day LIBOR Rate (as defined in the HGP Credit Facility) plus 1.90% per
annum. The effective rate was 7.89% and 8.36% as of March 31, 2000 and December
31, 1999, respectively. The HGP Credit Facility is cross-collateralized by
mortgages on six of the Company's operating outlet centers and one power center
at March 31, 2000. The HGP Credit Facility requires monthly payments of
interest. In addition, the HGP Credit Facility requires principal payments
totaling $1.5 million, $1.5 million and $2.0 million during the first, second
and third years, respectively, payable in equal monthly installments. The HGP
Credit Facility contains restrictions on the ability of HGP and HGP LP to incur
additional indebtedness and, under certain circumstances, requires the Company
to enter into an interest rate lock arrangement which would fix the interest
rate on the full outstanding amount of the HGP Credit Facility. In connection
with the HGP Credit Facility, the Company established certain escrow accounts
and cash collection accounts for the benefit of Nomura which are classified on
the balance sheet of the Company as restricted cash (see Note 2).
The HGP Credit Facility contains a contingent repayment penalty equal to 1% of
amounts repaid during the first loan year and 2% of amounts repaid thereafter
through the stated maturity date. Such penalty is not payable in the event the
Company refinances the HGP Credit Facility with Nomura. The Company sought
long-term financing from Nomura, but was unable to secure such financing.
Accordingly, the Company incurred a 1% penalty in connection with the prepayment
of $46.8 million, as described above. This penalty was an amount negotiated with
Nomura and was recognized as a component of the extraordinary charge on
prepayment of debt in 1999. Although the Company currently intends to seek
long-term financing from Nomura for the remainder of the HGP Credit Facility on
or before its maturity, there can be no assurance that Nomura will provide such
financing. The Company is recognizing estimated potential repayment fees related
to the remaining amounts due under the HGP Credit Facility as an expense over
the remaining term of the HGP Credit Facility beginning July 1, 1999.
On July 9, 1999 the Company completed a $46.7 million debt financing with Morgan
Guaranty Trust Company of New York ("the JP Morgan Loans"). The JP Morgan Loans
consist of (i) nonrecourse loans totaling $22.9 million secured by three factory
outlet centers located in Daleville, Indiana, Somerset, Pennsylvania and Tulare,
California and (ii) nonrecourse loans totaling $23.8 million secured by three
factory outlet centers located in Gretna, Nebraska, Sealy, Texas and Traverse
City, Michigan. The outstanding balance of both loans totaled $46.3 million at
March 31, 2000 and $46.4 million at December 31, 1999. The loans bear interest
at a fixed rate of 8.46%, mature on August 1, 2009 and require the monthly
payment of interest and principal based on a 25-year amortization schedule. The
proceeds from the loans, together with Company funds, were used to repay $46.8
million of indebtedness under the HGP Credit Facility, as described above. The
Company has established certain escrow accounts in connection with this loan
which are classified on the balance sheet of the Company as restricted cash (see
Note 2).
The Company has loans secured by a mortgage on the office building and related
equipment which the Company utilizes as a corporate office in Norton Shores,
Michigan. The principal balance on these loans was $2.6 million on March 31,
2000 and $2.7 million on December 31, 1999. The corporate office loan matures in
December 2002, bears an interest rate of LIBOR plus 2.50% per annum, and
requires monthly debt service payments of $22,500. The effective rate was 8.4%
and 8.5% at March 31, 2000 and December 31, 1999, respectively. The corporate
office equipment and fixture loan matures in December 2000, bears interest at
the lender's prime rate, and requires monthly debt service payments of $13,000.
The effective rate was 8.8% and 8.5% at March 31, 2000 and December 31, 1999,
respectively. The consent of the lender was required in connection with the
transfer of the property to the Company in the merger. The Company is currently
seeking such consent, but as of May 15, 2000 such consent had not been obtained.
The Company can give no assurances that it will be able to obtain the above
mentioned consent. Any such
11
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HORIZON GROUP PROPERTIES, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
failure to obtain such consent could have a material adverse effect upon the
Company. The consolidated financial statements of the Company do not include any
adjustments that may result from the ultimate outcome of this uncertainty.
The Company acquired approximately 95 acres of undeveloped land in Muskegon,
Michigan as part of the consideration from the sale of its interests in the
Bellport Outlet Center (see Note 7). Portions of this land are subject to land
contracts with a total balance of $771,000 as of March 31, 2000 and $776,000 at
December 31, 1999. The interest rates vary from 6.9% to 10.0%. Monthly debt
service payments total $6,000 through May 2000 and $1,000 from that time through
June 2001 with balloon payments due on these two dates of $646,000 and $125,000,
respectively.
In connection with the Merger, Prime became potentially liable for, or agreed to
guarantee certain indebtedness of the Company. As of March 31, 2000, the
components of such indebtedness included (1) the loans collateralized by the
Company's corporate office building and equipment in Norton Shores, Michigan
(with a principal balance of $2.6 million on March 31, 2000 and $2.7 million on
December 31, 1999), and (2) $10.0 million of the Company's obligations under its
credit facility with Nomura. The terms of the Working Capital Agreement require
the Company to repay any outstanding balance on the Prime Loan or other related
indebtedness on which Prime is contingently liable to the extent of net sale
proceeds or from an equity offering. The Company intends to use the net proceeds
from the sale of the outlet center in Algodones, New Mexico to pay down the
Nomura loan on or before its maturity pursuant to the terms of the Prime
Guarantee Agreement. The Company has indemnified Prime for any amounts advanced
under the guarantees. There is a $400,000 annual fee due to Prime under the
guarantees which has been prepaid through June 2000.
NOTE 7 - RELATED PARTY TRANSACTIONS
The Company utilizes Thilman & Filippini as its agent for insurance and risk
management programs. E. Thomas Thilman is a Director of the Company and a
partner in Thilman & Filippini. During the three months ended March 31, 2000 and
1999, the Company paid premiums totaling approximately $167,000 and $143,000,
respectively, on insurance policies placed by Thilman & Filippini.
The Company sub-leases office space on a month to month basis for its senior
executives at 77 W. Wacker, Chicago, Illinois from The Prime Group, Inc. The
Prime Group, Inc. is an affiliate of Michael W. Reschke, a Director of the
Company. During the three months ended March 31, 2000 and 1999, the Company
incurred rent expense of $31,000 and $30,000, respectively.
Prior to the Merger, Horizon entered into an agreement (the "PVH Agreement")
with Phillips Van Heusen, Inc. ("PVH") which modified certain provisions of PVH
leases for the benefit of Horizon in exchange for certain payments. Prime is
liable for future payments related to the PVH Agreement, but the Company was
obligated to pay $2,334,000 to Prime for payments related to the PVH Agreement.
This amount was paid in connection with the sale of the Company's interests in
the Bellport Outlet Center and the settlement of the Working Capital Agreement
discussed below.
In connection with the Merger, the Company entered into a Working Capital
Agreement with Prime (the "Working Capital Agreement"). The Working Capital
Agreement provides that Prime will transfer to the Company sufficient cash to
result in net working capital of $545,000, after consideration of the current
assets and current liabilities of the Predecessor Properties and the two
centers which the Company purchased from Prime as of the date of the Merger.
At the date of the merger, Prime transferred $3.0 million to the Company as a
partial payment of amounts due under the Working Capital Agreement. On
September 1, 1999, the Company reached an agreement with Prime to settle
amounts due under the Working Capital Agreement in connection with the
transfer of its interests in the joint ventures related to the outlet center
in Bellport, New York (see Note 1). The consideration for the transfer of the
Bellport interests was $7.5 million and approximately 95 acres of land in
Muskegon, Michigan subject to $800,000 of land contract payments. No gain or
loss was recognized in conjunction with the settlement of the Working Capital
Agreement.
12
<PAGE>
HORIZON GROUP PROPERTIES, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
The proceeds from the settlement of the Working Capital Agreement and the
transfer of the Bellport interests were used to repay $9.3 million of current
and future obligations owed by the Company to Prime. These obligations included
(i) $2.2 million which the Company had borrowed from Prime to make principal
repayments on the Nomura facility, (ii) $4.0 million which the Company had
borrowed from Prime to repay a credit facility assumed in the Merger, (iii) $2.3
million related to the PVH Agreement, and (iv) $800,000 related to the guarantee
fee associated with Prime's guarantee of certain of the Company's debt
obligations (see Note 6). The Company also received $230,000 in cash.
The Company made a $1.5 million loan to Prime Outdoor, LLC, an affiliate of
Prime Group, Inc. on April 18, 2000. The Prime Group, Inc. is an affiliate of
Michael W. Reschke, a Director of the Company. The loan matures on June 17,
2000. The loan bears interest at 10% and is secured by a pledge of all of the
unencumbered assets of Prime Outdoor, LLC, Prime Group Inc.'s ownership interest
in Prime Outdoor, LLC and 410,783 units in Horizon Group Properties, LP owned by
Prime Group, Inc. and its affiliates. The loan was approved by a committee of
independent directors of the Company.
NOTE 8 - SEGMENT INFORMATION
The Company operates thirteen shopping centers located in ten states. The
Company separately evaluates the performance of each of its centers. However,
because each of the centers has similar economic characteristics, facilities
and/or tenants, the shopping centers have been aggregated into a single dominant
shopping center segment. The Company evaluates performance and allocates
resources primarily based on the Funds From Operations ("FFO") expected to be
generated by an investment in each individual shopping center. FFO is a widely
used measure of the operating performance of REITs, which provides a relevant
basis for comparison to other REITs. FFO, as defined by the National Association
of Real Estate Investment Trusts, means net income excluding extraordinary items
(as defined by generally accepted accounting principles ("GAAP")) and gains and
losses from sales of depreciable operating property, plus depreciation and
amortization, and after adjustments for unconsolidated partnerships and joint
ventures. This definition, approved by NAREIT in October 1999, clarified the
treatment of non-recurring items that were not considered "extraordinary" under
GAAP. NAREIT adopted this new definition effective January 1, 2000 and required
that prior periods be restated accordingly. FFO should not be considered as an
alternative to net income computed under generally accepted accounting
principles. A reconciliation of income (loss) before minority interests to
diluted FFO is as follows:
Three Three
months ended Months ended
March 31, 2000 March 31, 1999
-------------- --------------
Loss before minority interests $ (429) $ (525)
FFO adjusted depreciation and
amortization (1) 1,267 1,511
------ ------
FFO $ 838 $ 986
====== ======
FFO per share $ 0.25 $ 0.29
====== ======
NOTE:
(1) Includes depreciation of the operating real estate and allocated
amounts relating to joint venture investments accounted for under the
equity method.
NOTE 9 - OTHER MATTERS
On September 27, 1999, the Company hired Secured Capital Corp as financial
advisor to assist the Company in studying strategic alternatives to enhance
shareholder value including, but not limited to, the sale or other disposition
13
<PAGE>
HORIZON GROUP PROPERTIES, INC.
Notes to Condensed Consolidated Financial Statements
(unaudited)
of some or all of its real estate portfolio. Concurrently, the Company is
assessing alternative business opportunities. There can be no assurance that a
transaction will result involving the Company.
On March 24, 2000, the Company signed a contract with Triple Net, LLC ("Triple
Net") for the sale of seven of the Company's shopping centers. The contract
provides for Triple Net to complete their due diligence on or about April 24,
2000, and to close on the transaction on or about June 7, 2000. The sale price
for the seven centers is $93.5 million, payable in cash at closing. The centers
are subject to debt with a principal balance of $56.7 million at March 31, 2000,
which the Company will repay at closing. During the due diligence period, Triple
Net may terminate the contract for any reason. After the due diligence period, a
penalty of $1.0 million is payable upon termination of the contract by Triple
Net prior to May 24, 2000 (the penalty increases to $1.5 million for the period
from May 24, 2000 to June 7, 2000), with the exception of the occurrence of
limited events. The centers subject to the contract are located in Dry Ridge,
KY; Holland, MI; Laughlin, NV; Medford, MN; Monroe, MI; Norton Shores, MI; and
Warrenton, MO. On April 26, the Company extended by three weeks the time periods
on this contract to provide for Triple Net to complete its due diligence on the
properties by May 16, 2000 and close on the transaction by June 30, 2000. There
can be no assurance at this time that the contract will be consummated.
14
<PAGE>
HORIZON GROUP PROPERTIES, INC.
Management's Discussion and Analysis of Financial Condition
and Results of Operations
For the three months ended March 31, 2000
(unaudited)
INTRODUCTION
The following discussion and analysis of the condensed consolidated financial
condition and results of operations of Horizon Group Properties, Inc. (together
with its subsidiaries "HGP" or the "Company") should be read in conjunction with
the Condensed Consolidated Financial Statements and Notes thereto. The Company's
operations are conducted primarily through a subsidiary limited partnership,
Horizon Group Properties, L.P. ("HGP LP"). The Company is the sole general
partner of HGP LP and, as of March 31, 2000, owned approximately 84.1% of the
HGP LP partnership interests ("Common Units"). Common Units of HGP LP are
exchangeable for shares of Common Stock on a one-for-one basis at any time (or
for an equivalent cash amount at the Company's election). The Company controls
HGP LP and is dependent on distributions or other payments from HGP LP to meet
its financial obligations.
CAUTIONARY STATEMENTS
The following discussion in "Management's Discussion and Analysis of Financial
Condition and Results of Operations" contains certain forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995 which
reflect management's current views with respect to future events and financial
performance. Such forward-looking statements are subject to certain risks and
uncertainties; including, but not limited to, the effects of future events on
the Company's financial performance; the risk that the Company may be unable to
finance its planned acquisition and development activities; risks related to the
retail industry in which the Company's outlet centers compete, including the
potential adverse impact of external factors, such as inflation, consumer
confidence, unemployment rates and consumer tastes and preferences; risks
associated with the Company's property acquisitions, such as the lack of
predictability with respect to financial returns; risks associated with the
Company's property development activities, such as the potential for cost
overruns, delays and the lack of predictability with respect to the financial
returns associated with these development activities; the risk of potential
increase in market interest rates from current levels; and risks associated with
real estate ownership, such as the potential adverse impact of changes in local
economic climate on the revenues and the value of the Company's properties. For
further information on factors which could impact the Company and the statements
contained herein, reference is made to the Company's other filings with the
Securities and Exchange Commission, including the Company's Registration
Statement on Form 10, as amended, dated as of June 4, 1998, with respect to the
Company's initial registration of its common stock under the Securities Exchange
Act of 1934, as amended and the Sky Merger Corp. Registration Statement on Form
S-4, as filed with the Securities and Exchange Commission on May 12, 1998
(Registration No. 333-51285).
GENERAL OVERVIEW
The Company is a self-administered and self-managed corporation that was
established in connection with the merger of Horizon Group, Inc., a Michigan
corporation ("Horizon") with and into Prime Retail, Inc., a Maryland corporation
("Prime") which was consummated on June 15, 1998 ("the Merger"). As of March 31,
2000, HGP's portfolio consisted of 12 factory outlet centers and one power
center located in 10 states comprising an aggregate of approximately 2.7 million
square feet of gross leasable area ("GLA"). Ten of the factory outlet centers
and the power center were contributed to the Company in connection with the
consummation of the Merger by Horizon pursuant to a Contribution Agreement
entered into in connection with the Merger (the "Contribution Agreement") and
two factory outlet centers were purchased by the Company from Prime immediately
subsequent to the consummation of the Merger.
COMPARISON OF THE THREE MONTHS ENDED MARCH 31, 2000 TO THE THREE MONTHS ENDED
MARCH 31, 1999
The net loss before minority interests was $429,000 for the three months ended
March 31, 2000 compared to net loss before minority interests of $525,000 for
the three months ended March 31, 1999. The main components of this change were
decreases in real estate tax and general and administrative expense, partially
offset by lower rents and increased interest expense.
15
<PAGE>
HORIZON GROUP PROPERTIES, INC.
Management's Discussion and Analysis of Financial Condition
and Results of Operations
For the three months ended March 31, 2000
(unaudited)
Total revenues decreased $729,000 in the three months ended March 31, 2000
compared to the same period in the prior year primarily as a result of a
decrease in base rents, including rents computed as a function of sales.
Real estate tax expense decreased $517,000 in the three months ended March 31,
2000 compared to the same period in the prior year mainly due to a refund of a
portion of the 1997 through 1999 taxes at the outlet center in Monroe, Michigan,
and a decrease in the tax assessments on this and several other properties.
General and administrative expenses decreased $205,000 in the three months ended
March 31, 2000 compared to the same period in the prior year mainly as a result
of unsuccessful merger costs of $305,000 reported in the three months ended
March 31, 1999. There were no similar costs recorded in the three months ended
March 31, 2000. This decrease was partially offset by 1999 state income tax
expense adjustments recorded in the three months ended March 31, 2000.
Interest expense increased $244,000 in the three months ended March 31, 2000
compared to the same period in the prior year. The primary factors causing the
increase were an increase in interest rates which affected the Company's
floating rate debt and the refinancing of a portion of the Nomura debt with the
proceeds from the JP Morgan loans in July 1999, which carry a fixed rate, but
which rate was greater than the effective rate on the Nomura loan for the same
period in the prior year. Offsetting the increase in interest rates was a net
reduction in debt outstanding of $7.8 million from March 31, 1999 to March 31,
2000.
The effective interest rate on the Nomura facility for the three months ended
March 31, 1999 was 6.94% compared to 7.85% for the three months ended March 31,
2000. The balance of the Nomura facility was $105.0 million as of March 31, 1999
and $56.7 million as of March 31, 2000. The reduction in the principal balance
resulted from the paydown of $46.8 million in connection with the JP Morgan
financing and monthly principal payments totaling $1.5 million made during the
period. The total principal balance of the JP Morgan loans was $46.3 million as
of March 31, 2000 with interest at a fixed rate of 8.46%. During the period, the
Company also repaid $3.2 million of loans to Prime Retail and $3.0 million to
Huntington Bank which were outstanding at March 31, 1999. The effective interest
rates on these loans were 10.0% and 7.75%, respectively, as of March 31, 1999.
In September 1999, the Company assumed loans totaling $771,000 as of March 31,
2000 in connection with land located in Muskegon, Michigan. The average interest
rate on these loans was approximately 7.2% for the three months ended March 31,
2000.
The Company accounted for its investments in the joint ventures, which own the
Bellport Outlet Center, utilizing the equity method. On September 1, 1999, the
Company transferred its investments in the Bellport joint ventures to an
affiliate of Prime.
Average occupancy for the Company's total portfolio of properties for the three
months ended March 31, 2000 was 83.4% compared to 79.5% for the three months
ended March 31, 1999. Occupancy of the Company's total portfolio at March 31,
2000 and 1999, was 83.2% and 79.2%, respectively.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 2000, the aggregate amount of outstanding mortgages and other
debt was approximately $106.5 million. The Company is contemplating the
expansion of its Tulare Outlet Center and has completed approximately 36,000
square feet of partially finished space at its center in Medford, Minnesota. The
Company is obligated to make capital improvements and repairs to certain of its
outlet centers pursuant to the terms of the HGP Credit Facility with Nomura and
the JP Morgan loans (each as hereinafter defined). At March 31, 2000 there was
approximately $1.1 million deposited in escrows with Nomura and JP Morgan which
the Company believes is sufficient to complete the work required under the HGP
Credit Facility and JP Morgan loans. The Company expects to fund other capital
improvements with additional borrowings, existing cash balances or cash flow
from operations.
16
<PAGE>
HORIZON GROUP PROPERTIES, INC.
Management's Discussion and Analysis of Financial Condition
and Results of Operations
For the three months ended March 31, 2000
(unaudited)
The Company is required to make monthly deposits with Nomura and JP Morgan for
future debt service payments, real estate taxes, insurance, operating expenses
and capital expenditures. These deposits totaled $3.4 million as of March 31,
2000, including the capital improvement escrows described above. Funds are
dispersed to or on behalf of the Company for the above mentioned uses. Funds in
excess of those specified in the loan agreement with Nomura are dispersed to the
Company monthly.
The Company expects to meet its short-term liquidity requirements generally
through working capital and cash flows from operations. The Company expects to
meet its long-term requirements, such as tenant allowances for new leases and
capital improvements, through the use of working capital and cash flows from
operations and, if necessary and available, the additional borrowing of
long-term debt and the potential offering of equity securities in the private or
public capital markets. As a result of the Company's leverage, the Company's
ability to obtain additional financing sources is limited. The Company is
currently seeking to mitigate its interest rate risk through refinancing the HGP
Credit Facility with fixed-rate, longer-term debt. There can be no assurance
that the Company will be able to complete such refinancing or on what terms such
refinancing may be accomplished.
On June 15, 1998, certain wholly owned affiliates of the Company entered into a
credit facility (the "HGP Credit Facility") with Nomura Asset Capital
Corporation ("Nomura"). The facility had an initial balance of $108.2 million
and has a balance of $56.7 million at March 31, 2000. The HGP Credit Facility is
guaranteed by HGP and HGP LP. The HGP Credit Facility expires July 11, 2001 and
bears interest at the 30-day LIBOR Rate (as defined in the HGP Credit Facility)
plus 1.90% per annum. The HGP Credit Facility is cross-collateralized by
mortgages on six of the Company's 12 outlet centers and one power center and
requires monthly payments of interest. In addition, the HGP Credit Facility
requires principal payments totaling $1.5 million, $1.5 million and $2.0 million
during the first, second and third years, respectively, payable in equal monthly
installments. The HGP Credit Facility contains restrictions on the ability of
HGP and HGP LP to incur additional indebtedness, and under certain
circumstances, requires the Company to enter into an interest rate lock
arrangement which would fix the interest rate on the full outstanding amount of
the HGP Credit Facility.
On July 9, 1999 the Company completed a $46.7 million debt financing with Morgan
Guaranty Trust Company of New York ("the JP Morgan Loans"). The proceeds from
the loans, together with Company funds, were used to repay $46.8 million of
indebtedness under the HGP Credit Facility. The JP Morgan Loans consist of (i)
nonrecourse loans totaling $22.9 million secured by three factory outlet centers
located in Daleville, Indiana, Somerset, Pennsylvania and Tulare, California and
(ii) nonrecourse loans totaling $23.8 million secured by three factory outlet
centers located in Gretna, Nebraska, Sealy, Texas and Traverse City, Michigan.
The outstanding balance was $46.3 million at March 31, 2000. The loans bear
interest at a fixed rate of 8.46%, mature on August 1, 2009 and require the
monthly payment of interest and principal based on a 25-year amortization
schedule. The JP Morgan Loans also require the monthly funding of escrow
accounts for the payment of real estate taxes, insurance and capital
improvements. Such escrow accounts currently total $1.3 million for the JP
Morgan Loans.
Prime has guaranteed approximately $10.0 million of obligations under the HGP
Credit Facility, together with other indebtedness (the "Prime Guarantee"). The
terms of the Working Capital Agreement require the Company to repay any
outstanding balance on indebtedness on which Prime is contingently liable to the
extent of net sale proceeds or from an equity offering. The Company intends to
use the net proceeds from the sale of the outlet center in Algodones, New
Mexico, to pay down the Nomura loan on or before its maturity pursuant to the
terms of the Prime Guarantee Agreement. In connection with the Prime Guarantee,
HGP has agreed to pay Prime a fee of $400,000 per annum until Prime is released
from its guarantee obligations related to the HGP Credit Facility. The Company
has paid this fee through June 2000.
The Company has loans secured by a mortgage on the office building and related
equipment which the Company utilizes as a corporate office in Norton Shores,
Michigan. The principal balance on these loans was $2.6 million on March 31,
2000 and $2.7 million on December 31, 1999. This building was previously owned
by an affiliate of Horizon and was contributed to the Company pursuant to the
Contribution Agreement. The consent of the lender to
17
<PAGE>
HORIZON GROUP PROPERTIES, INC.
Management's Discussion and Analysis of Financial Condition
and Results of Operations
For the three months ended March 31, 2000
(unaudited)
the previous owner of the property was required in connection with the transfer
of the property to the Company. The Company is currently seeking such consent
but, as of May 15, 2000 such consent had not been obtained. The consolidated
financial statements of the Company do not include any adjustments that may
result from the ultimate outcome of this uncertainty.
The Company acquired approximately 95 acres of undeveloped land in Muskegon,
Michigan in the transfer of it's interests in the Bellport Outlet Center (see
Note 7). Portions of this land are subject to land contracts with a total
balance of $771,000 as of March 31, 2000. The interest rates vary from 6.9% to
10.0%. Monthly debt service payments total $6,000 through May 2000 and $1,000
through June 2001 with balloon payments due on these two dates of $646,000 and
$125,000, respectively.
On September 27, 1999, the Company hired Secured Capital Corp as financial
advisor to assist the Company in studying strategic alternatives to enhance
shareholder value including, but not limited to, the sale or other disposition
of some or all of its real estate portfolio. Concurrently, the Company is
assessing alternative business opportunities going forward. There can be no
assurance that a transaction will result involving the Company.
On March 24, 2000, the Company signed a contract with Triple Net, LLC ("Triple
Net") for the sale of seven of the Company's shopping centers. The contract
provides for Triple Net to complete their due diligence on or about April 24,
2000, and to close on the transaction on or about June 7, 2000. The sale price
for the seven centers is $93.5 million, payable in cash at closing. The centers
are subject to debt with a principal balance of $56.7 million at March 31, 2000,
which the Company will repay at closing. During the due diligence period, Triple
Net may terminate the contract for any reason. After the due diligence period, a
penalty of $1.0 million is payable upon termination of the contract by Triple
Net prior to May 24, 2000 (the penalty increases to $1.5 million for the period
from May 24, 2000 to June 7, 2000), with the exception of the occurrence of
limited events. The centers subject to the contract are located in Dry Ridge,
KY; Holland, MI; Laughlin, NV; Medford, MN; Monroe, MI; Norton Shores, MI; and
Warrenton, MO. There can be no assurance at this time that the contract will be
consummated on the terms described above.
The Company made a $1.5 million loan to Prime Outdoor, LLC, an affiliate of
Prime Group, Inc. on April 18, 2000. The Prime Group, Inc. is an affiliate of
Michael W. Reschke, a Director of the Company. The loan matures on June 17,
2000. The loan bears interest at 10% and is secured by a pledge of all of the
unencumbered assets of Prime Outdoor, LLC, Prime Group Inc.'s ownership interest
in Prime Outdoor, LLC and 410,783 units in Horizon Group Properties, LP owned by
Prime Group, Inc. and its affiliates. The loan was approved by a committee of
independent directors of the Company.
18
<PAGE>
HORIZON GROUP PROPERTIES, INC.
Quantitative and Qualitative Disclosure of Market Risk
(unaudited)
The Company's primary market risk exposure is associated with the HGP Credit
Facility from Nomura. This facility had a balance of $56.7 million at March 31,
2000. The interest rate is set monthly at a rate equal to the 30 day London
Interbank Offered Rate ("LIBOR") plus 190 basis points. The facility matures in
July of 2001. The monthly interest rates applicable from June 15, 1998 to March
31, 2000 ranged from 6.80% to 8.36%. As of March 31, 2000, the effective rate
was 7.89%. The Company is currently seeking to mitigate this interest rate risk
through refinancing the facility with fixed rate, longer-term debt. There can be
no assurance that the Company will be able to complete such refinancing or on
what terms such refinancing may be accomplished.
The following table shows sensitivity of annual interest expense and net income
per share - diluted based on an increase in the LIBOR of 156 basis points
(1.56%).
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT CHANGE IN LIBOR RATE CHANGE IN INTEREST EXPENSE PER SHARE - DILUTED
- ---------------- -------------------- -------------------------- -------------------
<S> <C> <C> <C>
$56,700,000 1.56% $884,520 $.26
</TABLE>
INFLATION
HGP's leases with the majority of its tenants require the tenants to reimburse
HGP for most operating expenses and increases in common area maintenance
expense, which reduces HGP's exposure to increases in costs and operating
expenses resulting from inflation.
19
<PAGE>
HORIZON GROUP PROPERTIES, INC.
Part II - Other Information
ITEM 1. LEGAL PROCEEDINGS - None
ITEM 2. CHANGES IN SECURITIES - None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
The Company has loans totaling $2.6 million and $2.7 million as of March 31,
2000 and December 31, 1999, respectively, secured by a mortgage on the office
building and related equipment which the Company utilizes as a corporate office
in Norton Shores, Michigan. This building was previously owned by an affiliate
of Horizon and was contributed to the Company pursuant to the Contribution
Agreement. The consent of the lender to the previous owner of the property was
required in connection with the transfer of the property to the Company. The
Company is currently seeking such consent but, as of May 15, 2000 such consent
had not been obtained.
The Company can give no assurances that it will be able to obtain the above
mentioned consent. Any such failure to obtain such consent could have a material
adverse effect upon the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - None
ITEM 5. OTHER INFORMATION
The Company appointed former Illinois Governor Jim Edgar to the Company's Board
of Directors on March 30, 2000. He replaced Norman Perlmutter, who resigned his
position in February 2000.
20
<PAGE>
HORIZON GROUP PROPERTIES, INC.
Part II - Other Information
ITEM 6. EXHIBITS OR REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 3(i) Articles of Incorporation of Horizon Group Properties, Inc. (the
"Company") (1)
Exhibit 3(ii) By-laws of the Company (1)
Exhibit 3(iii) Amendment to By-laws of the Company dated March 17, 1999 (4)
Exhibit 4.1 Specimen certificate for common stock, $.01 par value per share,
of the Company (1)
Exhibit 10.1 Sky Merger Corp. Registration Statement on Form S-4 (excluding
exhibits thereto), as filed with the Securities and Exchange
Commission on May 12, 1998 (Registration No. 333-51285) (1)
Exhibit 10.2 Amended and Restated Agreement and Plan of Merger by and among
Prime Retail, Inc., Prime Retail, L.P., Horizon Group, Inc., Sky
Merger Corp., the Company, Horizon Group Properties, L.P. and
Horizon/Glen Outlet Centers Limited Partnership dated as of
February 1, 1998 (Incorporated by reference to Exhibit 10(a) to
Horizon Group, Inc.'s current report on Form 8-K dated
February 1, 1998 (SEC File No. 1-12424) (1)
Exhibit 10.3 Form of 1998 Stock Option Plan of the Company (1)
Exhibit 10.4 Employment Agreement between Gary J. Skoien and the Company (1)
Exhibit 10.5 Employment Agreement between David R. Tinkham and the Company (1)
Exhibit 10.6 Form of Indemnification Agreement for the Board of Directors of
the Company (1)
Exhibit 10.7 Form of Registration Rights Agreement (1)
Exhibit 10.8 Form of Contribution Agreement (incorporated by reference to
Appendix E to Exhibit 10.1) (1)
Exhibit 10.9 Employment Agreement between Richard Berman and the Company (3)
Exhibit 10.10 Working Capital Agreement with Prime Retail, Inc. (3)
Exhibit 10.11 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 (2)
Exhibit 10.12 Form of Deed of Trust, Assignment of Leases and Rents and
Security Agreement with Nomura Asset Capital Corporation (2)
Exhibit 10.13 Form of Mortgage, Assignment of Leases and Rents and Security
Agreement by and between Horizon Group Properties, Inc. and
Nomura Asset Capital Corporation (2)
Exhibit 10.14 Form of Assignment of Leases and Rents by and between Horizon
Group Properties, Inc. and Nomura Asset Capital Corporation (2)
Exhibit 10.15 Guaranty dated as of June 15, 1998 by the Company and Horizon
Group Properties, L.P. to and for the benefit of Nomura Asset
Capital Corporation (2)
Exhibit 10.16 Guaranty and Indemnity Agreement dated as of June 15, 1998 by and
among the Company, Horizon Group Properties, L.P., Prime Retail,
Inc., and Prime Retail, L.P. (2)
Exhibit 10.17 Assignment and Assumption Agreement, dated as of June 15, 1998 by
and among Prime Retail, Inc., Prime Retail, L.P., Indianapolis
Factory Shops Limited Partnership, and Indiana Factory Shops,
L.L.C. (3)
Exhibit 10.18 Assignment and Assumption Agreement, dated as of June 15, 1998 by
and among Prime Retail, Inc., Prime Retail, L.P., Nebraska
Factory Shops Limited Partnership, and Nebraska Factory Shops
L.L.C. (3)
Exhibit 10.19 Form of Option Agreement (3)
Exhibit 10.20 Fixed Rate Note dated as of July 9, 1999 between Gretna, Sealy,
Traverse City Outlet Centers, L.L.C. and Morgan Guaranty Trust
Company of New York related to the financing of the factory
outlet center in Gretna, Nebraska (5)
Exhibit 10.21 Deed of Trust and Security Agreement for the benefit of Morgan
Guaranty Trust Company of New York, as lender, from Gretna,
Sealy, Traverse City Outlet Centers, L.L.C., as borrower, related
to the financing of the factory outlet center in Gretna, Nebraska
(5)
Exhibit 10.22 Guaranty for the benefit of Morgan Guaranty Trust Company of New
York by Horizon Group Properties, Inc. related to the Gretna,
Sealy and Traverse City loans (5)
Exhibit 10.23 Agreement between Andrew F. Pelmoter and the Company (7)
Exhibit 10.24 Agreement of Purchase and Sale and Escrow Instructions dated
March 24, 2000 between Third Horizon Group Limited Partnership
and Triple Net Properties, LLC.
Exhibit 10.25 First Amendment to Agreement of Purchase and Sale and Escrow
Instructions between Third Horizon Group Limited Partnership and
Triple Net Properties, LLC, dated as of April 21, 2000
21
<PAGE>
HORIZON GROUP PROPERTIES, INC.
Part II - Other Information
Exhibit 10.26 Second Amendment to Agreement of Purchase and Sale and Escrow
Instructions between Third Horizon Group Limited Partnership and
Triple Net Properties, LLC, dated as of April 25, 2000
Exhibit 10.27 Promissory Note dated April 18, 2000, between Horizon Group
Properties, LP as Lender and Prime Outdoor Group, LLC as Borrower
Exhibit 10.28 Security Agreement dated April 18, 2000, between Horizon Group
Properties, LP and Prime Outdoor Group, LLC
Exhibit 10.29 Pledge Agreement by and among Horizon Group Properties, LP; Prime
Group Limited Partnership; Prime Group II, LP; Prime Group III,
LP; Prime Group IV, LP; Prime Group V, LP and Prime Financing
Limited Partnership
Exhibit 10.30 Collateral Assignment of Membership Interests dated April 18,
2000, between Horizon Group Properties, LP and The Prime Group,
Inc.
Exhibit 10.31 Guarantee dated April 18, 2000, between Horizon Group Properties,
LP; Prime Group Limited Partnership; Prime Group II, LP; Prime
Group III, LP; Prime Group IV, LP; Prime Group V, LP and Prime
Financing Limited Partnership
Exhibit 10.32 Letter Agreement dated April 18, 2000, between Horizon Group
Properties, Inc., Prime Group, Inc. and Prime Outdoor Group, LLC
Exhibit 10.33 Agreement between Andrew F. Pelmoter and the Company
Exhibit 27 Financial Data Schedule
Exhibit 99.11 Press release issued by the Company on March 28, 2000 announcing
the execution of a contract for the sale of seven of the
Company's shopping centers (6)
1 Incorporated by reference to the Company's Registration Statement on Form
10, as amended, dated as of June 4, 1998 (Commission file no. 0-24123).
2 Incorporated by reference to the Company's Current Report on Form 8-K dated
as of June 30, 1998 (Commission file no. 0-24123).
3 Incorporated by reference to the Company's Form 10-Q dated as of August 14,
1998 (Commission file no. 0-24123).
4 Incorporated by reference to the Company's Form 10-Q dated as of May 17,
1998 (Commission file no. 0-24123).
5 Incorporated by reference to the Company's Current Report on Form 8-K dated
as of August 3, 1999 (Commission file no. 0-24123).
6 Incorporated by reference to the Company's Current Report on Form 8-K dated
as of March 31, 2000 (Commission file no. 0-24123).
7 Incorporated by reference to the Company's Form 10-K dated as of March 6,
2000 (Commission file no. 0-24123).
(b) Reports on Form 8-K
A Form 8-K was filed on March 31, 2000 by the Company announcing that it had
executed a contract for the sale of seven of the Company's shopping centers.
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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 thereunto duly authorized.
HORIZON GROUP PROPERTIES, INC.
Registrant
DATE: MAY 15, 2000 BY: /s/ GARY J. SKOIEN
- ------------------ ------------------------------------
Gary J. Skoien, President and
Chief Executive Officer
DATE: MAY 15, 2000 BY: /s/ DAVID R. TINKHAM
- ------------------ ------------------------------------
David R. Tinkham, Chief Accounting
and Chief Financial Officer
<PAGE>
EXHIBIT 10.24
AGREEMENT OF PURCHASE AND SALE
AND ESCROW INSTRUCTIONS
THIS AGREEMENT OF PURCHASE AND SALE AND ESCROW INSTRUCTIONS ("Agreement")
is made as of this 24th day of March, 2000 (the "Effective Date"), by and
between THIRD HORIZON GROUP LIMITED PARTNERSHIP, a Delaware limited partnership
("Seller"), and TRIPLE NET PROPERTIES, LLC, a Virginia limited liability company
("Purchaser").
R E C I T A L S:
A. Seller is the fee owner of (i) the Holland Land and the Holland
Building (as such terms are hereinafter defined) comprising the outlet center
commonly referred to as Holland Outlet Center, located in Holland, Michigan,
(ii) the Monroe Land and the Monroe Building (as such terms are hereinafter
defined) comprising the outlet center commonly referred to as Horizon Outlet
Center, located in Monroe, Michigan, (iii) the Dry Ridge Land and the Dry Ridge
Building (as such terms are hereinafter defined) comprising the outlet center
commonly referred to as Dry Ridge Outlet Center, located in Dry Ridge, Kentucky,
(iv) the Norton Shores Land and the Norton Shores Building (as such terms are
hereinafter defined) comprising the power center commonly known as Lakeshore
Market Place, located in Norton Shores, Michigan, (v) the Medford Land and the
Medford Building (as such terms are hereinafter defined) comprising the outlet
center commonly known as the Medford Outlet Center, Medford, Minnesota, (vi) the
Warrenton Land and the Warrenton Building (as such terms are hereinafter
defined) comprising the outlet center commonly referred to as the Warrenton
Outlet Center, Warrenton, Missouri, and (vii) the Laughlin Fee Land (as such
term is hereinafter defined) comprising a portion of the outlet center commonly
referred to as the Horizon Outlet Center, Laughlin, Nevada.
B. Seller is the owner of the Leasehold Estate (as such term is
hereinafter defined) in the Laughlin Land and the Laughlin Building (as such
terms are hereinafter defined) comprising a portion of the outlet center
commonly referred to as the Horizon Outlet Center, Laughlin, Nevada.
C. Seller desires to sell, and Purchaser desires to purchase, the Real
Property, together with all of Seller's right, title and interest in and to the
Personal Property, the Contracts, the Leases and the Licenses (all as defined
below and collectively referred to herein as the "Property"), upon and subject
to the terms and conditions hereinafter set forth.
A G R E E M E N T S
NOW, THEREFORE, in consideration of the foregoing premises and the
respective representations, warranties, agreements, covenants and conditions
herein contained, and other good and valuable consideration, Seller and
Purchaser agree as follows:
ARTICLE 1
DEFINITIONS
1.1 DEFINITIONS. As used herein, the following terms shall have the
respective meanings indicated below:
(a) AGREEMENT. This Agreement of Purchase and Sale and Escrow
Instructions, including the Exhibits attached hereto which are
incorporated herein and made a part hereof.
(b) ASSIGNMENT ASSUMPTION OF LEASEHOLD ESTATE. That certain
recordable Assignment and Assumption of Leasehold Estate to be delivered
by Seller and Purchaser at Closing, whereby Seller shall convey to
Purchaser or Purchaser's nominee, all of Seller's right, title and
interest in, to and under the Ground
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Lease, and Purchaser or Purchaser's nominee shall accept such assignment
and assume and agree to perform all obligations of the "tenant" thereunder
accruing from and after the Closing Date.
(c) BUILDING. Collectively, the Dry Ridge Building, the Holland
Building, the Medford Building, the Monroe Building, the Norton Shores
Building and the Warrenton Building.
(d) CLOSING. The closing of the purchase and sale transaction
contemplated herein.
(e) CLOSING DATE. Subject to extension in accordance with the
provisions of Section 14.1 hereof, the thirtieth (30th) day following the
Due Diligence Approval Date, or such other date as is mutually agreed upon
by the parties hereto.
(f) CONFIDENTIAL MATERIALS. As defined in Section 17.6 hereof.
(g) CONTRACTS. All written (a) service, maintenance, operating,
repair, supply, purchase, construction or other contracts and commitments
(excluding the Leases, the Ground Lease and the recorded documents
evidencing the Permitted Title Exceptions) in any way related to all or
any portion of the Real Property, or pursuant to which goods, services and
supplies are furnished, or persons are employed on a continuing basis, for
the operation, maintenance, repair or construction of all or any portion
of the Real Property, to the extent any of the foregoing will survive the
Closing Date hereunder; and (b) equipment leases relating to equipment
leased by or on behalf of Seller, located in or upon all or any portion of
the Real Property, to the extent any of the foregoing will survive the
Closing Date, but excluding any contracts or leases that cover properties
in addition to the Real Property.
(h) DEED. Collectively, (i) that certain recordable Special Warranty
Deed to be delivered by Seller at Closing, conveying to Purchaser, or
Purchaser's nominee, fee simple title to the Dry Ridge Land and Dry Ridge
Building, subject only to the Permitted Title Exceptions relating thereto,
(ii) that certain recordable Special Warranty Deed to be delivered by
Seller at Closing, conveying to Purchaser, or Purchaser's nominee, fee
simple title to the Holland Land and Holland Building, subject only to the
Permitted Title Exceptions relating thereto, (iii) that certain recordable
Special Warranty Deed to be delivered by Seller at Closing, conveying to
Purchaser, or Purchaser's nominee, fee simple title to the Medford Land
and Medford Building, subject only to the Permitted Title Exceptions
relating thereto, (iv) that certain recordable Special Warranty Deed to be
delivered by Seller at Closing, conveying to Purchaser, or Purchaser's
nominee, fee simple title to the Monroe Land and Monroe Building, subject
only to the Permitted Title Exceptions relating thereto, (v) that certain
recordable Special Warranty Deed to be delivered by Seller at Closing,
conveying to Purchaser, or Purchaser's nominee, fee simple title to the
Norton Shores Land and the Norton Shores Building, subject only to the
Permitted Title Exceptions relating thereto, (vi) that certain recordable
Special Warranty Deed to be delivered by Seller at Closing, conveying to
Purchaser, or Purchaser's nominee, fee simple title to the Warrenton and
the Warrenton Building, subject only to the Permitted Title Exceptions
relating thereto, and (vii) that certain recordable Special Warranty Deed
to be delivered by Seller at Closing, conveying to Purchaser, or
Purchaser's nominee, fee simple title to the Laughlin Fee Land.
(i) DEPOSIT. The sum of One Million and 00/100 Dollars
($1,000,000.00), which shall be deposited by Purchaser with Escrowee, as
escrowee, within two (2) business days after the Effective Date, together
with the sum of Five Hundred Thousand and 00/100 Dollars ($500,000), which
may be deposited with Escrowee, as escrowee, pursuant to the provisions of
Section 14.1 below.
(j) DEVELOPMENT MATERIALS. As described in Section 10.1(b) hereof.
(k) DRY RIDGE BUILDING. The building or buildings located at the Dry
Ridge Land and comprising the outlet center commonly known as Dry Ridge
Outlet Center, Dry Ridge, Grant County, Kentucky.
(l) DRY RIDGE LAND. The land located in Dry Ridge, Grant County,
Kentucky, legally described on Exhibit A-1 attached hereto.
(m) DUE DILIGENCE APPROVAL DATE. The thirtieth (30th) day after the
Effective Date.
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(n) EFFECTIVE DATE. The date set forth in the preamble to this
Agreement.
(o) ESCROWEE. Guaranty National Title Insurance Company, located at
30 North LaSalle Street, Chicago, Illinois 60602.
(p) GROUND LEASE. The Amended and Restated Lease dated November 10,
1994 between Ground Lessor, as landlord, and J&S Enterprises, a Nevada
general partnership, as tenant, a Memorandum of which was recorded in Book
941223 as Instrument No. 01080, in the Official Records, Clark County,
Nevada, as amended by (i) the Lease Amendment dated September 25, 1996
between Ground Lessor and Horizon/Glen Outlet Centers Limited Partnership,
a Memorandum of which was recorded in Book 970708 as Document No. 01145,
(ii) the Second Amendment to Ground Lease dated June 30, 1997 between
Ground Lessor and Horizon/Glen Outlet Centers Limited Partnership and
recorded in Book 970708 as Document No. 01146, and (iii) the Third
Amendment to Ground Lease dated June 11, 1998 and recorded in Book 980618
as Document No. 00201 (the interest of the tenant thereunder having been
assigned to Seller pursuant to (x) the Assignment recorded in Book 950707
as Document No. 00163, and (y) the Assignment and Assumption of Ground
Lease recorded in Book 970708 as Document No. 01144), creating a leasehold
estate in the Laughlin Land and the Laughlin Building.
(q) GROUND LESSOR. James T. Slaybach, Sr. (and/or any current owner
of the Laughlin Land).
(r) HOLLAND BUILDING. The building or buildings located at the
Holland Land and comprising the outlet center commonly known as Holland
Outlet Center, Holland, Ottawa County, Michigan.
(s) HOLLAND LAND. The land located in Holland, Ottawa County,
Michigan, legally described on Exhibit A-2 attached hereto.
(t) INDEMNIFIED PARTIES. As defined in Section 10.1(a) hereof.
(u) INSPECTIONS. As defined in Section 10.1(a) hereof.
(v) INTANGIBLE PERSONAL PROPERTY. The trade names "Dry Ridge Outlet
Center", "Holland Outlet Center" "Lakeshore Market Place," "Medford Outlet
Center" and "Warrenton Outlet Center", and any and all logos, designs,
trade names, trademarks, service marks and applicable telephone number(s),
if transferable, and any other intellectual property used by Seller solely
in connection with the ownership and operation of the Real Estate, but
excluding the trade name "Horizon Outlet Center" or any variation thereof;
provided, however, that Purchaser shall, in the event of Closing, be
provided with a non-exclusive license to use the trade name "Horizon
Outlet Center" or any variation thereof during the period set forth in
this Agreement during which Purchaser is given an opportunity to resolve
signage and related name issues related to the Real Property.
(w) INVASIVE INSPECTIONS. As defined in Section 10.1(a) hereof.
(x) LAUGHLIN BUILDING. The building or buildings located at the
Laughlin Land and comprising the outlet center commonly known as Horizon
Outlet Center, Laughlin, Clark County, Nevada.
(y) LAUGHLIN FEE LAND. The land in Laughlin, Clark County Nevada,
legally described on Exhibit A-3 attached hereto.
(z) LAUGHLIN LAND. The land located in Laughlin, Clark County,
Nevada, legally described on Exhibit A-4 attached hereto.
(aa) LAND. Collectively, the Dry Ridge Land, the Holland Land, the
Laughlin Fee Land, the Medford Land, the Monroe Land, the Norton Shores
Land and the Warrenton Land.
(bb) LEASEHOLD ESTATE. The leasehold estate in the Laughlin Land and
the Laughlin Building created by the Ground Lease.
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(cc) LEASES. All leases, tenancies and rental agreements with
respect to space within any portion of the Real Property, and all
modifications, extensions, amendments and guaranties thereof, excluding,
however, the Ground Lease.
(dd) LICENSES. All licenses, franchises, certifications,
authorizations, certificates of occupancy, approvals and permits issued or
approved by any governmental authority and relating to Seller's (and not
any tenant's) operation, ownership and maintenance of the Real Property or
Personal Property or any part thereof.
(ee) MEDFORD BUILDING. The building or buildings located at the
Medford Land and comprising the outlet center commonly known as Medford
Outlet Center, Medford, Steele County, Minnesota.
(ff) MEDFORD LAND. The land located in Medford, Steele County,
Minnesota, legally described on Exhibit A-5 attached hereto.
(gg) MONROE BUILDING. The building or buildings located at the
Monroe Land and comprising the outlet center commonly known as Horizon
Outlet Center, Monroe, Monroe County, Michigan.
(hh) MONROE LAND. The land located in Monroe, Monroe County,
Michigan, legally described on Exhibit A-6 attached hereto.
(ii) NORTON SHORES BUILDING. The building or buildings located at
the Norton Shores Land and comprising the power center commonly known as
Lakeshore Market Place, Norton Shores, Muskegon County, Michigan.
(jj) NORTON SHORES LAND. The land located in Norton Shores, Muskegon
County, Michigan, legally described on Exhibit A-7 attached hereto.
(kk) OUTLOT CONTRACT. A contract described in Section 10.1(f) below.
(ll) PERMITTED TITLE EXCEPTIONS. (i) the standard and general
printed exceptions and exclusions contained in any owner's or leasehold
title insurance policy issued by the Title Insurer and (ii) those
exceptions to title to the Real Property approved or deemed approved by
Purchaser as provided in Article 5 hereof, and (iii) the rights of any
purchaser under any Outlot Contract entered into by Seller pursuant to
Section 10.1(f) below.
(mm) PERSONAL PROPERTY. Collectively, the Intangible Personal
Property and the Tangible Personal Property.
(nn) PURCHASE PRICE. Ninety-Three Million Five Hundred Thousand and
00/100 Dollars ($93,500,000.00), plus or minus prorations as described in
this Agreement, which sum is the consideration payable by Purchaser to
Seller for the Property. Without limiting the generality of the foregoing,
the parties hereby acknowledge and agree that for purposes of transfer
taxes and title insurance, the Purchase Price shall be allocated to each
of the outlet center properties comprising the Real Property in the manner
described in Exhibit B attached hereto and made a part hereof.
(oo) PURCHASER'S CONFIDENTIALITY OBLIGATIONS. As described in
Section 17.6 hereof.
(pp) PURCHASER'S INDEMNITY. As described in Section 10.1(a) hereof.
(qq) PURCHASER'S REPRESENTATIVES. As defined in Section 10.1(a)
hereof.
(rr) RECALCULATION DATE. The ninetieth (90th) day following the
Closing Date.
(ss) REAL PROPERTY. The Land, the Building and the Leasehold Estate,
together with all right, title and interest of Seller in and to all
improvements thereon or therein (including all replacements or additions
thereof between the date hereof and the Closing Date); all right, title
and interest of Seller in and to
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all systems, facilities, fixtures, machinery, equipment and conduits to
provide fire protection, security, heat, exhaust, ventilation,
air-conditioning, electrical power, light, plumbing, refrigeration, gas,
sewer and water to the Land, Building or Leasehold Estate; all right,
title and interest of Seller in and to all easements and appurtenances
inuring to the benefit of the Land, and the Laughlin Land; and all right,
title and interest of Seller in and to any streets, alleys, passages and
other rights-of-way included therein or adjacent thereto (before or after
the vacation thereof) to the extent inuring to the benefit of the owner of
the Land, the Building or the Leasehold Estate.
(tt) SURVEY. The existing as-built surveys of the Dry Ridge Land,
the Holland Land, the Laughlin Land, the Laughlin Fee Land, the Medford
Land, the Monroe Land, the Norton Shores Land and the Warrenton Land,
prepared by one or more surveyors licensed by the state in which the
applicable land is located and certified to Seller, and the Title Insurer,
prepared in accordance with the current Minimum Standard Detail
Requirements for Land Title Surveys adopted by the American Land Title
Association and American Congress on Surveying and Mapping, setting forth
the legal description of the applicable land and showing thereon the Dry
Ridge Building, the Holland Building, the Laughlin Building, the Medford
Building, the Monroe Building, the Norton Shores Building and the
Warrenton Building, as the case may be, and all recorded easements
encumbering and/or benefiting the applicable land.
(uu) TANGIBLE PERSONAL PROPERTY. Any and all tools, machinery,
equipment, fixtures, furnishings, signs, supplies and other tangible
personal property situated in or upon the Real Property or any part
thereof and listed on Exhibit C attached hereto, to the extent owned by
Seller, and all replacements thereto between the date hereof and the
Closing Date.
(vv) TITLE COMMITMENT. One or more title commitments dated on or
after January 15, 2000, for the current form of ALTA Owner's Title
Insurance Policy covering the Land and Building and for the current form
of ALTA Leasehold Title Insurance Policy covering the Leasehold Estate,
issued by the Title Insurer in favor of Purchaser in the amount of the
Purchase Price (or in the amount of the allocated portion of the Purchase
Price described in Exhibit B attached hereto, if separate title
commitments are issued), showing Seller as (i) the fee simple owner of the
Dry Ridge Land, Dry Ridge Building, Holland Land, Holland Building,
Laughlin Fee Land, Medford City Land, Medford Building, Monroe Land,
Monroe Building, Norton Shores Land, Norton Shores Building, Warrenton
Land and Warrenton Building, and (ii) the holder of the Leasehold Estate,
and including all standard and general printed exceptions and exclusions
raised in such form of commitment.
(ww) TITLE INSURER. Fidelity National Title Insurance Company.
(xx) TITLE POLICY. One or more ALTA Form Extended Coverage Owner's
Title Insurance Policies for the Land and Building and an ALTA Form
Extended Coverage Leasehold Title Insurance Policy for the Leasehold
Estate issued by the Title Insurer pursuant to the Title Commitment,
subject only to the Permitted Exceptions, together with all endorsements
reasonably requested by Purchaser and which the Title Insurer has
committed in writing to issue prior to the Due Diligence Approval Date,
including, but not necessarily limited to zoning, same as survey,
contiguity, comprehensive and access endorsements, to the extent available
in the applicable jurisdictions.
(yy) UPDATED SURVEY. As defined in Section 4.1 hereof.
(zz) WARRENTON BUILDING. The building or buildings located at the
Warrenton Land and comprising the outlet center commonly known as
Warrenton Outlet Center, Warrenton, Warren County, Missouri.
(aaa) WARRENTON LAND. The land located in Warrenton, Warren County,
Missouri, legally described on Exhibit A-8 attached hereto.
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ARTICLE 2
PURCHASE AND SALE
2.1 PURCHASE AND SALE. Subject to the conditions and on the terms
contained in this Agreement:
(a) Purchaser agrees to purchase and acquire from Seller, and Seller
agrees to sell and transfer to Purchaser, the Land and Building pursuant
to the Deed.
(b) Purchaser agrees to purchase, acquire and assume from Seller,
and Seller agrees to sell, assign, convey and transfer to Purchaser, all
of Seller's right, title and interest in, to and under the Ground Lease,
pursuant to the Assignment and Assumption of Leasehold Estate.
(c) Purchaser agrees to purchase and acquire from Seller, and Seller
agrees to sell, assign, convey and transfer to Purchaser, all of Seller's
right, title and interest in and to the Leases.
(d) Purchaser agrees to purchase and acquire from Seller, and Seller
agrees to sell, assign, convey and transfer to Purchaser, any and all of
Seller's right, title and interest in and to the following, to the extent
assignable without the consent of any other party thereto: (i) the
Contracts; (ii) the Licenses, and (iii) the Intangible Personal Property;
provided, however, that prior to the Due Diligence Approval Date,
Purchaser may give written notice to Seller requesting Seller to terminate
any one or more of the Contracts, to the extent any such Contracts contain
a cancellation provision permitting such cancellation, and in such event
Seller shall deliver cancellation notices to the applicable parties to
such Contracts on or before Closing and Purchaser shall assume such
Contracts only for the unexpired term thereof. Any termination charge or
penalty applicable to any Contract which is cancelled at Purchaser's
request shall be the responsibility of Seller and paid prior to or on the
Closing Date.
(e) Purchaser agrees to purchase and acquire from Seller, and Seller
agrees to sell, convey and transfer to Purchaser, any and all of Seller's
right, title and interest in the Tangible Personal Property, by good and
sufficient bill of sale, containing no warranties other than Seller's
warranty that it has not previously sold or pledged such Tangible Personal
Property.
ARTICLE 3
DEPOSIT AND PURCHASE PRICE
3.1. DEPOSIT; PAYMENT OF PURCHASE PRICE. Purchaser agrees to pay to
Seller, and Seller agrees to accept payment of the Purchase Price as follows:
(a) The Deposit (together with interest thereon, net of investment
charges, if any) shall be (i) paid to Seller and applied against the
Purchase Price at Closing, or (ii) disbursed in accordance with the terms
hereof, if Closing does not occur as contemplated hereby.
(b) At Closing, Purchaser shall pay to Seller the balance of the
Purchase Price (after deduction of the Deposit, together with net interest
earned thereon, paid to Seller and applied against the Purchase Price as
above provided), plus or minus prorations as hereinafter provided, by wire
transfer of immediately available federal funds.
ARTICLE 4
SURVEY
4.1 SURVEY. Seller has previously delivered the Survey to Purchaser.
Promptly following the Effective Date, at Seller's sole cost and expense, Seller
shall obtain and deliver to Purchaser an update to the Survey (the "Updated
Survey"), updating the same to a current date, depicting (by lot or metes and
bounds description, as
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applicable) any "out-parcels" constituting any portion of the Real Property,
adding such information and detail thereto as Purchaser may designate and adding
Purchaser, Purchaser's lender and the Title Insurer as additional parties to
whom the Updated Survey shall be certified, provided that Purchaser delivers to
Seller within two (2) days following the Effective Date a notice including a
description of the additional information and detail being requested and the
names of such additional parties. If the Survey or the Updated Survey discloses
any encroachments onto any Land or the Laughlin Land, as applicable, from any
adjacent property, encroachments by or from the Land or the Laughlin Land, as
applicable, onto any adjacent property, violations of or encroachments upon any
recorded building lines, restrictions or easements affecting any Land or the
Laughlin Land, as applicable, matters indicating possible rights of third
parties (other than tenants under existing Leases) or any other matter which in
Purchaser's reasonable judgment adversely affects the Real Property to which
Purchaser objects, Purchaser shall give Seller notice of such objection (i) no
later than ten (10) days after the Effective Date, with respect to the Survey,
and (ii) within five (5) business days after Purchaser's receipt of any Updated
Survey, with respect to each survey comprising the Updated Survey; Purchaser's
right to object to encroachments, violations, unpermitted exceptions or other
matters shown on the Updated Survey shall be limited to those matters shown on
the Updated Survey that were not shown on the Survey. Seller shall thereafter
have the right (without obligation) to elect, by written notice delivered to
Purchaser within five (5) business days after receipt of Purchaser's objections
to the Survey or any survey comprising the Updated Survey, as applicable (each,
a "Seller's Survey Response Period"), to have such encroachments, violations,
unpermitted exceptions or other matters so objected to by Purchaser removed from
the Survey or Updated Survey, as applicable, or insured over by the Title
Insurer. Any proposed title insurance endorsements shall be subject to the
reasonable approval of Purchaser and shall be issued prior to or at the time of
Closing. If Seller fails to elect during the applicable Seller's Survey Response
Period to have any objections properly and timely made by Purchaser removed from
the Survey (or the Updated Survey, as applicable) or insured over, provided that
any insurance shall be subject to Purchaser's reasonable approval, Purchaser may
elect, within five (5) days after the expiration of the applicable Seller's
Survey Response Period, and as its sole and exclusive remedy, to either (i)
terminate this Agreement, in which event the Deposit, together with net interest
earned thereon, shall promptly be returned to Purchaser, all obligations of the
parties hereunder shall terminate (other than Purchaser's Indemnity and
Purchaser's Confidentiality Obligations, which shall expressly survive such
termination), and this Agreement shall otherwise have no further force or
effect, or (ii) accept the Real Property subject to such encroachments,
violations, unpermitted exceptions or other matters which Seller did not elect
to cure, all of which shall thereafter be deemed Permitted Title Exceptions for
purposes hereof. Purchaser's failure to timely make either election shall be
deemed an election under clause (ii) above. Following delivery to Purchaser of
the Updated Survey, Purchaser shall have the right, at Purchaser's cost and
expense, to request that the Updated Survey be additionally updated to add
additional parties, detail or information, but the receipt of any additional
updates shall not be a condition to Purchaser's obligations under this
Agreement.
ARTICLE 5
TITLE
5.1 TITLE. Seller, at its sole cost and expense, has previously delivered
the Title Commitment to Purchaser, including a copy of all recorded documents
raised as an exception therein. If the Title Commitment raises any title
exceptions (other than general exceptions and rights of tenants under existing
Leases) to which Purchaser objects, Purchaser shall give Seller notice of such
objections no later than the fifteen (15) days after the Effective Date, and
Seller shall thereafter have the right (without obligation) to elect by written
notice within five (5) business days after receipt of such objections (the
"Seller's Title Response Period") to have such unpermitted exceptions so
objected to by Purchaser removed from the Title Commitment or insured over by
the Title Insurer. Any title insurance endorsements proposed by Seller shall be
subject to the reasonable approval of Purchaser and shall be issued prior to or
at the time of Closing. If Seller fails to elect during the Seller's Title
Response Period to have the same removed or insured over, provided any title
insurance endorsements shall be subject to Purchaser's reasonable approval,
Purchaser may elect, within five (5) business days after the expiration of the
Seller's Title Response Period, and as its sole and exclusive remedy, to either
(i) terminate the Agreement, in which event the Deposit, together with net
interest earned thereon, shall promptly be returned to Purchaser, all
obligations of the parties hereunder shall terminate (other than Purchaser's
Indemnity and Purchaser's Confidentiality Obligations, which shall expressly
survive such termination), and this Agreement shall otherwise have no further
force or effect, or (ii) accept the Real Property, subject to such unpermitted
exceptions raised in said Title Commitment which Seller did not elect to cure,
all of which shall thereafter be deemed Permitted Title Exceptions for purposes
hereof. Purchaser's failure to timely make either election shall be deemed an
election under clause (ii) above. Notwithstanding the foregoing, Seller shall be
obligated to cause to be
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paid off and released of record at Closing any mortgages or other monetary
encumbrances encumbering the Real Property, including any that arise, or are
first identified by the Title Insurer, following the Due Diligence Approval
Date; provided, however, that Seller shall have the right to cause the Title
Insurer to insure over any mechanic's liens filed against the Real Property, to
the extent Seller is disputing the same. On the Closing Date, Seller shall, at
Seller's sole cost and expense (except as otherwise provided in Section 6.3
below), cause the Title Insurer to issue the Title Policy (or a marked-up "New
York Style" Commitment), to Purchaser pursuant to and in accordance with the
Title Commitment, insuring fee simple title to the Land and Building in
Purchaser as of the Closing Date and insuring Purchaser as holder of the
Leasehold Estate as of the Closing Date, subject only to the Permitted Title
Exceptions.
ARTICLE 6
POSSESSION, PRORATIONS AND CLOSING COSTS
6.1 POSSESSION. Possession of the Property shall be delivered to Purchaser
on the Closing Date, subject to the rights of tenants in possession under the
Leases, the rights of the Ground Lessor under the Ground Lease and the rights of
other parties under Permitted Title Exceptions.
6.2 PRORATIONS.
(a) TAXES. On or before Closing, Seller shall pay in full (or credit
Purchaser at Closing for) all special assessments (including all
installments thereof accrued prior to the Closing Date if payable in
installments) levied, assessed and confirmed with respect to the Real
Property and which are payable through the Closing Date. Any special
assessments (including all installments thereof) which come due subsequent
to the Closing Date shall be payable by the Purchaser. General real estate
taxes and other state or local taxes, fees, charges and assessments
affecting the Real Property shall be prorated as of the Closing Date on an
accrual basis and on the basis of 100% of the most recent ascertainable
amounts of each such item, and the net credit to Seller or Purchaser (as
the case may be) shall be applied as an adjustment to or against the
Purchase Price on the Closing Date. Any such taxes prorated on an
estimated basis on the Closing Date shall be reprorated by the parties
when and as the actual amount of such item becomes known. Any adjustment
due to reproration shall be effected in cash not later than ten (10) days
following final determination of the amount of such item and demand by the
party to whom payment is due. As an example of the foregoing, if real
estate taxes affecting the Real Property or any portion thereof are
payable in arrears (that is, the taxes for the year 1999 are payable
entirely in the year 2000), the taxes for the year 1999 that are payable
in the year 2000 shall be paid entirely by Seller and the taxes for the
year 2000 that are payable in the year 2001 shall be prorated as of the
Closing Date. Specifically, if the Closing occurs on June 30, 2000, Seller
shall be responsible for payment of all of the taxes for the year 1999
taxes and 181/366ths of the taxes for the year 2000 that are payable in
the year 2001 and Purchaser shall be responsible for payment of the
balance of the taxes for the year 2000 and taxes for the year 2001 and all
subsequent years. Seller reserves the right (a) to meet with governmental
officials and to contest any reassessment governing or affecting Seller's
obligations under this Section 6.2, and (b) to contest any assessment of
the Real Property or any portion thereof and to attempt to obtain a refund
for any taxes previously paid. Subject to the rights of any tenants under
any Leases to receive reimbursement of portions of any such refunds,
Seller shall retain all rights with respect to any refund of taxes
applicable to any period prior to the Closing Date. In furtherance of the
foregoing, Purchaser acknowledges that Seller is currently seeking
reductions in the real estate tax assessments of the Real Property and has
engaged legal counsel to seek such reductions. Seller shall retain the
sole and exclusive right to direct such counsel and to negotiate
settlements with the applicable taxing authorities as to any tax year for
which Seller is fully or partially responsible for the payment of such
taxes; provided that with respect to any tax year as to which the taxes
are being prorated between Seller and Purchaser, Purchaser shall have the
right to participate (in the exercise of its reasonable discretion) in
such directions and negotiations. Seller shall be liable for all costs and
expenses incurred by such legal counsel relating to any tax year (whether
calendar or otherwise) ending prior to the tax year in which the Closing
occurs. At Closing, Seller shall assign to Purchaser and Purchaser shall
assume and agree to be liable for all fees and expenses owing to such
legal counsel for the tax year in which the Closing occurs and for all
subsequent tax periods; provided, however, that to the extent any fees and
expenses relate to a tax year for which taxes are being prorated as herein
provided, such fees and expenses shall be similarly prorated.
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(b) FIXED, MINIMUM AND BASE RENTS. Subject to Section 6.2(m) below
and this Section 6.2(b), Seller shall be entitled to fixed, minimum and
base rents which are due or past due or not yet due but accrued under the
terms of the Leases, prior to, and prorated as of the Closing Date.
Purchaser shall be entitled to all fixed, minimum and base rents accruing
and prorated from and after the Closing Date. Purchaser shall be entitled
to a credit at Closing for Purchaser's share of all such fixed, minimum
and base rents due in the month in which the Closing Date occurs and
received by Seller prior to the Closing Date. If any such fixed, minimum
or base rents due in the month in which the Closing Date occurs have not
been received by Seller as of the Closing Date, Seller shall receive a
credit at Closing for its share of such rents and Purchaser shall receive
a credit at Closing for its share of such rents, subject in each case to
readjustment as described in Section 6.2(m) below. By way of example, if
(i) there is $1,000,000 in fixed, minimum and base rents due for the month
in which the Closing Date occurs, (ii) Closing occurs on June 7, 2000, and
(iii) $900,000 of such rents have been collected as of Closing, then
Purchaser shall receive a credit at Closing of $800,000 (24/30ths of
$900,000, plus 24/30ths of $100,000) and Seller shall receive a credit of
$20,000 (6/30ths of $100,000).
(c) BASE PERCENTAGE RENT. Subject to Section 6.2(m) below and this
Section 6.2(c), with respect to those Leases pursuant to which tenants pay
rent based on a percentage of sales rather than any fixed, minimum or base
rent ("Base Percentage Rents"), Seller shall be entitled to such Base
Percentage Rents which are due or past due or not yet due but accrued
under the terms of the Leases, prior to, and prorated as of the Closing
Date. Purchaser shall be entitled to all Base Percentage Rents accruing
and prorated from and after the Closing Date. The parties acknowledge that
Base Percentage Rents for a particular month are based on the actual sales
for such month, but are not actually payable until after the end of such
month. Therefore, if the Closing occurs on May 31, 2000, Seller shall be
entitled to the Base Percentage Rent calculated on the basis of any
applicable tenant's sales for the entire month of May, even though such
Base Percentage Rent may not be due until mid or late June. Seller shall
receive a credit at Closing for its share of any Base Percentage Rents
that are calculated on the basis of sales occurring during the month in
which the Closing Date occurs and for any Base Percentage Rents that are
calculated on the basis of sales occurring during any prior month that is
due in the month in which the Closing Date occurs, and Purchaser shall
receive a credit at Closing for its share of any Base Percentage Rents
that are calculated on the basis of sales occurring during the month in
which the Closing Date occurs, subject in each case to readjustment as
described in Section 6.2(m) below. If on the Closing Date, the sales for
any applicable sales reporting period are not known, Seller and Purchaser
shall reasonably estimate the amount thereof and such proration shall be
based on such estimate, subject to readjustment as provided in Section
6.2(n) below. If the Closing Date occurs on a date other than the last day
for a sales reporting period for any tenant, sales for such tenant shall
be prorated based on a fraction, the denominator of which is the total
number of days within the applicable sales reporting period in which the
Closing Date occurs and the numerator of which is the number of days in
such sales reporting period prior to the Closing Date.
(d) OVERAGE RENTS. Overage rents to be prorated hereunder ("Overage
Rents") shall include, but not be limited to, percentage rents (other than
those described in subparagraph (c) above), consumer price index
escalation payments, other similar rental payments in excess of fixed,
minimum and base rents under the Leases, and other payments related to the
occupancy or use of the Real Property or Personal Property, whether
finally determined before or after the expiration of the fiscal years
under various Leases. Seller shall be entitled to Overage Rents which are
due or past due or not yet due but accrued under the term of the Leases,
prior to, and prorated as of the Closing Date. Purchaser shall be entitled
to all Overage Rents accruing and prorated from and after the Closing
Date. Overage Rents shall be separately prorated under each Lease on the
basis of the fiscal year set forth in each Lease for the payment of
Overage Rents. The foregoing notwithstanding, with the exception of
Overage Rents due and payable in the month in which the Closing Date
occurs, which shall be credited to Purchaser and Seller as described
below, Overage Rents shall not be credited at Closing, but shall instead
be adjusted and paid, subject to collection from tenants, at the year-end
adjustment described below. All interim Overage Rent payments made before
the Closing Date shall be retained by Seller until year-end adjustment as
provided in this Section 6.2(d) and determination of Seller's and
Purchaser's allocable share thereof. Overage Rents for the month in which
the Closing Date occurs shall be prorated as between Seller and Purchaser
based upon the number of days in the month occurring before the Closing
Date. Purchaser shall be entitled to a credit at Closing for Purchaser's
share of all Overage Rent due in the month in which the Closing Date
occurs and received by Seller prior to the Closing Date. If any Overage
Rent due in the month in which the Closing Date occurs has not been paid
as of
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the Closing Date, Seller shall receive a credit at Closing for its share
thereof and Purchaser shall receive a credit at Closing for its share
thereof, subject in each case to readjustment as described in this Section
6.2(d). If on the Closing Date the amount of any Overage Rent being
prorated is not actually known, Seller and Purchaser shall reasonably
estimate the amount thereof and such proration shall be based on such
estimate, subject to readjustment as provided in this Section 6.2(d). All
interim Overage Rent payments made to Purchaser after the Closing Date
shall be retained by Purchaser until year-end adjustment as provided in
this Section 6.2(d) and determination of Seller's and Purchaser's
allocable share thereof. Upon final determination of Overage Rents owed by
a tenant under its Lease for the fiscal year under that Lease in which the
Closing Date occurs, Seller and Purchaser shall adjust between themselves
amounts owed for such fiscal year on account of Overage Rents, and
Seller's allocable share of such Overage Rents shall be equal to an amount
determined by multiplying total Overage Rents owed by a fraction, the
numerator of which is the number of days in such fiscal year before the
Closing Date, and the denominator of which is the total number of days in
such fiscal year. Further, all such allocations shall be adjusted to
reflect any Leases not in effect for the full fiscal year. At the end of
the fiscal year for each Lease for which Overage Rents are due from a
tenant, Purchaser shall promptly bill the amounts due, if necessary. To
the extent received by Purchaser under the applicable Lease, Purchaser
shall furnish Seller with financial statements indicating the sales and
percentage rent figures for each tenant for all relevant periods and
Purchaser shall promptly remit to Seller its allocable share, less interim
payments previously retained by or credited to Seller, if any; provided,
however, in no event shall Purchaser be obligated to remit any amounts
payable to Seller as provided in this sentence unless actually collected
from the applicable tenants. If Seller has retained or been credited
amounts in excess of its allocable share, Seller shall, within fifteen
(15) days after notice from Purchaser of the excess owed Purchaser, remit
such excess to Purchaser. Any Overage Rents with respect to Leases
terminated before the Closing Date shall belong entirely to Seller, and
Purchaser shall remit to Seller, promptly following receipt, all payments
made to Purchaser after the Closing Date on account of such Overage Rents.
Any Overage Rents with respect to Leases commencing on or after the
Closing Date shall belong entirely to Purchaser.
(e) COMMON AREA MAINTENANCE CHARGES, TAXES AND SIMILAR Expenses. To
the extent tenants under Leases ("CAM Leases") pay monthly estimates of
common area maintenance charges, insurance charges, taxes, utility charges
and similar expenses charged to tenants for reimbursement, including
administrative fees (collectively, "Charges"), with an adjustment at the
end of each fiscal year applicable to Charges, such amounts shall be
prorated between Purchaser and Seller in accordance with this Section
6.2(e). Purchaser shall be entitled to a credit at Closing for Purchaser's
share of any tenant's payment for Charges that is due in the month in
which the Closing Date occurs and received by Seller prior to the Closing
Date. If any such tenant's payment for Charges that is due in the month in
which the Closing Date occurs has not been paid as of the Closing Date,
Seller shall receive a credit at Closing for its share thereof and
Purchaser shall receive a credit at Closing for its share thereof, subject
in each case to readjustment as described in Section 6.2(m) below. On the
Recalculation Date, Seller shall calculate the total amount of payments of
Charges received by or credited to Seller from each tenant under a CAM
Lease during the current fiscal year (subject to readjustment as provided
in Section 6.2(m) below) and shall compare such amount to the applicable
tenant's applicable share of all expenses comprising Charges theretofore
incurred by Seller or for which Seller is otherwise entitled to
reimbursement, including administrative fees and other fees and expenses,
in the current fiscal year through the Closing Date (including any Charges
for which a credit has been given to Purchaser as herein provided). To the
extent that the amount of the Charges received by or credited to Seller
(subject to readjustment as provided in Section 6.2(m) below) exceeds such
tenant's applicable share of all such expenses, Seller shall forward such
excess amount to Purchaser, together with the associated calculation
described above. To the extent that the Charges received by or credited to
Seller (subject to readjustment as provided in Section 6.2(m) below) are
less than such tenant's applicable share of all such expenses, Purchaser
shall forward such deficient amount to Seller, promptly following demand
by Seller; provided, however, that in no event shall Purchaser be
obligated to remit such deficient amount to Seller unless actually
collected from the applicable tenants. Seller's calculations shall, in all
events, be subject to reasonable audit and verification by Purchaser.
(f) MARKETING EXPENSES. With respect to any Leases which require the
tenants thereunder to make payments to a marketing fund for any retail
center comprising the Real Property, such payments shall be prorated
between Purchaser and Seller in accordance with this Section 6.2(f).
Purchaser shall be entitled to a credit at Closing for Purchaser's share
of any tenant's payment for the marketing fund that is due in the month
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in which the Closing Date occurs and received by Seller prior to the
Closing Date. If any such tenant's payments for the marketing fund due in
the month in which the Closing Date occurs has not been paid as of the
Closing Date, Seller shall receive a credit at Closing for its share
thereof and Purchaser shall receive a credit at Closing for its share
thereof, subject in each case to readjustment as provided in Section
6.2(m) below. On the Recalculation Date, Seller shall calculate the total
amount of marketing payments received by or credited to Seller (subject to
readjustment as provided in Section 6.2(m) below) from all tenants of the
Real Property for the marketing fund during the current fiscal year and
shall compare such amount to the total amount of marketing expenses
theretofore incurred by Seller or for which Seller is otherwise entitled
to reimbursement, including administrative fees and other fees and
expenses, in the current fiscal year through the Closing Date (including
any amounts for which a credit has been given to Purchaser as herein
provided). To the extent that the aggregate amount of the payments
received by or credited to Seller (subject to readjustment as provided in
Section 6.2(m) below) exceeds the aggregate amount of such expenses,
Seller shall promptly forward such excess amount to Purchaser, together
with the associated calculation described above. To the extent that the
aggregate amount of the payments received by or credited to Seller
(subject to readjustment as provided in Section 6.2(m) below) is less than
the aggregate amount of such expenses, Purchaser shall forward such
deficient amount to Seller, promptly following demand by Seller; provided,
however, that in no event shall Purchaser be obligated to remit such
deficient amount to Seller unless actually collected from the applicable
tenants. Seller's calculations shall, in all events, be subject to
reasonable audit and verification by Purchaser.
(g) PREPAID RENTS AND SECURITY DEPOSITS. Seller shall reasonably
estimate the amount of all prepaid rents (net of any outstanding amounts
due landlord on a tenant by tenant basis) ("Net Prepaid Rents") and all
security and other deposits of tenants under Leases not theretofore
applied as of the Closing Date, with interest thereon to the extent any
interest is required to be paid to such tenants under the terms of their
Leases. Purchaser shall receive a credit against the Purchase Price for
such net amount. On the Recalculation Date, Seller shall recalculate such
estimate in accordance with the provisions of Section 6.2(m) below and
remit to Purchaser (or if applicable, Purchaser shall pay to Seller) the
difference between such estimate and the recalculated amount. Purchaser
shall accept the liability for the proper application of such prepaid
rents and security deposits.
(h) CONTRACTS; UTILITIES. Other than any Contracts that may be
covered by the prorations described in Sections 6.2(e) and 6.2(f) above,
Purchaser shall be entitled to a credit against the Purchase Price for
sums that are due (or accrued) and unpaid as of the Closing Date under any
Contracts, and Seller shall be entitled to a credit to the extent that
sums have been paid under any Contracts for services to be performed or
goods to be delivered after the Closing Date. The foregoing
notwithstanding, Seller shall remain liable for any amounts owed under any
Contract for any leasing commissions or tenant improvement costs for any
Leases executed prior to the Effective Date, Seller shall receive no
credit for any amounts paid under any such Contract prior to the Closing
Date and Purchaser shall receive a credit for any amounts due thereunder
from and after the Closing Date. Any Contract for any leasing commissions
and tenant improvement costs for any Leases executed after the Effective
Date shall be governed by the provisions of Section 10.1(c) below.
Payments of accounts for water, sewer, electricity and all other utilities
currently in the name of Seller (excluding any that cover properties in
addition to the Property, such as telephone) shall be placed in the name
of Purchaser on the Closing Date and prorated as of the Closing Date.
Seller shall arrange for final meter readings, to the extent possible.
Seller shall cooperate with Purchaser to effect the transfer of utility
accounts from Seller to Purchaser. The prorations made pursuant to this
Section 6.2(h) shall be readjusted, to the extent necessary in accordance
with the provisions of Section 6.2(n) below. Purchaser shall have the
responsibility for the payment when due of all amounts for which it
receives a credit against the Purchase Price pursuant to this Section
6.2(h).
(i) OTHER ITEMS OF EXPENSE OR RECEIPT. All other customarily
prorated items of expense or receipt that are not otherwise specifically
described herein shall be prorated between Seller and Purchaser as of the
Closing Date as is customary for similar transactions in the state where
the applicable Real Property is located. Except with respect to items
prorated at Closing, Seller shall be responsible for payment of any and
all bills or charges incurred prior to the Closing Date for work,
services, supplies or materials, and Purchaser shall be responsible for
payment when due of any and all bills or charges incurred on or after the
Closing Date for work, services, supplies or materials. Seller shall be
responsible for payment when due of all
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accrued salaries and other benefits due to or in respect of its on-site
employees at the Real Property and no credit will be given to Purchaser
therefor.
(j) INTENTIONALLY OMITTED.
(k) GROUND LEASE. All ground rent and other sums payable by Seller
under the Ground Lease shall be prorated as of the Closing Date.
(l) ADJUSTMENTS. Except as otherwise set forth in this Section 6.2,
prorations shall be accomplished by an adjustment in the Purchase Price
due Seller on the Closing Date.
(m) COLLECTIONS AND APPLICATION OF PAYMENTS AFTER CLOSING. From and
after the Closing, Seller shall be entitled to bill, collect and receive
all fixed, minimum and base rentals due in the month in which the Closing
Date occurs, all Base Percentage Rentals calculated on the basis of sales
occurring during the month in which the Closing Date occurs or due in such
month, all Overage Rents due in the month in which the Closing Date
occurs, all Charges under CAM Leases due in the month in which the Closing
Date occurs and all contributions for marketing expenses due in the month
in which the Closing Date occurs (collectively "Closing Month Amounts"),
and the tenants under the Leases shall, pursuant to the tenant notices
disclosing the sale, be instructed to pay all such Closing Month Amounts
directly to Seller. Except to the extent provided in the preceding
sentence, after the Closing Date, Purchaser shall bill tenants for all
amounts due under Leases and attributable to periods prior to the Closing
Date (including any amounts accrued prior to, but payable after, the
Closing Date), including without limitation, any unpaid fixed, minimum and
base rents, Base Percentage Rents, Overage Rents, Charges due under CAM
Leases and contributions for marketing expenses (collectively, "Seller
Amounts"); Purchaser shall prepare and send to tenants all financial
statements and data required by Leases, and Seller shall cooperate and
assist Purchaser in the preparation thereof. Purchaser shall use good
faith and reasonable efforts to collect all Seller Amounts, including any
Closing Month Amounts not paid to Seller. Notwithstanding the foregoing
and in the absence of any direction from tenants to the contrary, rental
and other payments received by Purchaser from tenants after Closing
(excluding Overage Rents, which shall be applied in accordance with the
provisions of Section 6.2(d) above) shall be applied on a tenant by tenant
basis, as follows: (i) first, to the actual out-of-pocket third party
costs of collection; (ii) second, to rent and other charges due in the
month in which the Closing Date occurs, unless the applicable amount was
paid directly to Seller; (iii) third, to current rent and other charges
then owed to Purchaser; (iv) fourth, to any Seller Amounts then due
Seller; and (v) finally, any balance to Purchaser. On the Recalculation
Date, Seller and Purchaser shall determine the total amount of all Seller
Amounts collected by Purchaser after the Closing Date and prior to the
Recalculation Date which are to be applied to Seller as herein provided
and the total amount of all Closing Month Amounts collected by Seller
after the Closing and prior to the Recalculation Date. If the total of all
Seller Amounts so collected by Purchaser exceeds the credits for unpaid
rents and other charges given to Seller at Closing, Purchaser shall
promptly remit such excess to Seller. If the total of all Seller Amounts
so collected by Purchaser is less than the credit for unpaid rents and
other charges given to Seller at Closing, Seller shall promptly remit such
shortfall to Purchaser. If Purchaser's prorata share of all Closing Month
Amounts collected and retained by Seller after the Closing exceeds the
credit for such unpaid Closing Month Amounts given to Purchaser at
Closing, Seller shall promptly remit such excess amount to Purchaser. If
Purchaser's prorata share of all Closing Month Amounts collected and
retained by Seller after the Closing is less than the credit for such
unpaid Closing Month Amounts given to Purchaser at Closing, Purchaser
shall promptly remit such shortfall to Seller. In addition, on the
Recalculation Date, Seller shall calculate the actual amount of prepaid
rents received and retained by Seller as of the Closing Date. To the
extent such amount exceeds the credit for Net Prepaid Rents given to
Purchaser pursuant to Section 6.2(g) above, Seller shall promptly remit
such excess amount to Purchaser. To the extent the credit for Net Prepaid
Rents exceeded the actual amount of prepaid rents, Purchaser shall
promptly remit such shortfall to Seller. From time to time after the
Recalculation Date, promptly following receipt by Purchaser of any Seller
Amounts, Purchaser shall promptly remit such amounts to Seller as herein
provided. After the Closing Date, Seller shall have the right to pursue
any remedy against any tenant owing Seller Amounts which are not otherwise
received and retained by Seller (including to the extent independent or
readily separable from any payments due Purchaser, any Seller Amounts due
after the Closing Date) and retain any amounts so collected, provided that
(i) Seller shall notify Purchaser of its intent to institute any legal
proceeding relating thereto not less than ten (10) days prior to the
institution thereof, (ii) Seller shall not institute any legal proceedings
for collection of such Seller Amounts prior to the
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expiration of sixty (60) days following the Closing Date, and (iii) Seller
shall in no event institute any proceeding to evict or dispossess a tenant
from the Real Property. Purchaser may, by written notice to Seller within
ten (10) days of receipt of Seller's notice, restrict Seller from
collecting such Seller Amounts, but only if Purchaser first pays Seller
any such Seller Amounts in exchange for Seller's assignment to Purchaser
of all of Seller's rights and causes of action with respect thereto. With
respect to Seller Amounts owed by tenants who are no longer tenants of the
Real Property as of the Closing Date, Seller shall retain all rights
relating thereto. Seller shall have no right to bring any action or
otherwise try to collect from any tenant, any Seller Amount due after the
Closing Date, that is not independent of, or readily severable from,
amounts owed to and collectible by Purchaser.
(n) Notwithstanding the foregoing, to the extent any of the
prorations described in Sections 6.2(c), 6.2(h), 6.2(i) or 6.2(k) above
are based on estimates or prove to be incorrect, then within ninety (90)
days after the end of the calendar year in which the Closing occurs,
Purchaser and Seller shall cooperate with each other to prepare a
reproration statement of any such items, and the party that is obligated
to make any payment as a result of such reproration shall make such
payment to the other party within ten (10) days after demand; provided,
however, that to the extent any prorated amount is comprised of an amount
due from a tenant, in no event shall Purchaser be obligated to remit any
such amount to Seller unless actually collected from such tenant.
6.3 CLOSING COSTS. Seller shall pay all title charges and premiums
attributable to the Title Policy (provided that with respect to endorsements to
the Title Policy, Seller shall pay up to a maximum of $25,000 and Purchaser
shall pay the balance), all survey charges and fees for the Survey and the
Updated Survey, all state, county and municipal real property transfer or excise
taxes and fees (if any), all recordation taxes and fees for the Deed, Assignment
and Assumption of Leasehold Estate any releases of existing liens or
encumbrances and one-half of the escrow costs (as described in Section 7.2
below). Purchaser shall pay all recordation and mortgage taxes and fees on any
instruments related to Purchaser's financing, all title insurance and
money-lender's escrow charges incurred in connection with any mortgage loans
obtained by Purchaser, any additional survey costs attributable to Purchaser's
lender's requests incurred subsequent to the delivery of the Updated Survey and
one-half of the escrow costs (as described in Section 7.2 below). The parties
shall each be solely responsible for the fees and disbursements of their
respective counsel and other professional advisers.
ARTICLE 7
DEPOSIT AND CLOSING ESCROW
7.1 DEPOSIT IN ESCROW. Within two (2) business days after the Effective
Date, Purchaser shall cause the Deposit to be deposited in escrow with the
Escrowee. Purchaser's failure to timely deliver the Deposit described in the
preceding sentence shall be deemed a material default hereunder, giving rise to
the rights and remedies of Seller as described in Section 15.2 below. From and
after the Due Diligence Approval Date, the Deposit shall be deemed earned by
Seller and shall be non-refundable, except as otherwise provided in Article 4,
Article 5, Article 9, Article 12, Section 11.1, Section 13.2, Section 13.3,
Section 13.4 and Section 15.1 hereof. Escrowee shall be directed by the parties
to invest the Deposit in money market accounts designated by Purchaser and
reasonably acceptable to Seller, with interest thereon being applied on account
of the Purchase Price at Closing, or if Closing does not occur for any reason,
then such interest shall be paid to the party entitled to the Deposit. The
parties shall direct Escrowee to disburse the Deposit, together with net
interest earned thereon, to the party entitled to the same as set forth in this
Agreement, or as otherwise provided in Section 7.2 below. The foregoing
notwithstanding, in the event that this Agreement is terminated pursuant to
Sections 4.1, 5.1, 11.1, 13.1, 13.2 or 13.3 below, the Escrowee will release the
Deposit to the applicable party, without the need for, or requirement of,
further instruction from Purchaser or Seller, except for a copy of the written
notice required to be given under any such section.
7.2 CLOSING ESCROW. Upon the execution of this Agreement by Purchaser and
Seller, and the acceptance of this Agreement by Escrowee in writing, this
Agreement shall constitute the joint escrow instructions of Purchaser and Seller
to Escrowee to open an escrow ("Escrow") for the consummation of the sale of
Property to Purchaser pursuant to the terms of this Agreement. Upon Escrowee's
receipt of the Deposit and Escrowee's written acceptance of this Agreement
Escrowee is authorized to act, and shall act, in accordance with the terms
hereof. Purchaser and Seller shall execute Escrowee's general escrow
instructions upon request; provided, however, that if there is any
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conflict or inconsistency between such general escrow instructions and this
Agreement, this Agreement shall control. The escrow costs and fees for the
Escrow accounts described in this Article 7, including the fee for a "New York
Style" closing, shall be equally divided between Purchaser and Seller.
ARTICLE 8
BROKERAGE
8.1 BROKERAGE. Seller and Purchaser each hereby represents and warrants to
the other that it has not dealt with any broker or finder in respect to the
transactions contemplated hereby, except for Secured Capital Corporation (whose
commission shall be payable by Seller pursuant to Seller's separate written
commission agreement with said broker) and except for Triple Net Property
Realty, Inc. (whose commission in the amount of $500,000 will be paid by Seller
at and subject to the occurrence of the Closing); and Seller and Purchaser each
hereby agrees to indemnify the other for any claim for brokerage commission or
finder's fee asserted by any other person, firm or corporation claiming to have
been engaged by the party making such indemnification, including without
limitation, any commission or fee asserted by Harold Hofer or Clear Management,
which commission or fee shall be paid by Purchaser.
ARTICLE 9
CASUALTY AND CONDEMNATION
9.1 CASUALTY. If, prior to the Closing Date (without regard to any
extension thereto pursuant to Section 14.1 below), the Dry Ridge Building,
Holland Building, Laughlin Building, Medford Building, Monroe Building, Norton
Shores Building or Warrenton Building shall be destroyed or damaged in any one
case or in the aggregate in an amount in excess of the Material Damage Amount
(defined below), by fire or other casualty, then Purchaser shall have the option
(to be exercised in the manner hereinafter provided) to terminate this
Agreement, in which event all documents shall be returned to the respective
parties, the Deposit, together with net interest earned thereon, shall be
promptly returned to Purchaser, this Agreement shall become null and void, and
neither party shall have any further rights or obligations hereunder (subject,
however, to survival of Purchaser's Indemnity and Purchaser's Confidentiality
Obligations). Seller agrees to give Purchaser written notice of any casualty
promptly after Seller obtains knowledge of any such event, and Purchaser may
exercise such termination option by delivering written notice to Seller within
ten (10) days following the receipt of such notice. Purchaser's failure to
timely exercise such termination option shall be conclusive evidence that
Purchaser has waived such termination right. With respect to any casualty
hereunder whereby this Agreement is not terminated, upon the Closing Date,
Seller shall assign to Purchaser the interest of Seller in and to any insurance
proceeds with respect thereto, net of any portion thereof applied by Seller for
payment or reimbursement of all costs and expenses incurred by Seller in
connection therewith, including without limitation, the making of emergency
repairs, securing the applicable Real Property and complying with applicable
governmental requirements. In addition, Purchaser shall receive a credit against
the Purchase Price equal to any deductible under any policy or any uninsured or
self-insured amount for such Building or Laughlin Building, except to the extent
such amount has previously been expended by Seller for costs and expenses
incurred in connection with such casualty and not otherwise paid or reimbursed
to Seller as hereinabove provided. For the purposes hereof, the term "Material
Damage Amount" shall mean damage to any one or more of the buildings
constituting the Building or Laughlin Building reasonably determined to be in
excess of $750,000. In the event the parties hereto are unable to agree upon the
dollar amount of the aforesaid damages within ten (10) days after the date of
such fire, vandalism or other casualty, then the determination of said amount by
a licensed architect selected by Seller and reasonably acceptable to Purchaser
shall be binding upon the parties hereto and the beginning of the period in
which Purchaser will need to elect whether to terminate this Agreement shall be
tolled until such determination is complete. If the Closing Date is scheduled to
occur prior to the last day on which Purchaser is entitled to elect to terminate
this Agreement under this Section 9.1, then Closing shall be delayed to the
fifth (5th) business day following the date of Purchaser's election to proceed.
9.2 CONDEMNATION. If, prior to the Closing Date (without regard to any
extension thereto pursuant to Section 14.1 below), any judicial, administrative
or other proceeding relating to the proposed taking of any portion of the Real
Property by condemnation or eminent domain is instituted, Seller shall furnish
Purchaser notification thereof promptly following Seller's learning of same, and
Purchaser shall have the option, if such proceeding relates to a
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Substantial Portion (as hereinafter defined) of the Real Property, to terminate
this Agreement by giving Seller written notice of such termination within ten
(10) days after receipt of written notification of any such proceeding.
Purchaser's failure to give such notice in such time shall be conclusive
evidence that Purchaser has waived such option to terminate and, in such event,
Purchaser shall be assigned, at Closing, all of Seller's rights to any proceeds
or award for such taking. Should Purchaser elect to terminate this Agreement due
to the institution of such proceeding, all documents shall be returned to the
respective parties, the Deposit, together with net interest earned thereon,
shall be promptly returned to Purchaser, this Agreement shall become null and
void and neither party shall have any further rights or obligations hereunder
(subject, however, to survival of Purchaser's Indemnity and Purchaser's
Confidentiality Obligations). If the proceeding does not involve a Substantial
Portion of the Real Property, Purchaser shall not have the right to terminate
this Agreement, but shall be assigned, at Closing, all of Seller's rights to the
proceeds or award relating thereto. For the purposes of this Section 9.2, the
proceeding shall be deemed to involve a "Substantial Portion" of the Real
Property if the proceeding (i) affects more than the Material Damage Amount, as
reasonably determined by the parties, (ii) causes a permanent material
deprivation of access to the applicable land or building, or (iii) involves a
taking of parking areas located on the applicable land such that subsequent to
such taking, the applicable land or building will be in violation of municipal
zoning codes and ordinances, or in violation of parking requirements contained
in any of the Leases or recorded documents. In the event the parties hereto are
unable to agree if any of the foregoing conditions exists within ten (10) days
after the date on which Purchaser is notified of the condemnation or eminent
domain proceeding, then the determination of said amount by a licensed architect
selected by Seller and reasonably acceptable to Purchaser shall be binding upon
the parties hereto and the beginning of the period in which Purchaser will need
to elect whether to terminate this Agreement shall be tolled until such
determination is complete. If the Closing Date is scheduled to occur prior to
the last day on which Purchaser is entitled to elect to terminate this Agreement
under this Section 9.2, then Closing shall be delayed to the fifth (5th)
business day following the date of Purchaser's election to proceed.
ARTICLE 10
AFFIRMATIVE COVENANTS OF SELLER AND PURCHASER
10.1 AFFIRMATIVE COVENANTS.
(a) INSPECTIONS. From the date hereof to the Closing Date (or any
earlier date on which this Agreement is terminated), Seller shall permit
Purchaser and any of its officers, employees, agents, attorneys,
accountants, architects, engineers and consultants as designated by
Purchaser (collectively, "Purchaser's Representatives") access to Seller's
books and records relating to the ownership and operation of the Property
and access to and entry upon the Real Property, to examine, inspect,
measure and test the Real Property and conduct tenant interviews with
on-site representatives of tenants (provided that a representative of
Seller or its managing agent(s) will be present at any such interviews)
(herein collectively, the "Inspections"), all for the purpose of
performing its due diligence investigations described in Section 13.1
below. Prior to conducting any Inspections, Purchaser shall obtain
authorization of Seller or its managing agent(s). No boring, drilling or
other physical intrusion into the structures or ground comprising all or
any portion of the Real Property (herein, "Invasive Inspections") shall be
made without the prior written consent of Seller (which consent shall not
be unreasonably withheld). Purchaser shall give not less than forty-eight
(48) hours prior notice to Seller prior to any entry upon the Real
Property for the purpose of conducting such Inspections (including any
tenant interviews), and such entry (including any tenant interviews) shall
be scheduled and coordinated with Seller or its managing agent(s). At
Seller's election, a representative of Seller or its managing agent(s)
shall be present during any entry by any of Purchaser's Representatives
upon the Real Property for conducting said Inspections, including any
tenant interviews. Access to the Real Property by Purchaser's
Representatives shall be subject to the requirements of any permits,
codes, regulations, rules, laws, statutes and other requirements of any
governmental body, agency or authority having jurisdiction, as well as the
requirements of any private covenants, restrictions and easements of
record. Purchaser's Representatives shall work in harmony with all other
contractors or workmen performing work at or around the Real Property and
except as expressly permitted herein Purchaser shall not contact or
otherwise communicate with the tenants under any of the Leases. Further,
Purchaser shall take all necessary actions to insure that neither it nor
any of the other Purchaser's Representatives shall unreasonably interfere
with any tenants under the Leases or the ongoing operations occurring at
any retail center comprising the Real Property or any adjacent site during
the course of performing any such Inspections. Purchaser shall furnish
Seller with evidence of such insurance as Seller
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may reasonably require Purchaser to carry against liabilities which may
arise in connection with the Inspections. Purchaser shall not cause or
permit any mechanic's liens, materialmen's liens or other liens to be
filed against the Property as a result of the Inspections. The right of
Purchaser or the other Purchaser's Representatives to enter upon the Real
Property to perform the Inspections shall be limited to the period from
and after the Effective Date through the Closing Date or earlier
termination of this Agreement. Further such right to enter upon the Real
Property shall immediately terminate upon termination of this Agreement
for any reason (subject, however, to Purchaser's Indemnity, as hereinafter
described). Seller shall have the right to approve, in advance, any
contractors or consultants performing any Invasive Inspections at the Real
Property, as well as the scope of any such Invasive Inspections. Seller
shall not unreasonably withhold such approvals, and shall respond to any
request for such approvals within a reasonable time after receipt of the
request and other necessary information. Purchaser shall immediately
repair and/or restore any damage to the Property caused by entry upon the
Real Property by Purchaser or the other Purchaser's Representatives, so
that the Property shall be returned to its pre-existing condition.
Purchaser shall indemnify, defend and hold harmless Seller, its officers,
directors, shareholders, partners, tenants, agents and employees
(collectively, the "Indemnified Parties"), from and against any and all
actions, losses, costs, damages, claims, liabilities, and expenses
(including court costs and reasonable attorney's fees) brought, sought or
incurred by or against any of the Indemnified Parties resulting from,
arising out of, or in any way relating to, entry upon the all or any
portion of the Real Property by Purchaser or any of the other Purchaser's
Representatives. The foregoing indemnification and repair/restoration
obligations (herein collectively referred to as "Purchaser's Indemnity")
shall expressly survive the Closing or earlier termination of this
Agreement for the longest period allowed by applicable law.
(b) DEVELOPMENT MATERIALS. No later than three (3) business days
following the Effective Date, Seller shall deliver to Purchaser the
following items (the "Development Materials") concerning the Real Property
for Purchaser's inspection and copying, but only to the extent such items
are in the actual possession of, under the control of, or reasonably
accessible to, Seller or its managing agent(s) or have not previously been
delivered to Purchaser:
(i) true, correct and complete copies of the Leases,
Contracts and Licenses;
(ii) soils reports and environmental reports prepared for
Seller and relating to the Real Property;
(iii) written notices (if any) from any governmental entity or
agency and pertaining to current violations of the Real Property
with applicable environmental or other laws;
(iv) existing title insurance policy and survey covering
the Real Property;
(v) true, correct and complete copies of operating and
financial statements for the Real Property for the most recent three
(3) full fiscal years;
(vi) the Ground Lease;
(vii) real estate tax bills for the Real Property and personal
property tax bills, if any, for the Personal Property for the most
recent three (3) full fiscal tax years, together with any
correspondence received from the tax assessor relative to changed
assessments for the Real Property and Personal Property for the 1999
or 2000 fiscal tax years;
(viii) certificates of occupancy for the Real Property;
(ix) any plans and specifications for the buildings and other
improvements comprising the Real Property, including any existing
development plans or subdivision plans affecting any portion of the
Real Property; and
(x) "rent rolls" with respect to each Building and the
Laughlin Building for the calendar month immediately preceding the
Effective Date prepared by Seller in the ordinary course of its
business;
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(xi) A "rent roll", broken out by Building and the Laughlin
Building, current as of December, 1998 and December, 1999 and
prepared by Seller in the ordinary course of its business;
(xii) An aging report, broken out by Building and the Laughlin
Building, showing, with respect to each tenant, the date through
which such tenant has paid rent and a tenant by tenant monthly
activity report showing billing and collections for the preceding 24
months;
(xiii) Copies of Seller's general ledger which provides detail
related to utility bills for the Real Property for the calendar
years 1998, 1999 and 2000 year to date; and
(xiv) any additional existing information related to the Real
Property and reasonably requested by Purchaser; but excluding any
proprietary or confidential information.
(c) LEASING OF VACANT SPACE; LEASE RENEWALS, AMENDMENTS AND
TERMINATIONS.
(i) Seller expressly reserves the right to continue to show
and take offers to lease all vacant space (i.e., meaning currently
vacant or to become vacant upon a pending expiration or termination
of an existing lease) within the Building and the Laughlin Building.
If Seller desires to enter into any such lease of vacant space,
Seller shall submit to Purchaser a deal sheet describing the terms
of any proposed lease, as well as the form of lease which Seller
proposes to use. Such description shall include all applicable
commissions, any tenant allowances and all landlord improvement
obligations, if any (collectively, "Lease Costs"). Purchaser shall
thereafter have five (5) business days after receipt of such
information in each case to provide its written approval or
disapproval thereof (which approval shall not be unreasonably
withheld). Purchaser shall be deemed to have consented to any such
proposed lease if it fails to respond to Seller's request for such
consent within five (5) business days after such request and receipt
of the aforedescribed lease information. If Purchaser approves such
lease proposal, then Seller shall have the right to enter into a
lease on materially the same terms and conditions as set forth in
the deal sheet previously furnished to Purchaser. Purchaser
acknowledges that the Leases between Seller and The GAP at the
Laughlin Building and at the Medford Building have been approved by
Purchaser and that the Lease Costs relating to such Leases shall be
governed by the following sentences of this subsection (i),
regardless when actually executed. In the event any such proposed
lease includes Lease Costs, such costs shall be prorated between
Seller and Purchaser based upon a fraction, the numerator of which
is the base, minimum or fixed rent payable under the applicable
Lease prior to the Closing Date, and the denominator of which is the
total amount of base, minimum or fixed rent payable under such lease
during the initial term thereof. To the extent Seller has paid any
such Lease Costs, it shall receive an appropriate proration credit,
to the extent herein provided. To the extent any such costs are to
be incurred or are payable after the Closing Date, Purchaser shall
pay the same when due and receive an appropriate proration credit,
to the extent herein provided.
(ii) Seller expressly reserves the right to enter into any
renewal of an existing Lease to the extent that (x) the renewal is
pursuant to the exercise of a renewal option contained in the Lease,
(ii) the renewal is for a term of twelve (12) or fewer months, or
(z) the base, minimum or fixed rent (or Base Percentage Rent, if
applicable) is either equal to or greater than the greater of (A)
the fair market rental for such premises or (B) the fixed, minimum
or base rent (or Base Percentage Rent, if applicable) currently
payable under the applicable Lease; provided that Seller shall,
within five (5) days after execution of such renewal, deliver a copy
thereof to Purchaser. To the extent that any proposed renewal does
not meet any one of the conditions contained in the preceding
sentence, or if Seller desires to enter into any other amendment of
an existing Lease, Seller shall submit to Purchaser a deal sheet
describing the terms of such renewal or other amendment. Such
description shall include all applicable Lease Costs. Purchaser
shall thereafter have five (5) business days after receipt of such
information in each case to provide its written approval or
disapproval thereof (which approval shall not be unreasonably
withheld). Purchaser shall be deemed to have consented to any such
proposed renewal or other amendment if it fails to respond to
Seller's request for such consent within five (5) business days
after such request and receipt of the aforedescribed Lease
information. If Purchaser approves such renewal or other amendment,
then Seller shall have the right to enter into a renewal or other
amendment on materially the same terms and conditions as set forth
in the deal
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sheet previously furnished to Purchaser. In the event any such
proposed renewal or other amendment includes Lease Costs which are
payable by the landlord thereunder, such costs shall be prorated
between Seller and Purchaser in the same manner that they are
prorated pursuant to the provisions of subsection (i) above.
(iii) Seller expressly reserves the right to terminate any
Lease if the Tenant thereunder is in default in the payment of rent
or in any other material respect; provided, that Seller shall,
within five (5) days after such termination, deliver a copy thereof
to Purchaser.
(d) FURTHER ENCUMBRANCE. Seller shall not sell, assign, or convey
any right, title or interest whatsoever in or to the Real Property, or
create or permit to attach any lien, security interest, easement,
encumbrance, charge, or condition affecting the Real Property (other than
the Permitted Exceptions, liens that will be insured over by the Title
Insurer pursuant to Article 5 above, contracts for work which will be paid
for prior to or at Closing or for which an appropriate proration credit
will be given to Purchaser as herein provided and contracts for Lease
Costs under Leases approved or deemed approved pursuant to Section
10.1(c)).
(e) SERVICE CONTRACTS. Seller shall not, without Purchaser's written
approval (which approval shall not be unreasonably withheld), (a) amend or
waive any right under any Contract, or (b) enter into any service,
operating or maintenance agreement affecting the Real Property that would
survive the Closing, except for Contracts for Lease Costs.
(f) SALES OF OUTLET PARCELS. Seller expressly reserves the right to
continue to sell any of the outlot parcels comprising the Real Property.
If Seller desires to enter into any contract to sell any such outlot (an
"Outlot Contract"), Seller shall submit to Purchaser a deal sheet
describing the terms of any proposed sale, including a description of
estimated third-party closing costs, such as brokerage commissions, as
well as the form of contract which Seller proposes to use. Purchaser shall
thereafter have five (5) business days after receipt of such information
in each case to provide its written approval or disapproval thereof (which
approval shall not be unreasonably withheld). Purchaser shall be deemed to
have consented to any such proposed sale if it fails to respond to
Seller's request for such consent within five (5) business days after such
request and receipt of the aforedescribed information. If Purchaser
approves such sale proposal, then Seller shall have the right to enter
into an Outlot Contract on materially the same terms and conditions as set
forth in the deal sheet previously furnished to Purchaser. In the event
the closing under any Outlot Contract occurs prior to Closing, the
applicable outlot parcel shall be excluded from the Real Property and the
Purchase Price shall be reduced by the net proceeds realized by Seller as
a result of such sale (after deduction of all closing costs and proration
credits to the purchaser thereunder). Purchaser shall assume all
post-closing obligations of Seller under any such Outlot Contract. If the
closing under any Outlot Contract does not occur prior to Closing, Seller
shall assign the Outlot Contract to Purchaser at Closing and Purchaser
shall assume all obligations of Seller thereunder.
(g) INFORMATION REGARDING TAX APPEALS. Promptly following receipt by
Seller, Seller will provide Purchaser with copies of any correspondence,
notices or other information received by Seller from any taxing authority
or Seller's counsel concerning the assessment or reassessment of any
portion of the Real Property or Seller's actions seeking a reduction
thereof.
(h) ON-SITE EMPLOYEES. Purchaser shall have the right to interview
Seller's on-site employees at the Real Property. If Purchaser desires to
hire any such employees at the time of Closing, it will so notify Seller
not less than fourteen (14) days prior to the Closing Date. Seller shall
comply with all applicable laws relating to the termination of its on-site
employees.
ARTICLE 11
GROUND LEASE
11.1 GROUND LEASE. The transaction contemplated by this Agreement is
contingent upon Seller obtaining written consent from the Ground Lessor (the
"Laughlin Owner Consent") to Seller's assignment to Purchaser
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of Seller's interest, as landlord, under the Ground Lease, including (if
required under the Ground Lease) the Laughlin Owner's acknowledgment that Seller
shall be released of all obligations and liabilities of the "tenant" under the
Ground Lease effective from and after the date of such assignment. In addition,
Seller shall obtain from Ground Lessor a form of estoppel confirming the terms
of the Ground Lease and acknowledging that neither Ground Lessor or Seller are
in default thereunder (the "Ground Lease Estoppel"). Seller hereby covenants
that it shall use best efforts to obtain the Laughlin Owner Consent and the
Ground Lease Estoppel, provided that Seller shall not be required to make any
payment to the Ground Lessor as a condition to obtaining the Laughlin Owner
Consent and the Ground Lease Estoppel other than normal review expenses. If
Seller does not obtain the Laughlin Owner Consent and the Ground Lease Estoppel
on or before the Due Diligence Approval Date, then this Agreement shall
terminate, whereupon the Deposit, together with the net interest earned thereon,
shall, without any further instruction required, promptly be returned to
Purchaser, this Agreement shall become null and void and neither party shall
have any further rights or obligations hereunder (subject, however, to survival
of Purchaser's Indemnity and Purchaser's Confidentiality Obligations). If Seller
obtains the Laughlin Owner Consent and the Ground Lease Estoppel on or before
the Due Diligence Approval Date, Seller shall deliver a copy of same to
Purchaser and the parties shall proceed to close the transaction contemplated
hereby pursuant to the terms hereof and, at Closing, Seller and Purchaser shall
enter into the Assignment and Assumption of Ground Lease. A copy of the Laughlin
Owner Consent and the Ground Lease Estoppel shall, if obtained, be delivered to
Purchaser within two (2) days after Seller's receipt, but in no event later than
the Due Diligence Approval Date. Such Laughlin Owner Consent shall be either
unconditional or, if conditional, subject to no condition that is reasonably
objectionable to Purchaser and the Ground Lease Estoppel shall contain no
material deviations from the terms of the Ground Lease provided to Purchaser. In
the event that Seller receives the Laughlin Owner Consent, but such consent does
not contain an acknowledgment that Seller is released of all obligations and
liabilities of the "tenant" under the Ground Lease, such consent shall
nevertheless be satisfactory if Purchaser agrees to indemnify and hold Seller
harmless from Purchaser's failure to perform such obligations and liabilities
arising from and after the Closing.
ARTICLE 12
REPRESENTATIONS AND WARRANTIES; AS-IS
12.1 SELLER'S REPRESENTATIONS AND WARRANTIES. Without otherwise limiting
the general application of Section 12.3 hereinbelow, and subject to the terms of
Section 12.2 hereinbelow, Seller represents and warrants to Purchaser that, as
of the date hereof:
(a) COMPLIANCE. Except to the extent set forth in Exhibit E attached
hereto, Seller has received no written notice from any governmental body
that the Property currently violates any applicable governmental
requirements in respect to the use, occupation or construction thereof,
that have not be heretofore cured to the satisfaction of the issuer of the
notice.
(b) LITIGATION. Except to the extent set forth in Exhibit F attached
hereto, to Seller's actual knowledge, there is no action, suit, proceeding
or investigation pending or threatened, before any governmental agency,
court or other governmental authority which relates to the Property or the
use thereof and which would be binding upon Purchaser after Closing or
otherwise impact or affect the Property.
(c) ORGANIZATIONAL/AUTHORITY. Seller is a limited partnership duly
formed, validly existing and in good standing under the laws of Delaware.
Subject to Seller receiving approval of its Board of Directors pursuant to
Section 13.3 below, Seller has the requisite authority to enter into and
perform this Agreement. Subject to Seller receiving approval of its Board
of Directors pursuant to Section 13.3 below, the execution, delivery and
performance of this Agreement by Seller has been duly and validly
authorized by all necessary action of Seller. Subject to Seller receiving
approval of its Board of Directors pursuant to Section 13.3 below, this
Agreement has been duly executed and delivered by Seller or an authorized
representative of Seller and sets forth the legal, valid and binding
obligations of Seller which, subject to bankruptcy laws, statutory rights,
general principles of equity and other similar legal principles, are
enforceable against Seller in accordance with the terms hereof.
(d) NO BREACH. None of the execution, delivery or performance of
this Agreement by Seller does or will, with or without the giving of
notice, lapse of time or both, violate, conflict with or constitute a
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default under any term or condition of (i) subject to Seller receiving
approval of its Board of Directors pursuant to Section 13.3 below, the
organizational documents of Seller; (ii) any agreement to which Seller is
a party or by which Seller is bound; or (iii) subject to Seller receiving
approval of its Board of Directors pursuant to Section 13.3 below, any
terms or provisions of any judgment, decree, order, statute, injunction,
rule or regulation of a governmental unit applicable to Seller.
(e) LEASE DOCUMENTS. Attached hereto as Exhibit G and G1,
respectively, are (i) a complete and accurate list of the Leases,
occupancy agreements and amendments thereto relating to the Real Property
as of the date of this Agreement, which list shall be updated by Seller
prior to Closing, if necessary, including the addition thereto of any
Leases or amendments thereto executed after the date of this Agreement
through the Closing Date, and (ii) a true, correct and complete copy of
the current rent roll prepared by Seller in the ordinary course of its
business, provided that Seller makes no representation or warranty as to
the accuracy of any of the information contained therein. Seller has or
will deliver to Purchaser true, accurate and complete copies of all of the
Leases. There are no options or rights to renew, extend or terminate the
Leases or expand any leased premises, except as shown in the Leases. No
brokerage commission or similar fee is due or unpaid by Seller with
respect to any Lease, except as disclosed in Exhibit D attached hereto,
and there are no written or oral agreements that will obligate Purchaser,
as Seller's assignee, to pay any such commission or fee under any Lease or
extension, expansion or renewal thereof (except for any as to which a
credit will be given to Purchaser at Closing). Except as disclosed in
Exhibit D attached hereto, Seller has received no written notices from any
tenant asserting that any of the Leases or any guaranties thereof are not
in full force and effect, asserting that any defenses, setoffs or
counterclaims for the benefit of the tenants exist or asserting that any
material default exists by Seller under any Lease. To Seller's actual
knowledge, except as may be asserted in a notice described in Exhibit D
attached hereto, Seller is not in material default in any of the material
obligations of the landlord under any Lease. To Seller's actual knowledge,
no tenant under any Lease is in monetary default (in excess of thirty (30)
days) under any Lease, except as shown in the reports delivered to
Purchaser pursuant to Section 10.1(b)(xii) above. Seller has no obligation
to any tenant under the Leases to further improve such Tenant's premises
or to grant or allow any rent or other concessions, except as set forth in
the Leases. No rent or other payments have been collected in advance for
more than one (1) month and no rents or other deposits are held by Seller,
except the security deposits described on the Rent Roll, rent for the
current month and any prepaid rent for which Purchaser will be given a
credit at Closing.
(f) SERVICE CONTRACTS. Attached hereto as Exhibit H is a complete
and accurate list of all Contracts, equipment leases and other similar
agreements relating to the Real Property as of the date of this Agreement
(excluding any contracts, leases or similar agreements covering any
properties in addition to the Real Property), which shall be updated by
Seller prior to Closing, if necessary, including the addition thereto of
any such contracts, leases and similar agreements executed after the date
of this Agreement through the Closing Date.
(g) GROUND LEASE. Seller has not transferred, assigned, conveyed or
encumbered the Leasehold Estate, other than as shown in the Permitted
Title Exceptions and other than the mortgage lien granted by Seller which
will be paid and released at Closing. Seller has not received any written
notice from Ground Lessor asserting the existence of any default by Seller
under the Ground Lease. To Seller's actual knowledge, neither Seller nor
Ground Lessor is in default in any of its respective material obligations
under the Ground Lease.
(h) EMPLOYEES. Purchaser shall have no obligation to employ or
continue to employ any individual employed by Seller or its affiliates in
connection with the Real Property; provided, however, that Purchaser may,
at its option, elect to hire certain individuals located on site at the
Real Property in which event Seller will reasonably cooperate with
Purchaser in any such efforts to obtain such individuals as employees.
(i) ZONING. Seller has not received any written notice alleging any
violations of any zoning laws, subdivision laws or other local ordinances
covering the Real Property. To Seller's actual knowledge, there is no
pending rezoning proceeding covering the Real Property.
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(j) CONDEMNATION. To Seller's actual knowledge, there is no pending
or threatened condemnation, expropriation, eminent domain or similar
proceeding affecting all or any portion of the Real Property.
(k) ASSESSED VALUE; SPECIAL ASSESSMENTS. To Seller's actual
knowledge, there is no proposed increase in the assessed value of all or
any portion of the Real Property other than the customarily scheduled
increases in the state, county and/or city where the Real Property is
located and as otherwise may have been disclosed to Purchaser.
(l) PERSONAL PROPERTY. Seller has not granted any chattel mortgages,
security agreements or financing statements or other liens or security
interests of any kind covering the Personal Property, except for the
Permitted Title Exceptions and encumbrances granted by Seller which will
be paid and released at the time of Closing. Seller has not acquired any
such Personal Property pursuant to any conditional bill of sale.
(m) OPERATING STATEMENTS. The operating statements furnished to
Purchaser in connection with or pursuant to this Agreement were prepared
in the ordinary course of Seller's business.
(n) ACCESS. Seller has not received written notice of any pending or
threatened action which would impair access from the Real Property to any
public road.
(o) BANKRUPTCY. Seller has not (i) made a general assignment for the
benefit of creditors, (ii) filed any voluntary petition in bankruptcy or
suffered the filing of any involuntary petition by Seller's creditors,
(iii) suffered the appointment of a receiver to take possession of all or
substantially all of Seller's assets, (iv) suffered the attachment or
other judicial seizure of all, or substantially all, of Seller's assets,
(v) admitted in writing its inability to pay its debts as they come due,
or (vi) made an offer of settlement, extension or composition to its
creditors generally.
(p) RECAPTURE AGREEMENTS. Seller has not received any written notice
that either the Land or the Laughlin Land is subject to any so-called
"recapture agreement" involving refund for sewer extension, oversizing
utility, lighting or like expense or charge for work or services done upon
or relating to the Real Property.
(q) ENVIRONMENTAL. To Seller's actual knowledge, the Real Property
does not contain, and there is not located on or about the Real Property,
any Hazardous Materials, except to the extent disclosed to Purchaser with
respect to the Leasehold Estate and the Laughlin Fee Land, except as
disclosed in the environmental reports previously furnished by Seller to
Purchaser, except for prepackaged cleaning materials, personal grooming
items or other items which are sold for consumer use or typically used in
the operation, maintenance and repair of the Real Property and except for
oil and other petroleum products which are in proper and safe containers
or are present in quantities less than an amount which would require
reporting or cleanup obligations under Environmental Laws (the foregoing
specific items being hereinafter referred to as the "Hazardous Materials
Exception"). To Seller's actual knowledge, no part of the Real Property is
currently used by Seller for the use, storage, treatment, production,
manufacture, generation, transportation, release or disposal of Hazardous
Materials, except to the extent included in the Hazardous Materials
Exception. Seller has not received any written complaint, order, summons,
citation, notice of violation, directive letter or other communication
from any governmental authority or other person with regard to air
emissions, water discharges, noise emissions or Hazardous Materials, or
any other environmental, health or safety matters affecting the Real
Property, or any portion thereof, except with respect to the Leasehold
Estate and the Laughlin Fee Land. To Seller's actual knowledge, there are
no underground storage tanks located on the Real Property and Seller has
not removed, or caused to be removed, any underground storage tanks from
the Real Property, except to the extent disclosed in the Hazardous
Materials Exception. For purposes hereof, "Environmental Law" shall mean
any federal, state or local law, ordinance, regulation, code, order or
decree (including consent decrees and administrative orders) in effect on
the date of this Agreement which regulates the use, generation, handling,
storage, treatment, transportation, decontamination, clean-up, removal,
encapsulation, enclosure, abatement or disposal of any Hazardous
Materials, including the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. Section 9601, et seq., the
Resource Conservation and Recovery Act, 42 U.S.C. Sections 6901, et seq.,
the Toxic Substance Contract Act, 15 U.S.C. Sections 1251, et seq., their
state analogs, and any other federal, state or local statute, law,
ordinance, resolution, code, rule, regulation, order or decree regulating,
relating to, or imposing liability or standards of
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conduct concerning any Hazardous Materials, all as amended to date. For
purposes hereof, "Hazardous Materials" shall mean flammable, explosive,
radioactive or reactive materials, any asbestos (whether friable or
non-friable), any pollutants, contaminants or other hazardous, dangerous
or toxic chemicals, materials or substances, any petroleum products or
substances or compounds containing petroleum products, including gasoline,
diesel fuel and oil, any polychlorinated biphenyls, or substance or
compounds containing polychlorinated biphenyls, to the extent any of the
above materials or substances or any other material or substance is
defined as a "hazardous substance", "hazardous waste", "toxic materials",
"contamination", and/or "pollution" within the meaning of any
Environmental Law.
Subject to the terms of Section 12.2 below, all of the representations and
warranties set forth in this Section 12.1 shall be deemed to have been remade
again on and as of the Closing Date, and shall survive for a period of six (6)
months after such Closing Date. Notwithstanding the foregoing, in the event that
Purchaser discovers any matters during the course of its due diligence
inspections and investigations which give rise to knowledge that any of the
foregoing representations and warranties are untrue or inaccurate in any
respect, and if Purchaser nevertheless closes on the transaction contemplated
hereby on the Closing Date, then Purchaser shall be deemed to have waived such
representation and warranty, and shall have no further claim against Seller on
account thereof. For purposes of this Section 12.1, the term "Seller's actual
knowledge" or words of similar import shall mean the actual knowledge of
"Seller's Executive Personnel", as hereinafter defined, without any further
investigation or due diligence required of such Seller's Executive Personnel.
Further, to the extent any representations and warranties in this Section 12.1
relate to "notices" being received (or not being received) by Seller, the term
"Seller", as used in such representations and warranties, shall be deemed to
refer to "Seller's Executive Personnel". For purposes of the foregoing, the term
"Seller's Executive Personnel" shall mean the following individuals: Gary
Skoien, David Tinkham, Richard Berman and Tom Rumptz Any claim by Purchaser
against Seller based upon a breach of any warranty or representation contained
in this Section 12.1 shall be deemed waived unless Purchaser (i) delivers to
Seller written notice of such claim prior to the date which is six (6) months
after the Closing Date, and (ii) files suit within two (2) months after delivery
to Seller of any such notice of claim.
12.2 CHANGES. If any facts or circumstances change after the date of this
Agreement, and if, due to such changes in facts or circumstances, a material
representation or warranty of Seller that was true and accurate on the date
hereof, shall become untrue or inaccurate in any material respect if subsequent
to the Due Diligence Approval Date:
(a) Seller or Purchaser, as the case may be, shall promptly give
written notice to the other party of any such change in the truth or
accuracy of such representation or warranty (the "Change") to which such
party has actual knowledge;
(b) Unless such Change is the direct result of an intentional and
material act or omission of Seller which is in violation of any covenant
of Seller contained herein, such Change shall not constitute a default of
Seller under this Agreement, or a breach of Seller's representations or
warranties contained herein; and
(c) Unless Seller cures such Change within ten (10) days after
receipt or delivery of the notice described in subsection (i) above, or
notifies Purchaser within such ten (10) day period that it is willing to
give Purchaser a credit against the Purchase Price in an amount equal to
Purchaser's reasonable estimate of the cost necessary to cure such Change,
Purchaser shall have the right, as its sole remedy, to terminate this
Agreement, based upon the Change, by giving written notice of such
termination to Seller on or before the later of (a) five (5) days after
the expiration of the cure period provided for herein, or (b) the Due
Diligence Approval Date (time being of the essence), with the Closing Date
being extended, if necessary, to the end of said period; provided,
however, that (i) if such Change is the direct result of an intentional
and material act or omission of Seller which is in violation of any
covenant of Seller contained herein, Purchaser shall have all other rights
available to Purchaser under this Agreement arising out of a Seller
Default (as hereinafter defined), and (ii) Seller shall be obligated to
cure any Change which was caused by Seller or which is subject to monetary
cure for a cost not to exceed $50,000.00. If Purchaser terminates this
Agreement under this Section 12.2, this Agreement shall terminate,
whereupon the Deposit, together with the net interest earned thereon,
shall promptly be returned to Purchaser, this Agreement shall become null
and void and neither party shall have any further rights or obligations
hereunder (subject, however, to survival of Purchaser's Indemnity and
Purchaser's Confidentiality Obligations). In the event Purchaser does not
terminate this Agreement on account of such Change, then Seller shall not
be obligated to update the representation and warranty which is
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the subject of said Change on and as of the Closing Date, notwithstanding
anything contained in Section 12.1 above to the contrary, and Purchaser
shall be deemed to have waived such representation or warranty and shall
have no claim against Seller on account thereof.
12.3 PURCHASE AS IS. IT IS ACKNOWLEDGED THAT PURCHASER HAS HAD OR SHALL
HEREAFTER HAVE AMPLE OPPORTUNITY TO INVESTIGATE ALL ASPECTS OF THE PROPERTY AND
TO OBTAIN KNOWLEDGE OF ALL ATTRIBUTES CONCERNING SUCH PROPERTY. PURCHASER
ACKNOWLEDGES AND AGREES THAT, EXCEPT FOR THE EXPRESS REPRESENTATIONS AND
WARRANTIES SET FORTH IN SECTION 12.1 ABOVE, AND ANY REPRESENTATIONS OR
WARRANTIES CALLED FOR IN THE DEED, BILL OF SALE AND THE ASSIGNMENT AND
ASSUMPTION AGREEMENTS CALLED FOR BY THIS AGREEMENT, THE PROPERTY SHALL BE
CONVEYED TO PURCHASER ON AN "AS-IS, WHERE-IS" BASIS WITHOUT ANY REPRESENTATIONS
OR WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, EITHER ORAL OR WRITTEN, MADE BY
SELLER OR ANY AGENT OR REPRESENTATIVE OF SELLER WITH RESPECT TO THE PROPERTY,
CONCERNING (A) THE VALUE, NATURE, QUALITY OR CONDITION OF THE PROPERTY,
INCLUDING, WITHOUT LIMITATION, THE WATER, STRUCTURAL INTEGRITY, SOIL AND
GEOLOGY; (B) THE INCOME TO BE DERIVED FROM THE PROPERTY; (C) THE SUITABILITY OF
THE PROPERTY FOR ANY AND ALL ACTIVITIES AND USES WHICH PURCHASER MAY CONDUCT
THEREON, INCLUDING THE POSSIBILITIES FOR FUTURE DEVELOPMENT OF THE PROPERTY; (D)
THE COMPLIANCE OF OR BY THE PROPERTY OR ITS OPERATION WITH ANY LAWS, RULES,
ORDINANCES OR REGULATIONS OF ANY APPLICABLE GOVERNMENTAL AUTHORITY OR BODY; (E)
THE HABITABILITY, MERCHANTABILITY, MARKETABILITY, PROFITABILITY OR FITNESS FOR A
PARTICULAR PURPOSE OF THE PROPERTY; (F) THE MANNER OR QUALITY OF THE
CONSTRUCTION OR MATERIALS, IF ANY, INCORPORATED INTO THE PROPERTY; (G) THE
MANNER, QUALITY, STATE OF REPAIR OR LACK OF REPAIR OF THE PROPERTY; (H) THE
PRESENCE OR ABSENCE OF HAZARDOUS MATERIALS AT, UNDER, OR ADJACENT TO THE
PROPERTY OR ANY OTHER ENVIRONMENTAL MATTER OR CONDITION OF THE PROPERTY; OR (I)
ANY OTHER MATTER WITH RESPECT TO THE PROPERTY. PURCHASER ACKNOWLEDGES AND AGREES
THAT, EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES OF SELLER CONTAINED IN
SECTION 12.1 OF THIS AGREEMENT, AND ANY REPRESENTATIONS OR WARRANTIES CALLED FOR
IN THE DEED, BILL OF SALE AND THE ASSIGNMENT AND ASSUMPTION AGREEMENTS CALLED
FOR BY THIS AGREEMENT, ANY INFORMATION PROVIDED BY OR ON BEHALF OF SELLER WITH
RESPECT TO THE PROPERTY WAS OBTAINED FROM A VARIETY OF SOURCES AND THAT SELLER
HAS NOT MADE ANY INDEPENDENT INVESTIGATION OR VERIFICATION OF SUCH INFORMATION
AND MAKES NO REPRESENTATIONS AS TO THE ACCURACY OR COMPLETENESS OF SUCH
INFORMATION. SELLER IS NOT LIABLE OR BOUND IN ANY MANNER BY ANY ORAL OR WRITTEN
STATEMENTS, REPRESENTATIONS OR INFORMATION PERTAINING TO THE PROPERTY, OR THE
OPERATION THEREOF, FURNISHED BY ANY REAL ESTATE BROKER, AGENT, EMPLOYEE, SERVANT
OR OTHER PERSON EXCEPT FOR THE EXPRESS REPRESENTATIONS SET FORTH IN SECTION 12.1
OF THIS AGREEMENT, AND ANY REPRESENTATIONS OR WARRANTIES CALLED FOR IN THE DEED,
BILL OF SALE AND THE ASSIGNMENT AND ASSUMPTION AGREEMENTS CALLED FOR BY THIS
AGREEMENT. PURCHASER REPRESENTS AND WARRANTS TO SELLER THAT (A) PURCHASER IS NOT
IN A SIGNIFICANTLY DISPARATE BARGAINING POSITION; (B) PURCHASER IS REPRESENTED
BY LEGAL COUNSEL IN CONNECTION WITH THE SALE CONTEMPLATED BY THIS AGREEMENT; (C)
PURCHASER IS SOPHISTICATED, KNOWLEDGEABLE AND EXPERIENCED IN THE PURCHASE,
OWNERSHIP AND SALE OF COMMERCIAL REAL ESTATE AND IS FULLY ABLE TO EVALUATE THE
MERITS AND RISKS OF THIS TRANSACTION; AND (D) PURCHASER HAS CONDUCTED (OR WILL
HEREAFTER CONDUCT) OR HAD THE OPPORTUNITY TO CONDUCT (OR WILL HEREAFTER HAVE THE
OPPORTUNITY TO CONDUCT) ITS OWN INSPECTION AND INVESTIGATION OF THE PROPERTY.
SELLER HAS MADE NO AGREEMENT TO ALTER, REPAIR OR IMPROVE ANY OF THE PROPERTY.
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ARTICLE 13
CONDITIONS PRECEDENT AND TERMINATION
13.1 GENERAL FEASIBILITY. The obligation of Purchaser to close the
transaction contemplated hereby is subject to Purchaser's review and approval,
at its sole cost and expense, on or before the Due Diligence Approval Date, of
the Development Materials and of the results of the Inspections. If, for any
reason, Purchaser, in its sole good faith discretion, is not satisfied with any
of the foregoing, then Purchaser may, at its option at any time on or before the
Due Diligence Approval Date, elect (by specific written notice terminating this
Agreement or by failing to deliver written notice electing to proceed to
Closing) to terminate this Agreement, in which event the Deposit, together with
all net interest earned thereon, shall, without any further instruction
required, promptly be returned to Purchaser, this Agreement shall become null
and void and neither party shall have any further rights and obligations
hereunder (subject, however, to survival of Purchaser's Indemnity and
Purchaser's Confidentiality Obligations). Purchaser's failure to give Seller
notice that Purchaser has elected to proceed to Closing on or before the Due
Diligence Approval Date shall be deemed to be Purchaser's election to terminate
this Agreement. In the event Purchaser provides Seller with notice electing to
proceed to Closing, the parties shall thereafter proceed to close the
transaction contemplated by this Agreement as otherwise provided herein.
13.2 TENANT ESTOPPELS. The obligation of Purchaser to close the
transaction contemplated hereby is, at Purchaser's option, subject to Seller's
delivery to Purchaser of estoppel certificates addressed to Seller, Purchaser
and Purchaser's lender (in the form or forms provided to Seller by Purchaser no
later than the Due Diligence Approval Date or if no such form is provided, then
in the form attached hereto as Exhibit I, with such changes thereto as are
reasonably acceptable to Purchaser) dated no more than forty-five (45) days
prior to the Closing Date, from all the Major Tenants (as herein defined) and
from tenants (including the Major Tenants) occupying not less than 85% of the
currently leased square footage of each Building and not less than 85% of the
currently leased square footage of the Laughlin Building including, in all
cases, the square footage occupied by the Major Tenants; provided, however, that
notwithstanding the foregoing, if a Lease contains a form of estoppel as an
attachment thereto or specifically states the matters as to which the tenant is
obligated to deliver an estoppel, the form of required estoppel for such tenant
shall comply with such attached form or applicable provisions of the Lease.
Seller agrees to use reasonable efforts to obtain the foregoing estoppel
certificates, provided that Seller shall not be required to make any payment to
any tenant as a condition to obtaining an estoppel certificate therefrom. If
Purchaser receives any estoppel certificate which contains changes thereto or
which reflects information contrary to the applicable Lease, such estoppels
shall be deemed to be reasonably acceptable to Purchaser unless Purchaser
notifies Seller in writing within five (5) days after its receipt of any such
estoppel certificate that such changes are unacceptable. If Purchaser has not
received the requisite tenant estoppel certificates described above on or before
five (5) days prior to the Closing Date, then Purchaser may, at its option, and
as its sole and exclusive remedies hereunder, upon giving Seller written notice
thereof on or before two (2) days prior to the Closing Date, elect to (i)
require Seller to deliver estoppel certificates from, and executed by, Seller in
lieu of the requisite tenant estoppels, provided that such estoppel certificates
shall be subject to the same survival periods and limitations on liability
contained in Section 15.1 below and shall terminate if following the Closing,
Seller delivers to Purchaser an estoppel certificate executed by the applicable
tenant, or (ii) terminate this Agreement, in which event the Deposit, together
with all net interest earned thereon, shall promptly be returned to Purchaser,
this Agreement shall become null and void, and neither party shall have any
further rights and obligations hereunder (subject, however, to survival of
Purchaser's Indemnity and Purchaser's Confidentiality Obligations), subject to
Seller's right to nullify such termination as hereinafter provided; provided,
however, that in the event that the contrary information reflected in any tenant
estoppel constitutes a breach of Seller's representations and warranties,
Purchaser shall not be deemed to waive any rights otherwise and to the extent
available to Purchaser under this Agreement arising out of such breach.
Purchaser's failure to give Seller such notice on or before two (2) days prior
to the Closing Date shall be deemed to be Purchaser's waiver of the conditions
precedent set forth in this Section 13.2, and the parties shall thereafter
proceed to close the transaction contemplated by this Agreement as otherwise
provided herein. Notwithstanding anything contained in this Section 13.2 to the
contrary, if Seller has delivered to Purchaser estoppel certificates complying
with the requirements of this Section 13.2 from all the Major Tenants and from
tenants (including the Major Tenants) occupying not less than seventy-five (75%)
percent of the currently leased square footage of each Building and not less
than seventy-five (75%) percent of the currently lease square footage of the
Laughlin Building, including, in all cases, the square footage occupied by the
Major Tenants, Seller, at its option, to be exercised within one (1) business
day after receipt of any election by Purchaser to terminate this Agreement as
provided in (ii) above, shall be entitled to deliver estoppel certificates from,
and executed by, Seller in lieu of such additional requisite tenant estoppels,
subject to all of the provisions regarding such estoppel certificates as
provided in
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(i) above, whereupon Purchaser's termination of this Agreement shall be
nullified and the parties shall thereafter proceed to close the transaction
contemplated by this Agreement as otherwise provided herein. For purposes
hereof, Major Tenants shall be those tenants set forth and described in the list
attached hereto as Exhibit K. Seller further also agrees to use reasonable
efforts to deliver and undertake the execution and return by tenants of any
proposed form of Subordination, Non-Disturbance and Attornment Agreements
proposed by Purchaser's lenders. Seller's delivery of such forms shall not,
however, be a condition to Purchaser's obligation to close.
13.3 APPROVAL BY BOARD OF DIRECTORS OF SELLER. The obligations of Seller
under this Agreement are contingent upon Seller obtaining approval of this
transaction from its Board of Directors. Not later than the fifth (5th) business
day after the Effective Date, Seller shall deliver written notice to Purchaser
of such approval or disapproval. If no such notice is delivered, then Seller
shall be deemed to have delivered a notice of disapproval. In the event of
disapproval or deemed disapproval, Seller shall not be in default hereunder and
shall have no liability as a result thereof, this Agreement shall terminate, the
Deposit, together with all interest earned thereon, shall promptly be returned
to Purchaser and neither party shall have any further rights and obligations
hereunder (subject, however, to survival of Purchaser's Indemnity and
Purchaser's Confidentiality Obligations).
13.4 REPRESENTATIONS AND WARRANTIES BEING TRUE; COVENANTS BEING
PERFORMED; MATERIAL CHANGES IN FINANCIAL CONDITIONS.
(a) The obligations of Purchaser under this Agreement are, subject
to the terms of Section 9.1, Section 9.2, and Section 12.2, contingent
upon; (i) the representations and warranties of Seller set forth in
Article 12.1 being true and correct at Closing in all material respects;
and (ii) Seller having performed all of its pre-Closing covenants in
accordance with the terms of this Agreement.
(b) In the event an unexpected material change to the financial
condition of the Real Property occurs following the Due Diligence Approval
Date through the Closing Date (which shall be deemed for purposes of this
Section 13.4(b) to be the Closing Date prior to any extension thereof
pursuant to Section 14.1 below), Purchaser shall nonetheless be required
to perform its obligations hereunder as otherwise provided herein. For
purposes of this Section 13.4(b), an "unexpected material change to the
Real Property" shall be deemed to have occurred if following the Due
Diligence Approval Date and prior to the Closing Date, tenants who in the
aggregate are required to make payment under their Leases during the
twelve (12) month period following the Closing Date of an amount of annual
rent in excess of three percent (3%) of the aggregate annual rental
payable by all tenants of the Real Property during such twelve (12) month
period following the Closing Date commence voluntary bankruptcy
proceedings under the United States Bankruptcy Code, as amended, or have
had involuntary proceedings filed against them, and prior to the Closing
Date, such proceedings have not been dismissed, any applicable tenant has
not affirmed its Lease in the bankruptcy proceeding and the space leased
by such tenant has not been re-leased by Seller in accordance with Section
10.1(c) above (collectively, "Bankrupt Tenants"). If an unexpected
material change to the Real Property occurs, at Closing, a portion of the
Purchase Price equal to one hundred twenty-five percent (125%) of the Net
Lost Rent (as hereinafter defined), shall be deposited by Purchaser with
Escrowee (rather than being paid to Seller at Closing), and subject to the
terms hereof, held by Escrowee in one or more interest-bearing accounts
reasonably acceptable to Seller and Purchaser, with all interest accruing
thereon for the benefit of Seller, until the thirteen month anniversary of
the first day of the first month following the Closing Date. For purposes
of this Section 13.4, "Net Lost Rent" shall mean (a) the annual rental
otherwise payable by the Bankrupt Tenants pursuant to their Leases for the
twelve (12) month period following the Closing Date ("Expected Rents")
which, as a result of the referenced bankruptcy, are subject to
nonpayment, minus (b) three percent (3%) of the aggregate annual rental
income payable by all tenants of the Real Property during such twelve (12)
month period following the Closing Date. From and after the Closing Date,
Purchaser shall be entitled, by written notice to Escrowee and Seller, to
receive, on a monthly basis, commencing during the second full calendar
month following the Closing Date, the difference between the Expected
Rents due to Purchaser in the immediately preceding month and the actual
rents collected in such month by Purchaser as a result of the re-lease of
the premises occupied (or previously occupied by) the Bankrupt Tenants or
directly from any Bankrupt Tenants (including any past due sums received
upon the reaffirmation of a Lease by a Bankrupt Tenant). Any balance
remaining in the escrow at the conclusion of the thirteen (13) month
period described above, together with accrued interest thereon, shall be
remitted by Escrowee to Seller, without any further notice or direction.
Purchaser shall have the right to make a collateral assignment of its
rights in any such escrow accounts to any of its lenders holding a
mortgage on any portion of the Real Property that contains premises leased
to a Bankrupt Tenant.
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ARTICLE 14
CLOSING
14.1 TIME AND PLACE. The transaction contemplated hereby shall close on
the Closing Date through a New York Style escrow managed by the Escrowee or on
such other date, time, place or in such other manner as the parties may mutually
agree. The parties do not intend for there to be a live closing attended by
Seller and Purchaser representatives. Notwithstanding the foregoing, Purchaser
shall have the right, by delivery of written notice not later than ten (10) days
prior to the Closing Date containing its certification that it is prepared to
close the transactions contemplated by this Agreement, except for delays caused
by its lenders, to extend the Closing Date for a maximum of fifteen (15) days,
provided that concurrently with such notice to Seller, Purchaser shall deposit
the sum of Five Hundred Thousand and 00/100 Dollars ($500,000.00) with Escrowee,
which amount shall become part of the Deposit for all purposes under this
Agreement.
14.2 SELLER'S DELIVERIES. On or before the Closing Date, Seller shall
deliver or cause to be delivered to Purchaser or to Escrowee the following
closing documents and other items, each of which shall be executed, if
applicable and in form and substance reasonably acceptable to counsel for
Purchaser:
(a) the Deed;
(b) the Assignment and Assumption of Ground Lease; which document
shall contain Seller's indemnification of Purchaser from and against all
obligations of Seller thereunder arising or accruing prior to the Closing
Date (excepting therefrom any obligations for which Purchaser receives a
proration credit at closing or for which Purchaser expressly assumes
liability pursuant to the terms hereof);
(c) (1) Seller's assignment of the Contracts, (2) Seller's
assignment of the Leases, (3) Seller's assignment of the Licenses, (4)
Seller's assignment of the Intangible Personal Property, and (5) Seller's
assignment of any Outlot Contracts all as provided in Sections 2.1(c),
2.1(d) and 10.1(f), which assignment documents shall contain Seller's
indemnification of Purchaser from and against all obligations of Seller
thereunder arising or accruing prior to the Closing Date (excepting
therefrom any obligations for which Purchaser receives a proration credit
at Closing or for which Purchaser expressly assumes liability pursuant to
the terms hereof);
(d) Seller's bill of sale as provided in Section 2.1(e);
(e) To the extent in the possession of, under the control of, or
reasonably accessible to, Seller or its managing agent, originals (where
available) or copies of the Ground Lease and all Contracts, Leases and
Licenses relative to the Real Property or Personal Property (or any
portion thereof);
(f) Letters to tenants under the Leases (in a form reasonably
acceptable to Purchaser) advising that the Property has been sold to
Purchaser (or as Purchaser may otherwise designate), directing payment of
rental in accordance with the directions of Purchaser, and directing
tenants to deliver to Purchaser within a reasonable period after the
Closing Date, endorsements of any insurance policies required under the
tenant's Lease, deleting the interests of Seller with regard to
occurrences thereafter arising and adding the interest of Purchaser as
landlord;
(g) All keys held by Seller to the Building and the Laughlin
Building;
(h) The Title Policy (or marked-up "New York Style" commitment);
(i) Any required state, county and municipal transfer declarations;
(j) An executed Affidavit in the form attached hereto as Exhibit J;
and
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(k) An assignment of Seller's rights under that certain Consent
Agreement dated April 14, 1995 among the State of Nevada, acting by and
through its Department of Conservation and Natural Resources, Division of
Environmental Protection, Seller's predecessor in interest to the
Leasehold Estate and the Laughlin Fee Land, and others; and
(l) Such other documents, instruments, certifications and
confirmations as may be reasonably required and designated by the Title
Insurer to fully effect and consummate the transactions contemplated
hereby.
14.3 PURCHASER'S DELIVERIES. On or before the Closing Date, Purchaser
shall deliver or cause to be delivered to Seller or to Escrowee the following
closing documents and other items, each of which shall be in form and substance
reasonably acceptable to counsel for Seller:
(a) The balance of the Purchase Price;
(b) Any required state, county and municipal transfer declarations;
(c) Purchaser's acceptance of the Assignment and Assumption of
Ground Lease and of the assignments described in Section 14.2(c) above and
Purchaser's assumption, in favor of Seller, of all obligations and
liabilities of Seller arising or accruing from and after the Closing Date
pursuant to or in connection with the Ground Lease, Contracts, Leases,
Licenses and Intangible Personal Property, and Purchaser's indemnification
of Seller and the other Indemnified Parties from and against any such
obligations and liabilities so assumed and all costs, expenses and claims
arising therefrom; and
(d) Such other documents, instruments, certifications and
confirmations as may be reasonably required and designated by the Title
Insurer to fully effect and consummate the transactions contemplated
hereby.
14.4 CONCURRENT DELIVERIES. Seller and Purchaser shall jointly deposit in
the Escrow or deliver to each other at or before Closing an agreed proration
statement duly executed by the respective parties.
14.5 CONCURRENT TRANSACTIONS. All documents or other deliveries required
to be made by Purchaser or Seller at Closing, and all transactions required to
be consummated concurrently with Closing, shall be deemed to have been delivered
and to have been consummated simultaneously with all other transactions and all
other deliveries, and no transaction shall be deemed to have been consummated,
until all deliveries required by Purchaser and Seller shall have been made, and
all concurrent or other transactions shall have been consummated.
14.6 NEW YORK STYLE CLOSING. The transaction shall be closed by means of a
so-called New York Style Closing, with the concurrent delivery of the documents
of title, transfer of interests, delivery of the Title Policy or marked-up title
commitment described in Section 5.1 and the payment of the Purchase Price.
Seller and Purchaser shall each provide any undertaking to the Title Insurer
necessary to the New York Style Closing, including a "gap indemnity" to be
provided by Seller. Seller and Purchaser shall each pay 50% of the charges of
the Title Insurer for such New York Style Closing.
14.7 PURCHASER'S OBLIGATION TO CHANGE NAMES OF CERTAIN RETAIL CENTERS.
Following the Closing, Purchaser shall take all reasonable actions to change the
names of the retail centers comprising the Real Property in order to delete from
such names any reference to the name "Horizon", Purchaser shall provide Seller
with a status report of such actions at least monthly and will complete all such
actions, at Purchaser's expense, within one (1) year after Closing.
ARTICLE 15
DEFAULT
15.1 SELLER'S DEFAULT; PURCHASER'S REMEDIES. If Seller is in material
default hereunder, including without limitation as a result of an intentional
and material breach as of the Effective Date of any material
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<PAGE>
representation and warranty made herein by Seller (herein referred to as a
"Seller Default") and fails to cure such default within ten (10) business days
after Purchaser delivers written notice of such default to Seller (which cure
period shall be extended for a period not exceeding an additional ten (10)
business days for any default other than (a) a default in failing to close on
the Closing Date as required hereunder, or (b) any other intentional or willful
default of Seller, provided that such extended cure period shall only apply so
long as Seller is diligently pursuing the cure of such default during said ten
(10) business day period), and such Seller Default occurs on or prior to Closing
and Purchaser has notice or is otherwise aware thereof on or prior to Closing,
then Purchaser shall have the right, as its sole and exclusive remedy, to
terminate this Agreement, whereupon Purchaser shall receive a return of the
Deposit, together with all net interest earned thereon, this Agreement shall be
null and void and neither party shall have any further rights or obligations
hereunder (subject, however, to survival of Purchaser's Indemnity and
Purchaser's Confidentiality Obligations), and provided that if Purchaser elects
to terminate the Agreement, Purchaser shall remain entitled to receive
liquidated damages in the amount of $1,000,000 (it being agreed that the damages
to be sustained by Purchaser as a result of a Seller Default are extremely
difficult and impractical to ascertain, and that such amount is a reasonable
estimate of such damages and is not a penalty), except if within six (6) months
after Purchaser notifies Seller that a Seller Default exists, Seller sells the
Property in its entirety to an unaffiliated third party, and a court of
competent jurisdiction adjudicates that a Seller Default did in fact occur under
this Agreement, Purchaser shall also be entitled to receive any net proceeds
realized by Seller from such sale in excess of the net proceeds which would have
been realized by Seller if the sale contemplated by this Agreement had been
consummated. In no event shall Purchaser be entitled to seek the remedy of
specific performance or record a lis pendens or notice of pendency of action
against all or any portion of the Property for any reason whatsoever and
Purchaser expressly waives and relinquishes any such rights. If a Seller Default
first occurs after Closing or Purchaser first receives notice or otherwise
becomes aware thereof after Closing, then Purchaser's sole recourse shall be to
sue Seller for all provable damages of Purchaser caused by the Seller Default,
excluding consequential, speculative and punitive damages, and provided further
that the total amount of such damages to be collected by Purchaser as a result
of a Seller Default shall not exceed $1,000,000. Notwithstanding the foregoing,
Seller's re-proration obligations under Section 6.2 above, Seller's pre-Closing
indemnification obligations contained in the Assignment and Assumption
Agreements for the Ground Lease, Contracts, Licenses and Leases, and the losing
party's obligation to pay legal fees and costs in accordance with Section 17.10
shall not be subject to any of the limitations described in this Section 15.1.
Any claim by Purchaser against Seller based upon a Seller Default occurring
prior to Closing or as to which Purchaser receives notice or otherwise becomes
aware prior to Closing shall be deemed waived unless Purchaser (i) delivers to
Seller notice of such claim within three (3) months after the date on which the
Closing would have otherwise occurred, and (ii) files suit within two (2) months
after delivery to Seller of any notice of claim. Any claim by Purchaser against
Seller based upon a Seller Default occurring after Closing or as to which
Purchaser first receives notice or otherwise becomes aware after Closing shall
be deemed waived unless Purchaser (i) delivers to Seller written notice of such
claim prior to the date which is six (6) months after the Closing Date, and (ii)
files suit within two (2) months after delivery to Seller of any such notice of
claim.
15.2 PURCHASER'S DEFAULT; SELLER'S REMEDIES. If Purchaser is in material
default hereunder (herein referred to as a "Purchaser Default") and fails to
cure such default within ten (10) business days after Seller delivers written
notice to Purchaser (which cure period shall be extended for a period not
exceeding an additional ten (10) business days for any default other than (A) a
default in failing to close on the Closing Date as required hereunder, or (b)
any other intentional or willful default of Purchaser, provided that such
extended cure period shall only apply so long as Purchaser is diligently
pursuing the cure of such default during said ten (10) business day period),
then: (i) if a Purchaser Default occurs on or prior to Closing and Seller has
notice or is otherwise aware thereof on or prior to Closing, then Seller shall
have the right to terminate this Agreement and receive the Deposit, together
with the net interest earned thereon, as Seller's sole and exclusive remedy
hereunder, this Agreement shall be null and void and neither party shall have
any further rights or obligations hereunder (subject, however, to survival of
Purchaser's Indemnity and Purchaser's Confidentiality Obligations); and (ii) if
a Purchaser Default first occurs after Closing or if Seller first receives
notice or otherwise becomes aware thereof after Closing, then Seller may sue
Purchaser for all provable damages of Seller caused by the Purchaser Default,
excluding consequential, speculative and punitive damages, and provided further
that the total amount of such damages to be collected by Seller as a result of
Purchaser's Default shall not exceed $1,000,000. Notwithstanding the foregoing,
Purchaser's reproration obligations under Section 6.2 above, Purchaser's
indemnification obligations contained in the Assignment and Assumption of Ground
Lease, Purchaser's indemnity obligations described in Section 14.3(c) above,
Purchaser's Indemnity, Purchaser's Confidentiality Obligations and the losing
party's obligation to pay legal fees and costs in accordance with Section 17.10
shall not be subject to any of the limitations described in this Section 15.2.
Seller agrees that it will
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deliver written notice of a Purchaser Default to Purchaser within a reasonable
time after Seller obtains actual knowledge of such Purchaser Default.
SELLER AND PURCHASER HAVE ACKNOWLEDGED THAT THEY HAVE READ AND
SPECIFICALLY NEGOTIATED THE FOREGOING PROVISIONS AND LIMITATIONS ON REMEDIES
AFTER CONSULTATION WITH LEGAL COUNSEL OF THEIR RESPECTIVE CHOICE.
ARTICLE 16
NOTICES
16.1 NOTICES. Any notice, demand or other communication which any party
may desire or may be required to give to any other party shall be in writing and
shall be deemed given (i) if and when personally delivered, (ii) on the first
(1st) business day after being sent by a nationally recognized overnight courier
addressed to a party at its address set forth below, (iii) on the day of
transmission, if transmitted on a business day via facsimile to a party at its
facsimile number set forth below and received in its entirety by such party
prior to 5:00 p.m. (Chicago time), with the original sent via overnight courier
as provided in (ii) above, or if not received in its entirety prior to such
time, on the following business day, and (iv) on the third (3rd) business day
after being deposited in United States registered or certified mail, postage
prepaid, addressed to a party at its address set forth below, or to such other
address as the party to receive such notice may have designated to all other
parties by notice in accordance herewith:
If to Seller, to: Horizon Group Properties, Inc.
77 West Wacker Drive, Suite 4200
Chicago, Illinois 60601
Attention: Richard Berman, Esq.
Facsimile No.: (312) 917-8440
With copies to: Piper Marbury Rudnick & Wolfe
203 North LaSalle Street, Suite 1800
Chicago, Illinois 60601
Attention: Merle Teitelbaum Cowin, Esq.
Facsimile No.: (312) 236-7516
If to Purchaser, to: Triple Net Properties, LLC
1551 N. Tustin Avenue, Suite 650
Santa Ana, California 92705
Attention: Anthony W. Thompson
Facsimile No.: (714) 667-6860
and
Attention: Richard Gee
Facsimile No.: (714) 667-0611
With copies to: Hirschler, Fleisher, Weinberg, Cox & Allen
Federal Reserve Bank Building
701 East Byrd Street
Richmond, Virginia 23219
Attention: Louis J. Rogers, Esq.
Facsimile No.: (804) 644-0957
29
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ARTICLE 17
GENERAL
17.1 ENTIRE AGREEMENT, AMENDMENTS AND WAIVERS. This Agreement contains the
entire agreement and understanding of the parties in respect to the subject
matter hereof, and the same may not be amended, modified or discharged nor may
any of its terms be waived, except by an instrument in writing signed by the
party to be bound thereby. The waiver of any term or provision of this Agreement
shall not constitute a waiver of any other term or provision of this Agreement,
nor shall the right to require any enforcement of any term or provision of this
Agreement be permanently waived, if a continuing breach of any such term or
provision arises.
17.2 FURTHER ASSURANCES. The parties each agree to do, execute,
acknowledge and deliver all such further acts, instruments and assurances and to
take all such further action before or after the closing as shall be reasonably
necessary to perform this Agreement and consummate and effect the transactions
contemplated hereby.
17.3 SURVIVAL AND BENEFIT. No representations or warranties of the parties
contained herein, if any, shall be merged into the Deed, but subject to the
limitations contained in Sections 12.1, 15.1 and 15.2 above, shall survive
Closing for a period of six (6) months, and the same shall inure to the benefit
of and be binding upon the respective successors and permitted assigns of the
parties.
17.4 INTERPRETATION.
(a) The headings and captions herein are inserted for convenient
reference only, and the same shall not limit or construe the paragraphs or
sections to which they apply or otherwise affect the interpretation
thereof.
(b) The terms "hereby", "hereof", "hereto", "herein", "hereunder"
and any similar terms shall refer to this Agreement, and the term
"hereafter" shall mean after, and the term "heretofore" shall mean before,
the date of this Agreement.
(c) Words of the masculine, feminine or neuter gender shall mean and
include the correlative words of other genders, and words importing the
singular number shall mean and include the plural number and vice versa.
(d) Words importing persons shall include firms, associations,
partnerships (including limited partnerships), limited liability
companies, trusts, corporations and other legal entities, including public
bodies, as well as natural persons.
(e) The terms "include, "including" and similar terms shall be
construed as if followed by the phrase "without being limited to."
(f) This Agreement and any document or instrument executed pursuant
hereto may be executed in any number of counterparts, each of which shall
be deemed an original, but all of which together shall constitute one and
the same instrument.
(g) Whenever under the terms of this Agreement the time for
performance of a covenant or condition falls upon a Saturday, Sunday or
holiday, such time for performance shall be extended to the next business
day. Otherwise, all references herein to "days" shall mean calendar days
(unless specifically provided to be "business" days).
(h) This Agreement shall be governed by and construed in accordance
with the internal laws of the State of Illinois.
(i) Time is of the essence of this Agreement.
(j) If any provision hereof or the application of any such provision
to any particular person or circumstance is held to be invalid or
unenforceable, such invalidity or unenforceability shall not affect the
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validity or enforceability of any other provision hereof or the
application of such provision to different person(s) or circumstance(s),
as the case may be.
17.5 CONSENTS AND APPROVALS. Whenever consents or approvals are required
under the terms of this Agreement, said consents or approvals shall be in
writing.
17.6 CONFIDENTIALITY. Any and all information regarding the Property or
regarding Seller which is provided to Purchaser by Seller or by its agents, or
any other information obtained by Purchaser regarding the subject Property or
the Seller in the course of Purchaser's Inspections or other due diligence
investigations hereunder, in each case to the extent not generally available to
the public (herein, the "Confidential Materials"), shall be maintained by
Purchaser and each of Purchaser's Representatives (as defined in Section 10.1(a)
above) in strict confidence, to be used solely in connection with evaluating the
transaction contemplated hereby, and shall not be used in the purchase of stock
in Horizon Group Properties, Inc. and/or disclosed to third parties without the
prior written consent of Seller; provided, however, that Seller hereby consents
to the disclosure of such information to (a) any consultants, contractors,
attorneys, accountants or similarly situated persons assisting Purchaser in the
evaluation of the Property and (b) any lenders or investors (or potential
lenders or investors) with an interest in the Real Property, whether pursuant to
private placement memorandum, broker dealer network (in which event such consent
includes such broker dealer network) or otherwise. Purchaser acknowledges and
agrees that any breach or threatened breach of this confidentiality provision
would cause irreparable harm to Seller which may not be adequately remedied by
monetary damages and that, as a result, Seller may, in such event, in addition
to any other rights or remedies available hereunder or at law or in equity, seek
an injunction enjoining any disclosure of the Confidential Materials. This
obligation of confidentiality shall not apply to disclosures compelled by law,
any order of a court of competent jurisdiction or by a lawful, proper subpoena,
in which event Purchaser shall immediately notify Seller of the circumstances
purporting to require such disclosure and shall refrain from such disclosure for
the maximum period of time allowed by law so that Seller may take such actions
as it may deem appropriate to protect the Confidential Materials being sought.
Purchaser shall make all parties having access to the Confidential Materials
aware of their obligation of confidentiality described in this Section 17.6 and
shall bind such parties to similar obligations of confidentiality. The terms of
this Section 17.6 shall expressly survive the early termination of this
Agreement for the longest period provided by law. If this Agreement is
terminated for any reason prior to the closing of the transaction contemplated
hereby, then, upon the request of Seller, Purchaser shall immediately return to
Seller all Confidential Materials (including all copies thereof) which are in
the possession of Purchaser or any of Purchaser's Representatives. Purchaser's
obligations under this Section 17.6 are referred to herein as "Purchaser's
Confidentiality Obligations". Seller makes no representations or warranties
regarding the accuracy or completeness of any of the Confidential Materials.
17.7 PUBLICITY. Purchaser hereby covenants and agrees that, at all times
after the date of execution hereof and continuing after the Closing, unless
consented to in writing by Seller, such consent not to be unreasonably withheld,
no press release or other public disclosure concerning this transaction shall be
made, and Purchaser agrees to use best efforts to prevent disclosure of this
transaction. Seller shall have the right to make any filings with the Securities
and Exchange Commission and issue any press releases and make any other public
disclosure concerning this transaction.
17.8 ASSIGNMENT. Neither party shall have the right to assign this
Agreement, or any interest herein (including any right to purchase any separate
Building or any separately identified outlot constituting part of the Land or
the Laughlin Land), to any other person or entity, without first having obtained
the prior written consent of the non-assigning party (which consent maybe
withheld at such non-assigning party's sole and exclusive discretion); provided,
however, that Seller shall be deemed to have consented to the assignment, in
whole or in part, by Purchaser of Purchaser's rights and obligations under this
Agreement to one or more persons or entities associated or affiliated with, or
otherwise identified as potential investors or purchasers by, Purchaser
(including the right to purchase any separate Building or any separately
identified outlot constituting part of the Land or the Laughlin Land). In the
event of any assignment of this Agreement or any interest herein which has been
consented to by the non-assigning party hereunder, (i) the assignee shall be
entitled to the benefit of all the assigning party's rights and shall assume all
of the assigning party's obligations under this Agreement as to the applicable
Real Property, and (ii) the assigning party shall remain jointly and severally
responsible for all of its original obligations and liabilities set forth in
this Agreement and any obligations of the assignee under the closing documents
delivered in connection herewith; the aforementioned assignment shall not be
deemed to release the assigning party, in any respect, from any such obligations
and liabilities. This assignment provision shall survive the closing of the
transaction contemplated by this Agreement. Notwithstanding the foregoing,
Purchaser reserves the right to assign this Agreement, in whole or in part, to
one or
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more exchange intermediaries to effect a like-kind exchange of the Purchaser's
(or Purchaser's assignees) relinquished real property in accordance with Section
1031 of the Internal Revenue Code of 1986, as amended, and the regulations
thereunder. Seller consents to such assignments and agrees to sign Notices of
Assignment prior to Closing confirming that Seller has received the Notices of
Assignment and consented to the assignments. Seller shall not incur or be
responsible for any costs or expenses as a result of the exchanges.
17.9 WAIVER OF RIGHT TO TRIAL BY JURY. SELLER AND PURCHASER, TO THE EXTENT
THEY MAY LEGALLY DO SO, HEREBY EXPRESSLY WAIVE ANY RIGHT TO TRIAL BY JURY OF ANY
CLAIM, DEMAND, ACTION, CAUSE OF ACTION, OR PROCEEDING ARISING UNDER OR WITH
RESPECT TO THIS AGREEMENT, OR IN ANY WAY CONNECTED WITH, OR RELATED TO, OR
INCIDENTAL TO, THE DEALINGS OF THE PARTIES HERETO WITH RESPECT TO THIS AGREEMENT
OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER NOW EXISTING
OR HEREAFTER ARISING, AND IRRESPECTIVE OF WHETHER SOUNDING IN CONTRACT, TORT, OR
OTHERWISE. TO THE EXTENT THEY MAY LEGALLY DO SO, SELLER AND PURCHASER HEREBY
AGREE THAT ANY SUCH CLAIM, DEMAND, ACTION, CAUSE OF ACTION, OR PROCEEDING SHALL
BE DECIDED BY A COURT TRIAL WITHOUT A JURY AND THAT ANY PARTY HERETO MAY FILE AN
ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENT OF THE OTHER PARTY OR PARTIES HERETO TO WAIVER OF ITS OR
THEIR RIGHT TO TRIAL BY JURY.
17.10 ATTORNEYS' FEES AND COSTS. In the event suit or action is instituted
to interpret or enforce the terms of this Agreement, or in connection with any
arbitration or mediation of any dispute, the prevailing party shall be entitled
to recover from the other party such sum as the court, arbitrator or mediator
may adjudge reasonable as such party's costs and attorney's fees, including such
costs and fees as are incurred in any trial, on any appeal, in any bankruptcy
proceeding (including the adjudication of issues peculiar to bankruptcy law) and
in any petition for review.
17.11 RECORDATION. Purchaser shall not record this Agreement or a
memorandum or other notice thereof in any public office without the express
written consent of Seller. A breach by Purchaser of this covenant shall
constitute a default by Purchaser under this Agreement.
17.12 INDEPENDENT COUNSEL. Purchaser and Seller each acknowledge that: (a)
they have been represented by independent counsel in connection with this
Agreement; (b) they have executed this Agreement with the advice of such
counsel; and (c) this Agreement is the result of negotiations between the
parties hereto and the advice and assistance of their respective counsel. The
fact that this Agreement was prepared by Seller's counsel as a matter of
convenience shall have no import or significance. Any uncertainty or ambiguity
in this Agreement shall not be construed against Seller because Seller's counsel
prepared this Agreement in its final form.
17.13 GOVERNMENTAL APPROVALS. Nothing contained in this Agreement shall be
construed as authorizing Purchaser to apply for a zoning change, variance,
subdivision maps, lot line adjustment, or other discretionary governmental act,
approval or permit with respect to the Property prior to the Closing, and
Purchaser agrees not to do so. Purchaser agrees not to submit any reports,
studies or other documents, including, without limitation, plans and
specifications, impact statements for water, sewage, drainage or traffic,
environmental review forms, or energy conservation checklists to any
governmental agency, or any amendment or modification to any such instruments or
documents prior to the Closing.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first above written.
SELLER: PURCHASER:
THIRD HORIZON GROUP TRIPLE NET PROPERTIES, LLC,
LIMITED PARTNERSHIP, a Delaware a Virginia limited liability company
limited partnership
By: THIRD HGI, L.L.C., a Delaware By: /s/ ANTHONY W. THOMPSON
limited liability company, its --------------------------------
general partner Name: Anthony W. Thompson
Its: President
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/ GARY J. SKOIEN
----------------------------
Name: GARY J. SKOIEN
-----------------------
Its: PRESIDENT
------------------------
33
<PAGE>
ACCEPTANCE BY ESCROWEE
Escrowee acknowledges receipt of the foregoing Agreement and accepts the
instructions contained herein.
MARCH 24, 2000
GUARANTY NATIONAL TITLE INSURANCE
COMPANY
By: /s/ ROBERT ROTHSTEIN
----------------------------------------
Name: ROBERT ROTHSTEIN
--------------------------------------
Title: SENIOR VICE PRESIDENT
-------------------------------------
34
<PAGE>
LIST OF EXHIBITS
EXHIBIT A-1- Legal Description of Dry Ridge Land
EXHIBIT A-2- Legal Description of Holland Land
EXHIBIT A-3- Legal Description of Laughlin Fee Land
EXHIBIT A-4- Legal Description of Laughlin Land
EXHIBIT A-5- Legal Description of Medford Land
EXHIBIT A-6- Legal Description of Monroe Land
EXHIBIT A-7- Legal Description of Norton Shores Land
EXHIBIT A-8- Legal Description of Warrenton Land
EXHIBIT B - Allocation of Purchase Price
EXHIBIT C - Identified Tangible Personal Property
EXHIBIT D - List of Outstanding Commissions/Notices from Tenants
Asserting Claims
EXHIBIT E - List of Notices from Governmental Authorities
EXHIBIT F - List of Pending Litigation
EXHIBIT G - List of Leasing Documents
EXHIBIT G-1 - Rent Roll
EXHIBIT H - List of Service Contracts
EXHIBIT I - Form of Tenant Estoppel Certificate
EXHIBIT J - Form of Non-Foreign Affidavit
EXHIBIT K - Major Tenants
35
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EXHIBIT 10.25
FIRST AMENDMENT TO AGREEMENT OF
PURCHASE AND SALE AND ESCROW INSTRUCTIONS BETWEEN
THIRD HORIZON GROUP LIMITED PARTNERSHIP ("SELLER")
AND TRIPLE NET PROPERTIES, LLC ("PURCHASER")
DATED MARCH 24, 2000 (THE "AGREEMENT")
WHEREAS, Seller and Purchaser have entered into the Agreement for purposes
of the sale and acquisition of certain parcels of improved real property (the
"Real Property") located in various locations throughout the United States and
more particularly described in the Agreement;
WHEREAS, the Due Diligence Approval Date, as defined in the Agreement,
is currently April 23, 2000;
WHEREAS, Purchaser has not yet completed the necessary due diligence to
determine whether the Real Property is an appropriate investment for Purchaser
and has, therefore, requested an extension of the Due Diligence Approval Date.
NOW, THEREFORE, Seller and Purchaser, for $10.00 and other good and
sufficient consideration, the receipt and sufficiency of which is hereby
acknowledged, agree to the following:
1. DUE DILIGENCE APPROVAL DATE. Purchaser and Seller hereby agree to
extend, for all purposes, the Due Diligence Approval Date to 5:00
p.m. Central time on April 26, 2000.
2. MISCELLANEOUS. Any initially captioned terms contained in this
Amendment that are not separately defined herein shall have the
meanings ascribed to them in the Agreement. Except as modified and
amended by this Amendment, all other terms and conditions of this
Agreement are hereby reconfirmed by Purchaser and Seller.
[Signature page to follow]
1
<PAGE>
IN WITNESS WHEREOF, SELLER AND PURCHASER DO HEREBY EXECUTE THIS AMENDMENT
AS OF THIS 21ST DAY OF APRIL, 2000.
SELLER: PURCHASER:
THIRD HORIZON GROUP TRIPLE NET PROPERTIES, LLC,
LIMITED PARTNERSHIP, a Virginia limited liability company
a Delaware limited partnership
By: THIRD HORIZON HGI, L.L.C., By: /s/ RICHARD GEE
a Delaware limited liability ------------------------------
company, its general partner Name: Richard Gee
------------------------
Its: Executive Vice President
------------------------
By: HORIZON GROUP PROPERTIES, L.P.,
a Delaware limited partnership,
its managing partner
BY: Horizon Group Properties, Inc.
a Maryland corporation, its
general partner
By: /s/ Gary J. Skoien
-----------------------------
Name: Gary J. Skoien
-----------------------
Its: President
-----------------------
2
<PAGE>
EXHIBIT 10.26
SECOND AMENDMENT TO AGREEMENT OF
PURCHASE AND SALE AND ESCROW INSTRUCTIONS BETWEEN THIRD HORIZON GROUP LIMITED
PARTNERSHIP ("SELLER")
AND TRIPLE NET PROPERTIES, LLC ("PURCHASER")
DATED MARCH 24, 2000 (THE "AGREEMENT")
WHEREAS, Seller and Purchaser have entered into the Agreement for purposes
of the sale and acquisition of certain parcels of improved real property (the
"Real Property") located in various locations throughout the United States and
more particularly described in the Agreement;
WHEREAS, the original Due Diligence Approval Date, as defined in the
Agreement, was April 23, 2000;
WHEREAS, the parties have previously executed a First Amendment dated
April 21st, 2000, extending the Due Diligence Approval date through April 26,
2000.
WHEREAS, Purchaser has not yet completed the necessary due diligence to
determine whether the Real Property is an appropriate investment for Purchaser
and has, therefore, requested an additional extension of the Due Diligence
Approval Date, and, in the event the Purchaser elects to proceed at the extended
Due Diligence Approval Date, the Closing Date.
NOW, THEREFORE, Seller and Purchaser, for $10.00 and other good and
sufficient consideration, the receipt and sufficiency of which is hereby
acknowledged, agree to the following:
1. DUE DILIGENCE APPROVAL DATE AND CLOSING DATE. Purchaser and Seller
hereby agree to extend, for all purposes, the Due Diligence Approval Date to the
twenty-first (21st) day following the Effective Date of this Amendment. The
Closing Date shall, subject to further extension in accordance with the
provisions of Section 14.1 of the Agreement, be the thirtieth (30th) day
following such extended Due Diligence Approval Date. The Effective Date of this
Amendment shall be April 25, 2000.
2. REAL PROPERTY DESCRIPTION. Purchaser and Seller acknowledge and agree
that the description of the Real Property attached to the Agreement is
incomplete in that certain out parcels were inadvertently not included in this
Exhibit. By their execution of this Amendment, Purchaser and Seller agree to
amend the Agreement by attaching a corrected property description as soon as the
correct property descriptions are made available to the parties by the Title
Company and confirmed by the Updated Surveys, at which time the existing Exhibit
A to the Agreement shall be superseded and replaced by the corrected Exhibit A.
3. SURVEY AND TITLE OBJECTIONS. Purchaser and Seller hereby also extend
Purchaser's period to respond to Seller's response to Purchaser's objections to
Survey and Title until five (5) business days following the later of (i) the
Effective Date and (ii) the date Purchaser receives a written response addressed
to Purchaser from Seller and/or Title Company regarding the Purchaser's
objections including, in the case of any proposed endorsements, the specific
proposed language for such endorsements. In addition, Purchaser and Seller
acknowledge and agree that certain title commitments provided by Seller did not
address all of the Real Property and Purchaser hereby reserves, and is granted,
the right to object to such additional title commitments. The applicable time
periods for such additional title objections, Seller's response to such
objections and Purchaser's response to Seller's response shall be as set forth
in Section 5.1 of the Agreement; provided, however, that the period for
Purchaser's objections shall begin on the later of (i) the Effective Date or
(ii) the date such revised Title Commitments, together with copies of all
applicable Exceptions, are delivered to Purchaser.
4. MISCELLANEOUS. Any initially captioned terms contained in this
Amendment that are not separately defined herein shall have the meanings
ascribed to them in the Agreement. Except as modified and amended by this
Amendment, all other terms and conditions of the Agreement are hereby
reconfirmed and reaffirmed by Purchaser and Seller.
1
<PAGE>
[Signature page to follow]
2
<PAGE>
IN WITNESS WHEREOF, Seller and Purchaser do hereby execute this Second Amendment
as of this 25th day of April, 2000.
SELLER: PURCHASER:
THIRD HORIZON GROUP TRIPLE NET PROPERTIES, LLC,
LIMITED PARTNERSHIP, a Virginia limited liability company
a Delaware limited partnership
By: THIRD HORIZON HGI, L.L.C., By: ________________________________
a Delaware limited liability Name:___________________________
Company, its general partner Its:____________________________
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/ Gary J. Skoien
---------------------------
Name: Gary J. Skoien
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Its: President
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EXHIBIT 10.27
PROMISSORY NOTE
Chicago, Illinois
$1,500,000.00 April 18, 2000
FOR VALUE RECEIVED, the undersigned (the "BORROWER") HEREBY PROMISES
TO PAY to the order of Horizon Group Properties, L.P., a Delaware limited
partnership (the "LENDER") the principal sum of $1,500,000.00, together with all
accrued but unpaid interest thereon, on the Maturity Date.
The Borrower promises to pay interest to the Lender on the
outstanding principal amount hereof from the date hereof until such principal
amount is paid in full.
1. DEFINED TERMS. As used in this Note:
"AFFILIATE" means, as to any Person, any other Person that, directly
or indirectly, controls, is controlled by, or is under common control
with, such Person.
"BORROWER" is defined in the introductory paragraph.
"BUSINESS DAY" means a day (other than a Saturday or Sunday) on
which banks generally are open in Chicago, Illinois for the conduct of
substantially all of their commercial lending activities.
"DEFAULT RATE" is defined in SECTION 2(B).
"DOLLARS" and the sign "$" each means lawful currency of the United
States of America.
"EVENT OF DEFAULT" is defined in SECTION 5.
"INTEREST RATE" means ten percent (10%) per annum.
"LENDER" is defined in the introductory paragraph.
"LOAN" means the term loan made to the Borrower by the Lender which
is evidenced by this Note.
"LOAN DOCUMENTS" means, collectively, the Note, any guaranties
and/or security agreements and other documents entered into by the
Borrower to evidence or secure the loan evidenced by this Note and all
documents delivered or required to be delivered by the Borrower pursuant
thereto.
"MATURITY DATE" means June 17, 2000.
"NOTE" means this Promissory Note, as it may be amended or modified
and in effect from time to time.
"PERSON" means any natural person, corporation, firm, joint venture,
partnership, association, enterprise, trust or other entity or
organization, or any government or political subdivision or any agency,
department or instrumentality thereof.
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2. INTEREST AND FEES.
(a) INTEREST RATE. Except as otherwise provided in CLAUSE (B) of
this SECTION 2, the outstanding principal amount of this Note
shall, from the date hereof until such principal amount is
paid in full, bear interest at the Interest Rate. Interest on
this Note shall accrue and be payable on the Maturity Date or,
if earlier, on any date on which the Loan is prepaid, whether
by acceleration or otherwise.
(b) RATES APPLICABLE AFTER DEFAULT. During the continuance of an
Event of Default, the Lender may, at its option, by notice to
the Borrower, declare that any amount due and owing hereunder
from the Borrower and overdue in respect of the principal
amount of the Loan evidenced by this Note shall bear interest
at a rate per annum equal to fifteen percent (15%) per annum
(the "DEFAULT RATE"). Interest accrued at the Default Rate on
the principal amount of this Note shall be payable on demand.
If any amount due and payable under this Note is not paid
within five (5) Business Days following Borrower's receipt of
written demand for such payment, Borrower shall pay to Lender
a late charge equal to six percent (6%) of the amount which is
due but unpaid.
(c) INTEREST BASIS. Interest shall be calculated based on 30-day
months for actual days elapsed on the basis of a 365-day year.
Interest payable with respect to this Note or any portion
hereof which is paid or prepaid shall be payable for the day
the Loan is made but not for the day of any payment on the
amount paid if payment is received by the Lender prior to 3:00
p.m. (Chicago time) at the place of payment.
(d) COMMITMENT FEE. In consideration for making the Loan, Lender
is entitled to a fee in an amount equal to Thirty Thousand
Dollars ($30,000). which fee shall be due and payable on the
Maturity Date or such earlier date on which the Loan is repaid
in full.
(e) SPECIAL FEE. In the event Lender or an affiliate of Lender
does not acquire (or does acquire through a forclosure
proceeding) either substantially all of the assets and
business of Borrower or substantially all of the membership
interests in Borrower currently held by The Prime Group, Inc.,
on the earlier of (i) the day on which either substantially
all of the assets and business of Borrower or substantially
all of the membership interests in Borrower currently held by
The Prime Group, Inc. is sold, transferred or assigned to an
entity which is not affiliated with Lender or The Prime Group,
Inc., or (ii) October 31, 2000, Borrower shall pay Lender a
fee equal to Ninety Thousand Dollars ($90,000).
3. REQUIRED PAYMENTS; VOLUNTARY PREPAYMENT.
(a) The principal balance of this Note shall be payable by the
Borrower on the Maturity Date.
(b) The Borrower may from time to time pay, without penalty or
premium, the entire outstanding principal amount of this Note
or any portion of the outstanding principal amount of this
Note upon one Business Day's prior notice to the Lender.
4. METHOD OF PAYMENT. All payments of principal, interest and other
amounts owing hereunder shall be made, without set off, deduction or
counterclaim, in immediately available funds to the Lender at the Lender's
address at 77 West Wacker Drive, Chicago Illinois 60601, or at any other office
of the Lender specified
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in writing by the Lender to the Borrower, by 3:00 p.m. (Chicago time) on the
date when due. Whenever any payment to be made hereunder shall be stated to be
due on a day which is not a Business Day, such payment shall be made on the next
succeeding Business Day, and, in the case of a principal payment, such extension
of time shall in such case be included in computing interest with respect to
such payment.
5. EVENT OF DEFAULT. If any of the following events (each such
event, an "EVENT OF DEFAULT") shall occur and be continuing:
(a) Any representation or warranty made, or any financial or other
information provided by the Borrower to the Lender in connection with this Note
or any other Loan Document shall be untrue in any material respect on the date
as of which made;
(b) The Borrower shall fail to pay any amount of principal on this
Note when due, or the Borrower shall fail to pay any amount of interest on, or
other amount due under, this Note when due ;
(c) The breach by the Borrower (other than a breach which
constitutes an Event of Default under another clause of this SECTION 5) of any
of the terms or provisions of this Note which is not remedied within fifteen
(15) Business Days after written notice from the Lender.
(d) The Borrower or any guarantor shall generally not pay its debts
as such debts become due, or shall admit in writing its inability to pay its
debts generally, or shall make a general assignment for the benefit of
creditors; or any proceeding shall be instituted by or against the Borrower or
any guarantor seeking to adjudicate it a bankrupt or insolvent, or seeking
liquidation, winding up, reorganization, arrangement, adjustment, protection,
relief, or composition of it or debts under any law relating to bankruptcy,
insolvency or reorganization or relief of debtors, or seeking the entry of an
order for relief or the appointment of a receiver, trustee, or other similar
official for it or for any substantial part of its property; or
(e) The occurrence of a default (after the delivery of any required
notice and expiration of all applicable cure periods) under any Loan Document,
then the Lender may declare the principal amount and interest and other amounts
outstanding under this Note owing by the Borrower, to be forthwith due and
payable, whereupon such principal amount, all such interest and all such other
amounts shall become and be forthwith due and payable, without presentment,
demand, protest or notice of any kind by the Lender, all of which are hereby
expressly waived by the Borrower; PROVIDED, HOWEVER, that if an Event of Default
described in clause (d) above occurs with respect to the Borrower, the principal
amount and interest and other amounts outstanding under this Note shall
immediately become due and payable without any election or action on the part of
the Lender. The Borrower shall, as soon as possible, and in any event within
five (5) Business Days after becoming aware of the occurrence of an Event of
Default or an event which, with notice or lapse of time or both, could
constitute an Event of Default, deliver to the Lender a statement setting forth
details of such Event of Default. In addition, Lender may exercise any and all
other rights and remedies available to Lender under any of the other Loan
Documents or otherwise available to Lender at law or in equity.
6. SET OFF. Upon the occurrence and during the continuance of any
Event of Default, the Lender is hereby authorized at any time and from time to
time, to the fullest extent permitted by law, to set off and apply any and all
deposits (including all account balances, whether provisional or final and
whether or not collected or available) and any other indebtedness and other
obligations at any time held or owing by the Lender to or for the credit or
account of the Borrower against any and all of the obligations of the Borrower
now or hereafter existing under this Note and the Loan Documents executed in
connection herewith, irrespective of whether or not the Lender shall have made
any demand under this Note and although such obligations may be unmatured.
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7. AMENDMENTS. This Note may not be amended orally but only in
writing signed by the Borrower and the Lender.
8. PRESERVATION OF RIGHTS; SURVIVAL. No delay or omission of the
Lender to exercise any right under this Note shall impair such right or be
construed to be a waiver of any Event of Default or an acquiescence therein. Any
single or partial exercise of any such right shall not preclude other or further
exercise thereof or the exercise of any other right, and no waiver, amendment or
other variation of the terms, conditions or provisions of this Note whatsoever
shall be valid unless in writing signed by the Lender and then only to the
extent in such writing specifically set forth. All remedies contained in the
Loan Documents or available to Lender at law or in equity shall be cumulative
and all shall be available to the Lender until this Note has been paid in full.
All representations and warranties of the Borrower contained in this Note and
any other Loan Document shall survive delivery of this Note and the making of
the Loan evidenced hereby.
9. HEADINGS; ENTIRE AGREEMENT. Section headings in this Note are for
convenience of reference only, and shall not govern the interpretation of any of
the provisions of this Note. This Note and the Loan Documents embody the entire
agreement and understanding between the Borrower and the Lender and supersede
all prior agreements and understandings between the Borrower and the Lender
relating to the subject matter thereof.
10. BENEFITS OF THIS AGREEMENT. This Note shall be binding upon the
Borrower and the Borrower's successors and assigns and, subject to the following
sentence, shall not be construed so as to confer any right or benefit upon any
Person other than the Borrower and his or her personal representatives, heirs
and assigns. This Note shall inure to the benefit of the Lender and its
successors and assigns, it being understood that the Lender may from time to
time assign, or grant participations in, its rights hereunder in whole or in
part. The Borrower shall not have the right to assign its rights or obligations
hereunder.
11. EXPENSES; INDEMNIFICATION. The Borrower agrees to reimburse the
Lender for any costs, internal charges and out-of-pocket expenses (including
reasonable attorneys' fees and time charges and expenses of attorneys for the
Lender, which attorneys may be employees of the Lender) paid or incurred by the
Lender in connection with the preparation, administration, collection or
enforcement of this Note or the other Loan Documents. The Borrower further
agrees to indemnify the Lender, its directors, officers and employees against
all losses, claims, damages, penalties, judgments, liabilities and expenses
(collectively, "INDEMNIFIED OBLIGATIONS") (including, without limitation, all
expenses of litigation or preparation therefor whether or not the Lender is a
party thereto) which any of them may pay or incur arising out of or relating to
this Note, the transactions contemplated hereby or the direct or indirect
application of the proceeds of the Loan evidenced hereby, except that no
indemnified party shall be indemnified for any indemnified obligations to the
extent that they arise from its own gross negligence or willful misconduct as
finally determined by a court of competent jurisdiction. The obligations of the
Borrower under this Section shall survive the repayment of this Note.
12. SEVERABILITY OF PROVISIONS. Any provision in this Note that is
held to be inoperative, unenforceable, or invalid in any jurisdiction shall, as
to that jurisdiction, be inoperative, unenforceable, or invalid without
affecting the remaining provisions in that jurisdiction or the operation,
enforceability, or validity of that provision in any other jurisdiction, and to
this end the provisions of this Note are declared to be severable. If any
interest payment or other charge or fee payable by the Borrower under this Note
exceeds the maximum amount then permitted by applicable law, the Borrower shall
be obligated to pay, and the Lender shall be entitled to receive, only the
maximum amount permitted by applicable law. If the Lender has collected interest
in excess of such maximum rate, the Borrower's only remedy will be that the
Lender will apply such excess interest as a full or partial prepayment of the
unpaid balance of the principal amount to the extent of the unpaid principal
balance and refund any additional excess amount to the Borrower.
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13. CHOICE OF LAW. THE LOAN DOCUMENTS SHALL BE CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS, WITHOUT REGARD TO CONFLICT OF LAWS
PROVISIONS, OF THE STATE OF ILLINOIS, BUT GIVING EFFECT TO FEDERAL LAWS
APPLICABLE TO NATIONAL BANKS.
14. CONSENT TO JURISDICTION. THE BORROWER HEREBY IRREVOCABLY SUBMITS
TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR ILLINOIS STATE
COURT SITTING IN CHICAGO IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING
TO THIS NOTE AND THE BORROWER HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN
RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH
COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO
THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT
SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT OF THE
LENDER TO BRING PROCEEDINGS AGAINST THE BORROWER IN THE COURTS OF ANY OTHER
JURISDICTION. ANY JUDICIAL PROCEEDING BY THE BORROWER AGAINST THE LENDER OR ANY
AFFILIATE OF THE LENDER INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY
ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT SHALL BE BROUGHT
ONLY IN A COURT IN CHICAGO, ILLINOIS.
15. WAIVER OF JURY TRIAL. THE BORROWER AND, BY ACCEPTANCE HEREOF,
THE LENDER HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING,
DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR
OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS NOTE.
16. Notices. Any notice required or desired to be served, given or
delivered hereunder shall be in writing (including facsimile transmission), and
shall be deemed to have been validly served, given or delivered upon the earlier
of (a) personal delivery to the address set forth below (b) in the case of
mailed notice, two (2) days after deposit in the United States mails, with
proper postage for certified mail, return receipt requested, prepaid, or in the
case of notice by Federal Express or other reputable overnight courier service,
one (1) day after delivery to such courier service, and (c) in the case of
facsimile transmission, upon transmission with confirmation of receipt,
addressed to the party to be notified as follows:
If to the Borrower: c/o The Prime Group, Inc.
77 West Wacker Drive
Suite 4200
Attn: Michael W. Reschke
Facsimile Number: (312) 917-1511
With a copies to: The Prime Group, Inc.
77 West Wacker Drive
Suite 4200
Attn: Robert J. Rudnik, Esq.
Facsimile Number: (312) 917-8442
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If to the Lender: Horizon Group Properties, L.P.
77 West Wacker Drive
Suite 4200
Attention: Gary J. Skoien
Facsimile Number: (312) 917-0911
With a copy to: Horizon Group Properties, L.P.
77 West Wacker Drive
Suite 4200
Attention: Richard A. Berman
Facsimile Number: (312) 917-8440
or to such other address as any of the parties may hereafter designate for
itself by written notice to the other parties in the manner herein prescribed.
17. BORROWER'S WAIVER. Borrower and all endorsers, guarantors and
sureties of this Note and all other persons liable or to become liable on this
Note severally waive presentment for payment, demand, notice of demand and of
dishonor and nonpayment of this Note, notice of intention to accelerate the
maturity of this Note, notice of acceleration, protest and notice of protest,
diligence in collection, and the bringing of suit against any other party, and
agree to all renewals, extensions, modifications, partial payments, releases or
substitutions of security, in whole or in part, with or without notice, before
or after maturity.
[Remainder of page intentionally left blank]
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IN WITNESS WHEREOF, the undersigned Borrower has executed this Note
as of the day and year first above written.
BORROWER:
PRIME OUTDOOR GROUP, LLC, a Delaware limited
liability company
By: /s/ Mark Harris
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Its: President
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EXHIBIT 10.28
SECURITY AGREEMENT
THIS SECURITY AGREEMENT, dated as of April 18, 2000, is made by PRIME
GROUP OUTDOOR, LLC, a Delaware limited liability company ("Grantor"), in favor
of HORIZON GROUP PROPERTIES, L.P. ("Lender").
W I T N E S S E T H:
A. Pursuant to a certain Promissory Note dated as of even date herewith in
the principal amount of One Million, Five Hundred Thousand Dollars ($1,500,000)
(the "Note"), Lender has agreed to make a loan (the "Loan"), to Grantor in the
principal amount of the Note.
B. Lender has required, as a condition to making the Loan, that Grantor
execute and deliver this Security Agreement to Lender, in order to secure its
obligations hereunder, under the Note and under any document, instrument or
agreement executed and delivered in connection with the Note (collectively, the
"Obligations").
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained and for other good and valuable consideration, the
receipt of which is hereby acknowledged, the parties hereto agree as follows:
1. DEFINED TERMS. The following terms shall have the following meanings
(such meanings being equally applicable to both the singular and plural forms of
the terms defined):
"ACCOUNT DEBTOR" shall mean any "account debtor," as such term is
defined in section 9-105(1)(a) of the UCC.
"ACCOUNTS RECEIVABLE" shall mean any "account," as such term is
defined in section 9-106 of the UCC, now owned or hereafter acquired by
Grantor and, in any event, shall include, without limitation, all
accounts, accounts receivable, other receivables, contract rights, chattel
paper, instruments, documents, notes, and other forms of obligations now
owned or hereafter received or acquired by or belonging or owing to
Grantor (including, without limitation, under any trade names, styles or
divisions thereof) whether arising out of goods sold or services rendered
by Grantor or from any other transaction, whether or not the same involves
the sale of goods or services by Grantor (including, without limitation,
any such obligation which might be characterized as an account or contract
right under the UCC) and all of Grantor's rights in, to and under all
purchase orders or receipts now owned or hereafter acquired by it for
goods or services, and all of Grantor's rights to any goods represented by
any of the foregoing (including, without limitation, unpaid seller's
rights of rescission, replevin, reclamation and stoppage in transit and
rights to returned, reclaimed or repossessed goods), and all moneys due or
to become due to Grantor under all contracts for the sale of goods or the
performance of services or both by Grantor (whether or not yet earned by
performance on the part of Grantor or in connection with any other
transaction), now in existence or hereafter occurring, including, without
limitation, the right to receive the proceeds of said purchase orders and
contracts, and all collateral security and guarantees of any kind given by
any person with respect to any of the foregoing.
"CHATTEL PAPER" shall mean any "chattel paper," as such term is
defined in section 9-105(1)(b) of the UCC, now owned or hereafter acquired
by Grantor.
"COLLATERAL" shall have the meaning assigned to such term in Section
2 of this Security Agreement.
"CONTRACTS" shall mean all contracts, undertakings, or other
agreements (other than rights
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evidenced by Chattel Paper, Documents or Instruments) in or under which
Grantor may now or hereafter have any right, title or interest, including,
without limitation, with respect to an Account, any agreement relating to
the terms of payment or the terms of performance thereof.
"DOCUMENTS" shall mean any "documents," as such term is defined in
section 9-105(1)(f) of the UCC, now owned or hereafter acquired by
Grantor.
"EQUIPMENT" shall mean any "equipment," as such term is defined in
section 9-109(2) of the UCC, now owned or hereafter acquired by Grantor
and, in any event, shall include, without limitation, all machinery,
equipment, furnishings, fixtures, vehicles and computers and other
electronic data-processing and other office equipment now owned or
hereafter acquired by Grantor and any and all additions, substitutions and
replacements of any of the foregoing, wherever located, together with all
attachments, components, parts, equipment and accessories installed
thereon or affixed thereto.
"EVENT OF DEFAULT" shall have the meaning set forth in Section 9.
"INSTRUMENTS" shall mean any "instrument," as such term is defined
in section 9-105(1)(i) of the UCC, now owned or hereafter acquired by
Grantor, other than instruments that constitute, or are a part of a group
of writings that constitute, Chattel Paper.
"INTANGIBLE ASSETS" shall mean any "general intangibles," as such
term is defined in section 9-106 of the UCC, now owned or hereafter
acquired by Grantor and, in any event, shall include, without limitation,
all right, title and interest which Grantor may now or hereafter have in
or under any Contract, all customer lists, trademarks, patents, rights in
intellectual property, licenses, permits, copyrights, trade secrets,
proprietary or confidential information, inventions (whether patented or
patentable or not), technical information, procedures, designs, knowledge,
know-how, software, data bases, data, skill, expertise, experience,
processes, models, drawings, materials and records now owned or hereafter
acquired by Grantor, goodwill and rights of indemnification.
"INVENTORY" shall mean any "inventory," as such term is defined in
section 9-109(4) of the UCC, now owned or hereafter acquired by Grantor
and, in any event, shall include, without limitation, all inventory,
merchandise, goods and other personal property now owned or hereafter
acquired by Grantor which are held for sale or lease or are furnished or
are to be furnished under a contract of service or which constitute raw
materials, work in process or materials used or consumed or to be used or
consumed in Grantor's business, or the processing, packaging, delivery or
shipping of the same, and all finished goods.
"INVESTMENT PROPERTY" shall mean all "investment property" as such
term is defined in the UCC, now or hereafter owned or acquired by,
Grantor, wherever located and, in any event, including, without
limitation, (a) stocks, bonds, interests in limited liability companies,
partnership interests, treasuries, certificates of deposit and mutual fund
shares; (b) all securities entitlements of Grantor, including, without
limitation, all rights of Grantor to any securities account and any free
credit balance or other money owing by any securities intermediary with
respect to any such account; (c) all securities accounts held by Grantor;
(d) all commodity contracts held by Grantor; and (e) all commodity
accounts held by Grantor.
"NOTE" shall have the meaning set forth in the Recitals.
"OBLIGATIONS" shall have the meaning set forth in the Recitals.
"PROCEEDS" shall mean "proceeds," as such term is defined in section
9-306(1) of the UCC and, in any event, shall include, without limitation,
(i) any and all proceeds of any insurance, indemnity, warranty or guaranty
payable to Grantor from time to time with respect to any of the
Collateral, (ii) any and all
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payments (in any form whatsoever) made or due and payable to Grantor from
time to time in connection with any requisition, confiscation,
condemnation, seizure or forfeiture of all or any part of the Collateral
by any governmental body, authority, bureau or agency (or any person
acting under color of governmental authority), (iii) any claim of Grantor
against third parties (A) for past, present or future infringement of any
patent or patent license or (B) for past, present or future infringement
or dilution of any trademark or trademark license or for injury to the
goodwill associated with any trademark, trademark registration or
trademark licensed under any trademark license, and (iv) any and all other
amounts from time to time paid or payable under or in connection with any
of the Collateral.
"SECURITY AGREEMENT" shall mean this Security Agreement, as the same
may from time to time be amended, modified or supplemented and shall refer
to this Security Agreement as in effect of the date such reference becomes
operative.
"UCC" shall mean the Uniform Commercial Code as the same may, from
time to time, be in effect in the State of Illinois; PROVIDED, HOWEVER, in
the event that, by reason of mandatory provisions of law, any or all of
the attachment, perfection or priority of Lender's security interest in
any Collateral is governed by the Uniform Commercial Code as in effect in
a jurisdiction other than the State of Illinois, the term "UCC" shall mean
the Uniform Commercial Code as in effect in such other jurisdiction for
purposes of the provisions hereof relating to such attachment, perfection
or priority and for purposes of definitions related to such provisions.
2. GRANT OF SECURITY INTEREST.
(a) As collateral security for the prompt and complete payment and
performance when due (whether at stated maturity, by acceleration or
otherwise) of the Obligations, Grantor hereby assigns, conveys, mortgages,
pledges, hypothecates and transfers to Lender, and hereby grants to
Lender, a security interest in, all of Grantor's right, title and interest
in, to and under the following (all of which being hereinafter
collectively called the "Collateral"):
(i) all Accounts Receivable of Grantor;
(ii) all Chattel Paper of Grantor;
(iii) all Contracts of Grantor;
(iv) all Documents of Grantor;
(v) all Equipment of Grantor;
(vi) all Intangible Assets of Grantor;
(vii) all Instruments of Grantor;
(viii) all Inventory of Grantor;
(ix) all Investment Property of Grantor;
(x) to the extent not otherwise included, all Proceeds of
each of the foregoing and all accessions to,
substitutions and replacements for, and rents, profits
and product of each of the foregoing.
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(b) In addition, as collateral security for the prompt and complete
payment when due of the Obligations and in order to induce Lender as
aforesaid, Lender is hereby granted a lien and security interest in all
property of Grantor held by Lender, including, without limitation, all
property of every description, now or hereafter in the possession or
custody of or in transit to Lender for any purpose, including safekeeping,
collection or pledge, for the account of Grantor, or as to which Grantor
may have any right or power.
(c) The Collateral shall not include any assets of Grantor in which
Grantor has granted Old National Bank a security interest pursuant to that
certain Commercial Security Agreement dated April 14, 2000 between Grantor
and Old National Bank, which Grantor represents and warrants consist
solely of the assets described on EXHIBIT A attached hereto, to the extent
that a breach of or a default under such Commercial Security Agreement
would result by including any such assets within the definition of the
Collateral.
3. RIGHTS OF LENDER; LIMITATIONS ON LENDER'S OBLIGATIONS.
(a) It is expressly agreed by Grantor that, anything herein to the
contrary notwithstanding, Grantor shall remain liable under each of its
Contracts to observe and perform all the conditions and obligations to be
observed and performed by it thereunder and Grantor shall perform all of
its duties and obligations thereunder, all in accordance with and pursuant
to the terms and provisions of each such Contract. Lender shall not have
any obligation or liability under any Contract by reason of or arising out
of this Security Agreement or the granting to Lender of a security
interest therein or the receipt by Lender of any payment relating to any
Contract pursuant hereto, nor shall Lender be required or obligated in any
manner to perform or fulfill any of the obligations of Grantor under or
pursuant to any Contract, or to make any payment, or to make any inquiry
as to the nature or the sufficiency of any payment received by it or the
sufficiency of any performance by any party under any Contract, or to
present or file any claim, or to take any action to collect or enforce any
performance or the payment of any amounts which may have been assigned to
it or to which it may be entitled at any time or times.
(b) Grantor hereby authorizes Lender, at any time or times after the
occurrence and during the continuance of an Event of Default, to (i)
notify any or all Account Debtors that the Accounts Receivable have been
assigned to Lender and that Lender has a security interest therein and
(ii) direct such Account Debtors to make all payments due from them to
Grantor upon the Accounts Receivable directly to Lender or to a lock box
designated by Lender. Lender shall promptly furnish Grantor with a copy of
any such notice sent. Any such notice, in Lender's sole discretion, may be
sent on Grantor's stationery, in which event Grantor shall co-sign such
notice with Lender.
(c) Lender shall have the right to make test verifications of the
Accounts Receivable in any manner and through any commercially reasonable
medium that it considers advisable, and Grantor agrees to furnish all such
assistance and information as Lender may require in connection therewith.
Grantor at its expense will cause certified independent public accountants
satisfactory to Lender to prepare and deliver to Lender at any time and
from time to time promptly upon Lender's request, the following reports:
(i) a reconciliation of all its Accounts Receivable, (ii) an aging of all
its Accounts Receivable, (iii) trial balances, and (iv) a test
verification of such Accounts Receivable as Lender may request.
4. REPRESENTATIONS AND WARRANTIES. Grantor hereby represents and warrants
that:
(a) Except for the security interest granted to Lender pursuant to
this Security Agreement, Grantor is the sole owner of each item of the
Collateral in which it purports to grant a security interest hereunder,
having good and marketable title thereto, free and clear of any and all
liens and encumbrances. No material amounts payable under or in connection
with any of its Accounts Receivable or Contracts are
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evidenced by Instruments which have not been delivered to Lender.
(b) No effective security agreement, financing statement, equivalent
security or lien instrument or continuation statement covering all or any
part of the Collateral has been executed by Grantor or is on file or of
record in any public office, except such as may have been filed by Grantor
in favor of Lender pursuant to this Security Agreement.
(c) Upon the filing of appropriate financing statements, this
Security Agreement shall be effective to create a valid and continuing
first priority lien on and first priority perfected security interest in
the Collateral with respect to which a security interest may be perfected
by filing pursuant to the UCC in favor of Lender prior to all other liens,
and is enforceable as such as against creditors of and purchasers from
Grantor. All action necessary or desirable to protect and perfect such
security interest in each item of the Collateral has been duly taken.
(d) Grantor's principal place of business and the place where its
records concerning the Collateral are kept is located at the address of
Grantor set forth in Section 12 hereof, and Grantor will not change such
principal place of business or remove such records unless it has taken
such action as is necessary to cause the security interest of Lender in
the Collateral to continue to be perfected. Grantor will not change its
principal place of business or the place where its records concerning the
Collateral is kept without giving thirty (30) days' prior written notice
thereof to Lender.
(e) Grantor is a limited liability company, duly formed, validly
existing and in good standing under the laws of the State of Delaware;
Grantor is properly qualified to do business and is in good standing under
the laws of each state in which it either owns property or transacts
business; the execution, delivery and performance of this Security
Agreement, the Note and all other related documents and agreements have
been authorized by all necessary actions of Grantor's Board of Managers
and member; the Note, this Agreement and all other related documents and
agreements have been duly executed and delivered by Grantor and constitute
the legal, valid and binding obligations of Grantor enforceable in
accordance with their respective terms.
(f) Grantor is the owner of all assets and property relating to the
outdoor billboard advertising business described in that certain Business
Plan of Prime Outdoor Group prepared by Mark Harris and Gina Crist; a
true, correct and complete list of all of Grantor's assets is attached
hereto as Exhibit B.
(g) Neither the execution, delivery and performance of the Note or
this Security Agreement, nor the exercise of Lender's rights and remedies
thereunder or hereunder, shall violate, conflict with, breach or cause a
default under any document, instrument or agreement applicable to or
relating to Grantor or any portion of the Collateral or to which Borrower
is a party or by which it is bound.
5. COVENANTS. Grantor covenants and agrees with Lender that from and after
the date of this Security Agreement and until the Obligations are fully
satisfied:
(a) FINANCING STATEMENTS AND FURTHER DOCUMENTATION. Grantor will
join with Lender in the execution and filing of such financing statement
or statements in the form and content reasonably required by Lender.
Grantor will pay all costs of filing any financing, continuation or
termination statements with respect to the security interest created by
this Agreement, together with costs and expenses of any lien search
required by Lender, during the term hereof, either as a condition
precedent to the extension of the Loan or as a condition precedent to any
advance made by Lender to Grantor hereunder. At any time and from time to
time, upon the written request of Lender, and at the sole expense of
Grantor, Grantor will promptly and duly execute and deliver any and all
such further instruments and documents and
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take such further action as Lender may reasonably deem desirable to obtain
the full benefits of this Security Agreement and of the rights and powers
herein granted, including, without limitation, using its best efforts to
secure all consents and approvals necessary or appropriate for the
assignment to Lender of any Contract held by Grantor or in which Grantor
has any rights not heretofore assigned, the filing of any financing or
continuation statements under the UCC with respect to the liens and
security interests granted hereby, transferring Collateral to the Lender's
possession (if a security interest in such Collateral can be perfected by
possession), placing the interest of Lender as lienholder on the
certificate of title of any vehicle and using its best efforts to obtain
waivers of liens from landlords and mortgagees. Grantor also hereby
authorizes Lender to file any such financing or continuation statement
without the signature of Grantor to the extent permitted by applicable
law.
(b) SPECIAL COLLATERAL. Immediately upon Grantor's receipt of that
portion of the Collateral which is or becomes evidenced by an agreement,
instrument and/or document, including, without limitation, promissory
notes, trade acceptances, documents of title and warehouse receipts (the
"Special Collateral"), Grantor shall deliver the original thereof to
Lender, together with appropriate endorsements or other specific evidence
(in form and substance reasonably acceptable to Lender) of assignment
thereof to Lender.
(c) MAINTENANCE OF RECORDS. Grantor will keep and maintain at its
own cost and expense satisfactory and complete records of the Collateral,
including, without limitation, a record of all payments received and all
credits granted with respect to the Collateral and all other dealings with
the Collateral. Grantor will mark its books and records pertaining to the
Collateral to evidence this Security Agreement and the security interests
granted hereby. All Chattel Paper will be marked with the following
legend: "This writing and the obligations evidenced or secured hereby are
subject to the security interest of Horizon Group Properties, Inc. (or any
successor lender)". For Lender's further security, Grantor agrees that
Lender shall have a special property interest in all of Grantor's books
and records pertaining to the Collateral and, upon the occurrence and
during the continuation of any Event of Default, Grantor shall deliver and
turn over true, correct and complete copies of any such books and records
to Lender or to its representatives at any time on demand of Lender. Prior
to the occurrence of an Event of Default and upon reasonable notice from
Lender, Grantor shall permit any representative of Lender to inspect such
books and records and will provide photocopies thereof to Lender.
(d) INDEMNIFICATION. In any suit, proceeding or action brought by
Lender relating to any Account Receivable, Chattel Paper, Contract,
Intangible Asset or Instrument for any sum owning thereunder, or to
enforce any provision of any Account Receivable, Chattel Paper, Contract,
Intangible Asset or Instrument, Grantor will save, indemnify and keep
Lender harmless from and against all expense, loss or damage suffered by
reason of any defense, setoff, counterclaim, recoupment or reduction of
liability whatsoever of the obligor thereunder, arising out of a breach by
Grantor of any obligation thereunder or arising out of any other
agreement, indebtedness or liability at any time owing to, or in favor of,
such obligor or its successors from Grantor, and all such obligations of
Grantor shall be and remain enforceable against and only against Grantor
and shall not be enforceable against Lender.
(e) COMPLIANCE WITH LAWS, ETC. Grantor will comply, in all material
respects, with all acts, rules, regulations, orders, decrees and
directions of any governmental authority, applicable to the Collateral or
any part thereof or to the operation of Grantor's business; PROVIDED,
HOWEVER, that Grantor may contest any act, regulation, order, decree or
direction in any reasonable manner which shall not in the sole opinion of
Lender, adversely affect Lender's rights hereunder or adversely affect the
first priority of its security interest in the Collateral.
(f) PAYMENT OF OBLIGATIONS. Grantor will pay promptly when due all
charges imposed upon the Collateral or in respect of its income or profits
therefrom and all claims of any kind (including, without limitation,
claims for labor, material and supplies).
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(g) COMPLIANCE WITH TERMS OF ACCOUNTS, ETC. In all material
respects, Grantor will perform and comply with all obligations in respect
of Accounts Receivable, Chattel Paper and Contracts and all other
agreements to which it is a party or by which it is bound.
(h) LIMITATION ON LIENS ON COLLATERAL. Except for the liens
previously granted to Old National Bank, Grantor will not create, permit
or suffer to exist, and will defend the Collateral and any real property
now or hereafter owned by Grantor against and take such other action as is
necessary to remove, any lien on the Collateral or any of its real
property, and will defend the right, title and interest of Lender in and
to any of Grantor's rights under the Chattel Paper, Contracts, Documents,
Intangible Assets and Instruments and to the Equipment and Inventory and
real property and in and to the Proceeds thereof against the claims and
demands of all persons whomsoever.
(i) MAINTENANCE OF INSURANCE. Grantor will maintain, with
financially sound and reputable companies, insurance policies (i) insuring
its Inventory and Equipment against loss by fire, explosion, theft and
such other casualties as are usually insured against by companies engaged
in the same or similar businesses and (ii) insuring Grantor and Lender
against liability for personal injury and property damage relating to such
Inventory and Equipment, such policies to be in such amounts and against
at least such risks as are usually insured against, in the same general
area by companies engaged in the same or a similar business, naming Lender
as an additional insured with losses payable to Grantor and Lender, as
their respective interests may appear, under a standard non-contributory
"mortgagee", "lender" or "secured party" clause. Grantor shall, if so
requested by Lender, deliver to Lender as often as Lender may reasonably
request, a report of a reputable insurance broker satisfactory to Lender
with respect to the insurance on its Inventory and Equipment. All
insurance with respect to the Inventory and Equipment shall (i) contain a
clause which provides that Lender's interest under the policy will not be
invalidated by any act or omission of, or any breach of warranty by, the
insured, or by any change in the title, ownership or possession of the
insured property, or by the use of the property for purposes more
hazardous than is permitted in the policy, and (ii) provide that no
cancellation, reduction in amount or change in coverage thereof shall be
effective until at least thirty (30) days after receipt by Lender of
written notice thereof.
(j) LIMITATIONS ON DISPOSITION. Grantor will not sell, lease,
transfer or otherwise dispose of any significant portion of the
Collateral, without Lender's prior written consent.
(k) FURTHER IDENTIFICATION OF COLLATERAL. Grantor will, if so
requested by Lender, furnish to Lender, as often as Lender reasonably
requests, statements and schedules further identifying and describing the
Collateral and such other reports in connection with the Collateral as
Lender may reasonably request, all in reasonable detail.
(l) NOTICES. Grantor will advise Lender promptly, in reasonable
detail, (i) of any material lien, security interest, encumbrance or claim
made or asserted against any of the Collateral, (ii) of any material
change in the composition of the Collateral, and (iii) of the occurrence
of any other event which would have a material adverse effect on the
aggregate value of the Collateral or on the security interests created
hereunder.
(m) RIGHT OF INSPECTION. During regular business hours and upon
reasonable prior notice (unless an Event of Default has occurred and is
continuing, in which case at all times), Lender shall have full and free
access to all the books and records and correspondence of Grantor, and
Lender or its representatives may examine the same, take extracts
therefrom and make photocopies thereof, and Grantor agrees to render to
Lender, at Grantor's cost and expense, such clerical and other assistance
as may be reasonably requested with regard thereto. Lender and its
representatives shall also have the right to enter into and upon any
premises where any of the Equipment or Inventory is located for the
purpose of
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inspecting the same, observing its use or otherwise protecting its
interests therein.
(n) CONTINUOUS PERFECTION. Grantor will not change its name,
identity or corporate structure in any manner which might make any
financing or continuation statement filed in connection herewith seriously
misleading within the meaning of section 9-402(7) of the UCC (or any other
then applicable provision of the UCC) unless Grantor shall have given
Lender at least thirty (30) days' prior written notice thereof and shall
have taken all action (or made arrangements to take such action
substantially simultaneously with such change if it is impossible to take
such action in advance) necessary or reasonably requested by Lender to
amend such financing statement or continuation statement so that it is not
seriously misleading.
(o) REAL PROPERTY. In the event Grantor hereafter acquires any real
property or any interest in real property, Grantor shall notify Lender in
writing in advance of the acquisition thereof, and if requested by Lender
shall grant Lender a first priority mortgage lien on such property
concurrently with the acquisition thereof, and agrees not to grant any
lien, encumbrance, mortgage or security interest in such real property to
any other person without Lender's prior written consent. In the event
Grantor currently owns any real property or any interest in real property,
Grantor shall promptly notify Lender in writing, and upon Lender's request
shall grant Lender a first priority mortgage lien on such property.
6. LENDER'S APPOINTMENT AS ATTORNEY-IN-FACT.
(a) Grantor hereby irrevocably constitutes and appoints Lender and
any officer or agent thereof, with full power of substitution, as its true
and lawful attorney-in-fact with full irrevocable power and authority in
the place and stead of Grantor and in the name of Grantor or in its own
name, from time to time in Lender's discretion, for the purpose of
carrying out the terms of this Security Agreement, to take any and all
appropriate action and to execute and deliver any and all documents and
instruments which may be necessary or desirable to accomplish the purposes
of this Security Agreement and, without limiting the generality of the
fore going, hereby gives Lender the power and right, on behalf of Grantor,
without notice to or assent by Grantor to do the following:
(i) to ask, demand, collect, receive and give acquittances and
receipts for any and all moneys due and to become due under
any Collateral and, in the name of Grantor or its own name or
otherwise, to take possession of and endorse and collect any
checks, drafts, notes, acceptances or other Instruments for
the payment of moneys due under any Collateral and to file any
claim or to take any other action or proceeding in any court
of law or equity or otherwise deemed appropriate by Lender for
the purpose of collecting any and all such moneys due under
any Collateral whenever payable and to file any claim or to
take any other action or proceeding in any court of law or
equity or otherwise deemed appropriate by Lender for the
purpose of collecting any and all such moneys due under any
Collateral whenever payable;
(ii) to pay or discharge taxes, liens, security interests or other
encumbrances levied or placed on or threatened against the
Collateral, to effect any repairs or any insurance called for
by the terms of this Security Agreement and to pay all or any
part of the premiums therefor and the costs thereof; and
(iii) (A) to direct any party liable for any payment under any of
the Collateral to make payment of any and all moneys due, and
to become
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due thereunder, directly to Lender or as Lender shall direct;
(B) to receive payment of and receipt for any and all moneys,
claims and other amounts due, and to become due at any time,
in respect of or arising out of any Collateral; (C) to sign
and indorse any invoices, freight or express bills, bills of
lading, storage or warehouse receipts, drafts against debtors,
assignments, verifications and notices in connection with
accounts and other Documents constituting or relating to the
Collateral; (D) to commence and prosecute any suits, actions
or proceedings at law or in equity in any court of competent
jurisdiction to collect the Collateral or any part thereof and
to enforce any other right in respect of any Collateral; (E)
to defend any suit, action or proceeding brought against
Grantor with respect to any Collateral; (F) to settle,
compromise or adjust any suit, action or proceeding described
above and, in connection therewith, to give such discharges or
releases as Lender may deem appropriate; and (G) generally to
sell, transfer, pledge, make any agreement with respect to or
otherwise deal with any of the Collateral as fully and
completely as though Lender were the absolute owner thereof
for all purposes, and to do, at Lender's option and Grantor's
expense, at any time, or from time to time, all acts and
things which Lender reasonably deems necessary to protect,
preserve or realize upon the Collateral and Lender's lien
therein, in order to effect the intent of this Security
Agreement, all as fully and effectively as Grantor might do.
(b) Grantor hereby ratifies, to the extent permitted by law, all
that said attorneys shall lawfully do or cause to be done by virtue
hereof. The power of attorney granted pursuant to this Section 6 is a
power coupled with an interest and shall be irrevocable until the
Obligations are indefeasibly paid in full. Lender hereby agrees that it
shall not exercise the power of attorney granted to it under this Section
6 unless or until an Event of Default has occurred.
(c) The powers conferred on Lender hereunder are solely to protect
Lender's interests in the Collateral and shall not impose any duty upon it
to exercise any such powers. Lender shall be accountable only for amounts
that it actually receives as a result of the exercise of such powers and
neither it nor any of its officers, directors, employees or agents shall
be responsible to Grantor for any act or failure to act, except for its
own gross negligence or willful misconduct.
(d) Grantor also authorizes Lender, at any time and from time to
time upon the occurrence and during the continuation of any Event of
Default, (i) to communicate in its own name with any party to any Contract
with regard to the assignment of the right, title and interest of Grantor
in and under the Contracts hereunder and other matters relating thereto
and (ii) to execute, in connection with the sale provided for in Section 8
hereof, any endorsements, assignments or other instruments of conveyance
or transfer with respect to the Collateral.
7. PERFORMANCE BY LENDER OF GRANTORS' OBLIGATION. If Grantor fails to
perform or comply with any of its agreements contained herein (after notice, to
the extent required to be delivered by Lender hereunder) and Lender, as provided
for by the terms of this Security Agreement, shall itself perform or comply, or
otherwise cause performance or compliance, with such agreement, the reasonable
expenses of Lender incurred in connection with such performance or compliance,
together with interest thereon at the rate then in effect in respect of the
Loan, shall be payable by Grantor to Lender on demand and shall constitute
Obligations secured hereby.
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8. REMEDIES, RIGHTS UPON DEFAULT.
(a) If an Event of Default shall occur and be continuing, Lender may
accelerate the Obligations and declare the Obligations to be immediately
due and payable, without notice or demand, exercise all other rights and
remedies granted to it in this Security Agreement and in any other
instrument or agreement securing, evidencing or relating to the
Obligations, and exercise all rights and remedies of a secured party under
the UCC. Without limiting the generality of the foregoing, Grantor
expressly agrees that in any such event Lender, without demand of
performance or other demand, advertisement or notice of any kind (except
the notice specified below of time and place of public or private sale) to
or upon Grantor or any other person (all and each of which demands,
advertisements and/or notices are hereby expressly waived to the maximum
extent permitted by the UCC and other applicable law), may forthwith
collect, receive, appropriate and realize upon the Collateral, or any part
thereof, and/or may forthwith sell, lease, assign, give an option or
options to purchase, or sell or otherwise dispose of and deliver said
Collateral (or contract to do so), or any part thereof, in one or more
parcels at public or private sale or sales, at any exchange or broker's
board or at any of Lender's offices or elsewhere at such prices as it may
deem best, for cash or on credit or for future delivery without assumption
of any credit risk. Lender shall have the right upon any such public sale
or sales, and, to the extent permitted by law, upon any such private sale
or sales, to purchase the whole or any part of said Collateral so sold,
free of any right or equity of redemption, which equity of redemption
Grantor hereby releases. Grantor further agrees, at Lender's request, to
assemble the Collateral and make it available to Lender at places which
Lender shall reasonably select, whether at Grantor's premises or
elsewhere. Lender shall apply the net proceeds of any such collection,
recovery, receipt, appropriation, realization or sale, as provided in
Section 8(d) hereof, Grantor remaining liable for any deficiency remaining
unpaid after such application, and only after so paying over such net
proceeds and after the payment by Lender of any other amount required by
any provision of law, including section 9-504(1)(c) of the UCC, need
Lender account for the surplus, if any, to Grantor. To the maximum extent
permitted by applicable law, Grantor waives all claims, damages, and
demands against Lender arising out of the repossession, retention or sale
of the Collateral except such as arise out of the gross negligence or
wilful misconduct of Lender. Grantor agrees that the Lender need not give
more than ten (10) days' notice (which notification shall be deemed given
when mailed or delivered on an overnight basis, postage prepaid, addressed
to Grantor at its address referred to in Section 12 hereof) of the time
and place of any public sale or of the time after which a private sale may
take place and that such notice is reasonable notification of such
matters. Grantor shall remain liable for any deficiency if the proceeds of
any sale or disposition of the Collateral are insufficient to pay all
amounts to which Lender is entitled, Grantor also being liable for the
fees of any attorneys employed by Lender to collect such deficiency.
(b) Grantor also agrees to pay all costs of Lender, including,
without limitation, reasonable attorneys' fees, incurred in connection
with the enforcement of any of its rights and remedies hereunder.
(c) Grantor hereby waives presentment, demand, protest or any notice
(to the maximum extent permitted by applicable law) of any kind in
connection with this Security Agreement or any Collateral.
(d) The Proceeds of any sale, disposition or other realization upon
all or any part of the Collateral shall be distributed by Lender in the
following order of priorities:
FIRST, to Lender in an amount sufficient to pay in full the
reasonable expenses of
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Lender in connection with such sale, disposition or other
realization, including all expenses, liabilities and advances
incurred or made by Lender in connection therewith, including,
without limitation, reasonable attorney's fees;
SECOND, to Lender (or such other holder of the Obligations) in
an amount equal to the then unpaid Obligations;
FINALLY, upon payment in full of all of the Obligations, to
pay to Grantor, or its representatives or as a court of competent
jurisdiction may direct, any surplus then remaining from such
Proceeds.
9. EVENTS OF DEFAULT. An Event of Default shall be deemed to have occurred
upon the occurrence of any of the following events:
(a) Grantor shall fail to make any payment when due under the terms
of the Note or an Event of Default shall occur under the Note;
(b) Grantor shall fail to perform any obligation or observe any
covenant arising under this Security Agreement or any other document,
instrument or agreement executed and delivered in connection with or
relating to the Obligations and such failure is not cured within fifteen
(15) business days after notice from Lender, or should any representation
or warranty made by Grantor prove to be untrue or misleading in any
material respect when made;
(c) Any of the assets of Grantor with a value in excess of $50,000
shall be attached, seized, levied upon or subjected to a writ or distress
warrant, or come within the possession of any receiver, trustee, custodian
or assignee for the benefit of creditors of Grantor and shall remain
unstayed or undismissed for 10 consecutive days; or any person shall apply
for the appointment of a receiver, trustee or custodian for any of the
assets of Grantor and shall remain unstayed or undismissed for 10
consecutive days; or Grantor shall have concealed, removed or permitted to
be concealed or removed, any part of its property with intent to hinder,
delay or defraud its creditors or any of them or made or suffered a
transfer of any of its property or the incurring of an obligation which
may be fraudulent under any bankruptcy, fraudulent conveyance or other
similar law;
(d) A case or proceeding shall have been commenced against Grantor
in a court having competent jurisdiction seeking a decree or order in
respect of Grantor (i) under the Bankruptcy Code, or any other applicable
Federal, state or foreign bankruptcy or other similar law, (ii) appointing
a custodian, receiver, liquidator, assignee, trustee or sequestrator (or
similar official) of Grantor or of any substantial part of its properties,
or (iii) ordering the winding-up or liquidation of the affairs of Grantor
and such case or proceeding shall remain undismissed or unstayed for 30
consecutive days or such court shall enter a decree or order granting the
relief sought in such case or proceeding;
(e) Grantor shall (i) file a petition seeking relief under the
Bankruptcy Code, or any other applicable Federal, State or foreign
bankruptcy or other similar law, (ii) consent to the institution of
proceedings thereunder or to the filing of any such petition or to the
appointment of or taking possession by a custodian, receiver, liquidator,
assignee, trustee or sequestrator (or similar official) of Grantor or of
any substantial part of its properties, (iii) fail generally to pay its
debts as such debts become due, or (iv) take any corporate action in
furtherance of any such action; or
(f) Grantor shall fail to deliver any documents, instruments or
agreements required by Lender to perfect a security interest, mortgage or
lien on any of the Collateral or its interests in
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real property within two business days after delivery of such documents,
instruments or agreements to Grantor.
10. LIMITATION ON LENDER'S DUTY IN RESPECT OF COLLATERAL. Lender shall use
reasonable care with respect to the Collateral in its possession or under its
control. Lender shall not have any other duty as to any Collateral in its
possession or control or in the possession or control of any agent or nominee of
it or any income thereon or as to the preservation of rights against prior
parties or any other rights pertaining thereto. Upon request of Grantor, Lender
shall account for any moneys received by it in respect of any foreclosure on or
disposition of the Collateral.
11. REINSTATEMENT. This Agreement shall remain in full force and effect
and continue to be effective should any petition be filed by or against Grantor
for liquidation or reorganization, should Grantor become insolvent or make an
assignment for the benefit of creditors or should a receiver or trustee be
appointed for all or any significant part of Grantor's assets, and shall
continue to be effective or be reinstated, as the case may be, if at any time
payment and performance of the Obligations, or any part thereof, is, pursuant to
applicable law, rescinded or reduced in amount, or must otherwise be restored or
returned by any obligee of the Obligations, whether as a "voidable preference",
"fraudulent conveyance", or otherwise, all as though such payment or performance
had not been made. In the event that any payment, or any part thereof, is
rescinded, reduced, restored or returned, the Obligations shall be reinstated
and deemed reduced only by such amount paid and not so rescinded, reduced,
restored or returned.
12. NOTICES. Except as otherwise provided herein, whenever it is provided
herein that any notice, demand, request, consent, approval, declaration or other
communication shall or may be given to or served upon any of the parties by any
other party, or whenever any of the parties desires to give or serve upon any
other communication with respect to this Security Agreement, each such notice,
demand, request, consent, approval, declaration or other communication shall be
in writing and shall be delivered in person with receipt acknowledged, or sent
via overnight courier, addressed as hereafter set forth, or mailed by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
If to Grantor: Prime Outdoor Group, LLC
1225 Seventeenth Street
Suite 1523
Denver, Colorado
Attn: Gina Crist
The Prime Group, Inc.
77 West Wacker Drive
Suite 4200
Chicago, Illinois 60601
Attn: Robert J. Rudnik
If to Lender: Horizon Group Properties, Inc.
77 West Wacker Drive
Suite 4200
Chicago, Illinois 60601
Attn: Gary Skoien
13. SEVERABILITY. Any provision of this Security Agreement which is
prohibited 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, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such
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provision in any other jurisdiction.
14. NO WAIVER; CUMULATIVE REMEDIES. Lender shall not by any act, delay,
omission or otherwise be deemed to have waived any of its rights or remedies
hereunder, and no waiver shall be valid unless in writing, signed by Lender and
then only to the extent therein set forth. A waiver by Lender of any right or
remedy hereunder on any one occasion shall not be construed as a bar to any
right or remedy which Lender would otherwise have had on any future occasion. No
failure to exercise nor any delay in exercising on the part of Lender, any
right, power or privilege hereunder, shall operate as a waiver thereof, nor
shall any single or partial exercise of any right, power or privilege hereunder
preclude any other or future exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies hereunder provided are
cumulative and may be exercised singly or concurrently, and are not exclusive of
any rights and remedies provided by law. None of the terms or provisions of this
Security Agreement may be waived, altered, modified or amended except by an
instrument in writing, duly executed by Lender and, where applicable by Grantor.
15. SUCCESSOR AND ASSIGNS; GOVERNING LAW.
(a) This Security Agreement and all obligations of Grantor hereunder
shall be binding upon the successors and assigns of Grantor, and shall,
together with the rights and remedies of Lender hereunder, inure to the
benefit of Lender, and all future holders of instruments or agreements
evidencing the Obligations and their respective successors and assigns. No
sales of participations, other sales, assignments, transfers or other
dispositions of any agreement governing or instrument evidencing the
Obligations or any portion thereof or interest therein shall in any manner
affect the security interest granted to Lender hereunder.
(b) This Security Agreement shall be governed by, and be construed
and interpreted in accordance with, the laws of the State of Illinois.
16. FURTHER INDEMNIFICATION. Grantor agrees to pay, and to save Lender
harmless from, any and all liabilities with respect to, or resulting from any
delay in paying, any and all excise, sales or other similar taxes which may be
payable or determined to be payable with respect to any of the Collateral or in
connection with any of the transactions contemplated by this Security Agreement.
17. WAIVER OF JURY TRIAL AND WAIVER. GRANTOR WAIVES ALL RIGHT TO TRIAL BY
JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES
HEREUNDER, UNDER THE NOTE OR UNDER ANY OTHER DOCUMENT, INSTRUMENT OR AGREEMENT
RELATED TO THE OBLIGATIONS. AS PART OF THE CONSIDERATION FOR VALUE THIS DAY
RECEIVED, GRANTOR HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL
COURT LOCATED WITHIN THE COUNTY OF COOK, STATE OF ILLINOIS, AND WAIVES PERSONAL
SERVICE OF ANY AND ALL PROCESS UPON GRANTOR, AND CONSENTS THAT ALL SUCH SERVICE
OF PROCESS BY MADE BY REGISTERED MAIL DIRECTED TO GRANTOR AT THE ADDRESSES
PROVIDED IN SECTION 12 ABOVE AND SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED
FIVE (5) BUSINESS DAYS AFTER THE SAME SHALL HAVE BEEN DEPOSITED IN THE UNITED
STATES MAILS, POSTAGE PREPAID. GRANTOR WAIVES ANY OBJECTION TO VENUE OF ANY
ACTION INSTITUTED HEREUNDER AND CONSENTS TO THE GRANTING OF SUCH LEGAL OR
EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY THE COURT.
[INTENTIONALLY BLANK]
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IN WITNESS WHEREOF, each of the parties hereto has caused this Security
Agreement to be executed and delivered by its duly authorized officer on the
date first set forth above.
PRIME OUTDOOR GROUP, LLC
By: /s/ Mark T. Harris
-----------------------
Name: Mark T. Harris
---------------------
Title: President
--------------------
Accepted and acknowledged by:
HORIZON GROUP PROPERTIES, L.P.
By: Horizon Group Properties, Inc., general partner
By: /s/ David R. Tinkham
------------------------------------------------
Name: David R. Tinkham
----------------------------------------------
Title: CFO
---------------------------------------------
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EXHIBIT 10.29
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT (this "AGREEMENT"), dated as of April 18, 2000,
is by and among PRIME GROUP LIMITED PARTNERSHIP, an Illinois limited partnership
("PGLP"), PRIME GROUP II, L.P., an Illinois limited partnership ("PG2LP"), PRIME
GROUP III, L.P., an Illinois limited partnership ("PG3LP"), PRIME GROUP IV,
L.P., an Illinois limited partnership ("PG4LP"), PRIME GROUP V, L.P., an
Illinois limited partnership ("PG5LP"), and PRIME FINANCING LIMITED PARTNERSHIP,
an Illinois limited partnership ("PFLP"? PGLP, PG2LP, PG3LP, PG4LP, PG5LP and
PFLP are sometimes referred to herein collectively as the "PLEDGOR"), and
HORIZON GROUP PROPERTIES, L.P., a Delaware limited partnership (the "PLEDGEE").
W I T N E S S E T H
WHEREAS, the Pledgee made a loan (the "LOAN") to Prime Outdoor
Group, LLC, a Delaware limited liability company ("BORROWER") in the amount of
One Million Five Hundred Thousand and 00/100 Dollars ($1,500,000.00), the
repayment of which is evidenced by that certain Promissory Note, dated of even
date herewith (the "NOTE"), issued by Borrower payable to the order of the
Pledgee; and
WHEREAS, each of the Pledgors are affiliates of Borrower and will
receive direct or indirect financial benefits from the Loan; and
WHEREAS, PFLP owns 277,850 common units of partnership interests in
the Pledgee ("HGPLP PARTNERSHIP UNITS"); PGLP owns (or has the rights to as more
specifically described on Schedule I attached hereto) 75,620 HGPLP Partnership
Units; PG2LP owns 42,281 HGPLP Partnership Units; PG3LP owns 3,081 HGPLP
Partnership Units; PG4LP owns 6,818 HGPLP Partnership Units, and PG5LP owns
5,133 HGPLP Partnership Units (the HGPLP Partnership Units referred to in this
paragraph are referred to in this Agreement as the "PLEDGED HGPLP PARTNERSHIP
UNITS"); and
WHEREAS, pursuant to the Amended and Restated Agreement of Limited
Partnership of the Pledgee, dated as of _______________ (as amended, modified or
restated from time to time, the "HORIZON PARTNERSHIP AGREEMENT"), each of the
Pledged HGPLP Partnership Units may be exchanged one unit of HGPLP Partnership
Unit for one share of common stock, par value $0.01 per share ("HORIZON STOCK"),
of Horizon Group Properties, Inc., a Maryland corporation that has qualified for
treatment as a real estate investment trust ("HGPI"); and
WHEREAS, as a condition to making the Loan, the Pledgee has required
that the Pledgor grant to the Pledgee a security interest in the Pledged HGPLP
Partnership Units as described on Schedule I attached hereto, as security for
the repayment of the Loan.
NOW, THEREFORE, for good and valuable consideration, the receipt,
sufficiency and adequacy of which are hereby acknowledged, the Pledgor and the
Pledgee hereby agree as follows:
1. PLEDGE. The Pledgor hereby pledges to the Pledgee, and grants to the
Pledgee a security interest in, the following (the "PLEDGED COLLATERAL"):
(a) the Pledged HGPLP Partnership Units now owned by the Pledgor and
the certificates, if any, representing such Pledged HGPLP Partnership
Units, the Pledgor's interest in the capital, dividends, income, profits
and distributions of HGPLP attributable to the Pledged HGPLP Partnership
Units, and all other cash, securities, instruments and other property from
time to time received, receivable or otherwise distributed in respect of
or in exchange for any or all of the Pledged HGPLP Partnership Units;
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(b) all securities acquired by the Pledgor in any manner with
respect to the Pledged HGPLP Partnership Units (including, but not limited
to, Horizon Stock for which the Pledged HGPLP Partnership Units are
exchangeable), and the certificates, if any, representing such securities
(any such securities shall constitute part of the Pledged HGPLP
Partnership Units under and as defined in this Agreement), and all
dividends, cash, instruments, subscription warrants, securities and any
other rights and options and other property from time to time received,
receivable or otherwise distributed in respect of or in exchange for any
or all of such securities; and
(c) all other property hereafter delivered to the Pledgee in
substitution for, as proceeds of, or in addition to any of the foregoing
and all certificates, instruments and documents representing or evidencing
such property, and all cash, securities, interest, dividends, rights and
other property at any time and from time to time received, receivable or
otherwise distributed in respect of or in exchange for or upon conversion
of any or all thereof.
2. SECURITY FOR OBLIGATIONS. The Pledged Collateral secures the repayment
of the Loan and all other amounts due and payable under the Note or in
connection with the Loan, whether for principal, interest, fees, expenses or
otherwise, and all obligations of the Pledgor now or hereafter existing under
this Agreement (the "OBLIGATIONS").
3. DELIVERY OF PLEDGED COLLATERAL.
(a) All certificates, instruments or documents, if any, representing
or evidencing the Pledged Collateral (including all certificates
representing the HGPLP Partnership Units to which PGLP is entitled as more
specifically described on Schedule I attached hereto) shall be delivered
to and held by or on behalf of the Pledgee pursuant hereto and shall be in
suitable form for transfer by delivery, shall be accompanied by duly
executed instruments of transfer or assignment in blank, all in form and
substance satisfactory to the Pledgee. In the event any or all of the
Pledged Collateral are evidenced by a book entry, Pledgor shall execute
and deliver to Pledgee such documents as are required by Pledgee to create
and perfect a security interest in such uncertificated Pledged Collateral.
In addition, the Pledgee shall have the right at any time to exchange
certificates or instruments representing or evidencing Pledged Collateral
for certificates or instruments of smaller or larger denominations.
(b) Pledgor shall, and shall cause other appropriate parties under
Section 8-313 and 8-321 of the Uniform Commercial Code as in effect on the
date hereof in the State of Illinois (the "CODE") to, mark it or their
books and records with the numbers and face amounts of all uncertificated
securities evidencing the Pledged Collateral, and all rollovers and
replacements therefor to reflect the security interests granted pursuant
to Section 2 hereof. Pledgor shall provide Pledgee and shall cause other
persons to provide Pledgee with written confirmation of the security
interest in such uncertificated securities. Pledgor shall take, and shall
cause all other necessary persons to take, all action necessary or
appropriate to create, perfect and maintain a first perfected priority
lien in such uncertificated securities in favor of Pledgee. In the event
that subsequent to the date hereof, the Pledged Collateral are evidenced
by certificates, Pledgor will promptly deliver such certificates to
Pledgee, together with an assignment duly endorsed in blank for transfer.
4. REPRESENTATIONS AND WARRANTIES. The Pledgor represents and warrants as
follows:
(a) The Horizon Stock to be issued upon the exchange of the Pledged
HGPLP Partnership Units has been duly authorized and will be, upon
exchange, fully paid and nonassessable.
(b) The Pledgor is, or at the time of any future delivery, pledge,
assignment or transfer will be, the legal and beneficial owner of the
Pledged Collateral, free and clear of any lien, security interest, pledge,
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warrant, option, purchase agreement, shareholders' agreement, restriction,
redemption agreement or other charge, encumbrance or restriction of any
nature on the Pledged Collateral (except for the lien created by this
Agreement and the restrictions imposed by the agreements listed on
Schedule II hereto), with full right to deliver, pledge, assign and
transfer the Pledged Collateral to the Pledgee as Pledged Collateral
hereunder.
(c) Subject to compliance with the agreements listed on Schedule II
hereto, each of the Pledged HGPLP Partnership Units can be exchanged at
any time at the rate of one unit of Pledged HGPLP Partnership Unit for one
share of HGPI Stock.
(d) Upon possession by the Pledgee of the certificates representing
the Pledged Collateral, the pledge of the Pledged Collateral pursuant to
this Agreement will create a valid, perfected and first security interest
in the Pledged Collateral, securing the payment of the Obligations. All
other filings, registrations, recordings and other actions necessary or
desirable to create, perfect and protect such security interest have been
duly taken, and such security interests are entitled to all of the rights,
priorities and benefits afforded by the Code or other relevant law as
enacted in any relevant jurisdiction which relates to perfected security
interests.
(e) Except as otherwise set forth in paragraph (d) above, no
authorization, approval, or other action by, and no notice to or filing
with, any governmental authority or regulatory body or any other person is
required either (i) for the pledge by the Pledgor of the Pledged
Collateral pursuant to this Agreement or for the execution, delivery or
performance of this Agreement by the Pledgor, or (ii) for the exercise by
the Pledgee of the voting or other rights provided for in this Agreement
or the remedies in respect of the Pledged Collateral pursuant to this
Agreement (except as may be required in connection with a disposition of
such Pledged Collateral by laws affecting the offering and sale of
securities generally).
(f) The Pledgor has full power and authority to enter into this
Agreement and has the right to pledge and grant a security interest in the
Pledged Collateral as provided by this Agreement.
(g) Schedule I ATTACHED HERETO LISTS ALL OF THE HGPLP PARTNERSHIP
UNITS OWNED BY PLEDGOR WHICH ARE NOT CURRENTLY SUBJECT TO A PLEDGE TO ANY
PERSON OTHER THAN THE PLEDGEE.
5. FURTHER ASSISTANCE. The Pledgor agrees that at any time and from time
to time, at the expense of the Pledgor, the Pledgor will promptly execute and
deliver, or cause to be executed and delivered, all certificates, stock powers,
proxies, assignments, instruments and documents; and will take all further
action that may be reasonably necessary or desirable, or that the Pledgee may
reasonably request, in order to perfect and protect any security interest
granted or purported to be granted hereby or to enable the Pledgee to exercise
and enforce its rights and remedies hereunder with respect to any Pledged
Collateral and to carry out the provisions and purposes hereof.
6. VOTING RIGHTS; DIVIDENDS; ETC.
(a) Except as set forth below, so long as no Event of Default
(as hereinafter defined):
(i) The Pledgor shall be entitled to exercise any and all
voting and other consensual rights pertaining to the Pledged
Collateral or any part thereof for any purpose not inconsistent with
the terms of this Agreement or any document executed in connection
with this Agreement; PROVIDED, HOWEVER, that the Pledgor shall not
exercise nor shall it refrain from exercising any such right if such
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action or inaction could have a material adverse effect on the value
of the Pledged Collateral or upon the rights of the Pledgee to
effectively realize upon the security afforded by such Pledged
Collateral.
(ii) The Pledgor shall be entitled to receive and retain any
and all distributions paid in respect of the Pledged HGPLP
Partnership Units, provided however, that any and all
(1) dividends, interest and distributions paid or payable
other than in cash in respect of, and instruments and
other property received, receivable or otherwise
distributed in respect of, or in exchange for, any
Pledged Collateral,
(2) dividends and other distributions paid or payable in
cash in respect of any Pledged Collateral in connection
with a partial or total liquidation or dissolution or in
connection with a reduction of capital, capital surplus
or paid-in-surplus resulting from a sale or refinancing
of any property, and
(3) cash paid, payable or otherwise distributed in
redemption of, or in exchange for, any Pledged
Collateral,
shall be Pledged Collateral, shall be forthwith delivered to the
Pledgee to hold as Pledged Collateral and shall, if received by the
Pledgor, be received in trust for the benefit of the Pledgee, be
segregated from the other property or funds of the Pledgor, and be
forthwith delivered to the Pledgee as Pledged Collateral in the same
form as so received (with any necessary endorsement).
(b) Except as set forth below, upon the occurrence (and during the
continuance) of an Event of Default (as hereinafter defined):
(i) All rights of the Pledgor to exercise the voting and other
consensual rights which it would otherwise be entitled to exercise
pursuant to Section 6(a)(i) (but only after an Event of Default) and
to receive the dividends and interest payments and distributions
which it would otherwise be authorized to receive and retain
pursuant to Section 6(a)(ii) shall cease, and all such rights shall
thereupon become vested in the Pledgee which shall thereupon have
the sole right to exercise such voting and other consensual rights
and to receive and hold as Pledged Collateral such dividends and
interest payments and distributions;
(ii) All dividends and interest payments and distributions
which are received by the Pledgor contrary to the provisions of
paragraph (i) of this Section 6(b) shall be received in trust for
the benefit of the Pledgee, shall be segregated from other funds of
the Pledgor and shall be forthwith paid over to the Pledgee as
Pledged Collateral in the same form as so received (with any
necessary endorsements); and
(iii) The Pledgor shall execute and deliver (or cause to be
executed and delivered) to the Pledgee all such proxies and other
instruments as the Pledgee may (reasonably) request for the purpose
of enabling the Pledgee to exercise the voting and other rights
which it is entitled to exercise pursuant to paragraph (i) above and
to receive the dividends or interest payments or distribution which
it is authorized to receive pursuant to paragraph (ii) above.
7. TRANSFERS AND OTHER LIENS; ADDITIONAL SHARES. The Pledgor agrees that
it will not without the prior consent of the Pledgee (i) sell, assign, transfer,
convey, exchange, pledge, hypothecate or otherwise dispose of, or grant any
option, warrant, right, contract or commitment with respect to, any of the
Pledged Collateral without the prior
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written consent of the Pledgee, or (ii) create or permit to exist any lien,
security interest, pledge, proxy, purchase arrangement, restriction, redemption
agreements, shareholders' agreement or other charge or encumbrance upon or with
respect to any of the Pledged Collateral, except for the lien created by this
Agreement, restrictions imposed by the agreements listed on Schedule II hereto.
8. APPLICATION OF PROCEEDS OF SALE OR CASH HELD AS COLLATERAL. All
proceeds from the sale of Pledged Collateral sold pursuant to this Agreement
and/or the cash held as Pledged Collateral hereunder shall be (a) retained by
the Pledgee as cash collateral for the Obligations, or (b) at the election of
the Pledgee, applied by the Pledgee as follows:
FIRST: to payment of the costs and expenses of such sale,
including the out-of-pocket expenses of the Pledgee, including the reasonable
fees and out-of-pocket expenses of counsel employed in connection therewith, and
to the payment of all advances made by the Pledgee for the account of the
Pledgor hereunder, and the payment of all costs and expenses incurred by the
Pledgee in connection with the administration and enforcement of this Agreement,
to the extent that such advances, costs and expenses shall not have been
reimbursed to the Pledgee;
SECOND: to the payment of interest accrued and unpaid, if any,
on any of the Obligations to and including the date of such application and then
to the payment or prepayment of principal of any of the Obligations and then to
the payment of the balance of the Obligations in such order as Pledgee may
determine in its sole discretion; and
THIRD: the balance, if any, of such proceeds shall be paid to
the Pledgor, or its successors or assigns, or as a court of competent
jurisdiction may direct.
9. THE PLEDGEE APPOINTED ATTORNEY-IN-FACT. The Pledgor hereby appoints the
Pledgee as the Pledgor's attorney-in-fact (such appointment being irrevocable
and coupled with an interest), with full authority in the place and stead of the
Pledgor and in the name of the Pledgor or otherwise, from time to time after
giving notice to Pledgee in the Pledgee's discretion to take any action and to
execute any instrument which the Pledgee may deem necessary or advisable to
accomplish the purposes of this Agreement, including, without limitation, (i) to
receive, endorse and collect all instruments made payable to the Pledgor
representing any dividend, interest payment or other distribution in respect of
the Pledged Collateral or any part thereof and to give full discharge for the
same and (ii) to exercise all rights, including conversion rights, with respect
to such Pledged Collateral.
10. THE PLEDGEE MAY PERFORM. If the Pledgor fails to perform any agreement
contained herein, the Pledgee may itself perform, or cause performance of, such
agreement, and the reasonable expenses of the Pledgee incurred in connection
therewith shall be payable by the Pledgor under Section 17.
11. REASONABLE CARE. The Pledgee shall be deemed to have exercised
reasonable care in the custody and preservation of the Pledged Collateral in its
possession if the Pledged Collateral is accorded treatment substantially equal
to that which the Pledgee accords its own property, it being understood that the
Pledgee shall not have any responsibility for (i) ascertaining or taking action
with respect to calls, conversions, exchanges, maturities, tenders or other
matters relative to any Pledged Collateral, whether or not the Pledgee has or is
deemed to have knowledge of such matters, or (ii) taking any necessary steps to
preserve rights against any parties with respect to any Pledged Collateral;
PROVIDED, HOWEVER, that upon the Pledgor's instruction, the Pledgee shall use
reasonable efforts to take such action as the Pledgor directs the Pledgee to
take with respect to calls, conversions, exchanges, maturities, tenders, rights
against other parties or other similar matters relative to the Pledged
Collateral, but failure of the Pledgee to comply with any such request shall not
of itself be deemed a failure to exercise reasonable care, and no failure of the
Pledgee to preserve or protect any rights with respect to the Pledged Collateral
against prior parties, or to do any act with respect to preservation of the
Pledged Collateral not so requested by the Pledgor, shall be deemed a failure to
exercise reasonable care in the custody or preservation of the Pledged
Collateral.
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12. SUBSEQUENT CHANGES AFFECTING COLLATERAL. The Pledgor represents to the
Pledgee that the Pledgor has made its own arrangements for keeping informed of
changes or potential changes affecting the Pledged Collateral (including, but
not limited to, rights to convert, rights to subscribe, payment of dividends or
distributions, reorganization or other exchanges, tender offers and voting
rights), and the Pledgor agrees that the Pledgee shall have no responsibility or
liability for informing the Pledgor of any such changes or potential changes or
for taking any action or omitting to take any action with respect thereto.
13. EVENTS OF DEFAULT; REMEDIES UPON AN EVENT OF DEFAULT.
(a) The occurrence of any one or more of the following events shall
constitute an "EVENT OF DEFAULT" by Pledgor under this Agreement:
(i) Borrower fails to make any payment when due under the
Note;
(ii) the Pledgor fails to perform or observe any term,
covenant (after 5 business days written notice) or agreement
contained in this Agreement on its part to be performed or observed,
or any representation or warranty made by the Pledgor in this
Agreement shall be untrue or misleading in any material respect;
(iii) a notice of lien, levy or assessment is filed or
recorded with respect to all or a substantial part of the Pledged
Collateral, and such lien, levy or assessment is not released,
discharged or removed within thirty (30) days from the date it is
filed or recorded, except for a lien, levy or assessment which
relates to current taxes not yet due and payable or a lien permitted
by any of the Loan Documents (as defined in the Note);
(iv) all or a substantial part of the Pledged Collateral is
attached, seized, subjected to a writ or distress warrant, or is
levied upon, or comes within the possession of any receiver,
trustee, custodian or assignee for the benefit of creditors; and
(v) an Event of Default (after the delivery of all required
notices and the expiration of all applicable cure periods) occurs
under any of the other Loan Documents.
(b) If any Event of Default shall have occurred (and be continuing),
the Pledgee shall have, in addition to all other rights given by law or by
this Agreement, the Note or otherwise, all of the rights and remedies with
respect to the Pledged Collateral of a secured party under the Code in
effect in the State of Illinois at that time, and the Pledgee may, without
notice and at its option, transfer or register the Pledged Collateral or
any part thereof on the books of the issuer thereof into the name of the
Pledgee or the Pledgee's nominee(s), with or without any indication that
such Pledged Collateral is subject to the security interest hereunder. In
addition, with respect to any Pledged Collateral which shall then be in or
shall thereafter come into the possession or custody of the Pledgee, the
Pledgee may sell or cause the same to be sold at any broker's board or at
public or private sale, in one or more sales or lots, at such price or
prices as the Pledgee may deem best, for cash or on credit or for future
delivery, without assumption of any credit risk. The purchaser of any or
all Pledged Collateral so sold shall thereafter hold the same absolutely,
free from any claim, encumbrance or right of any kind whatsoever, except
for claims, encumbrances or rights that may arise without the knowledge or
consent of the Pledgor. Unless any of the Pledged Collateral threatens to
decline speedily in value or is or becomes of a type sold on a recognized
market, the Pledgee will give the Pledgor reasonable notice of the time
and place of any public sale thereof, or of the time after which any
private sale or other intended disposition is to be made. Any sale of the
Pledged Collateral conducted in conformity with reasonable commercial
practices
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of banks, insurance companies, commercial finance companies, or other
financial institutions disposing of property similar to the Pledged
Collateral shall be deemed to be commercially reasonable. Any requirements
of reasonable notice shall be met if such notice is mailed to the Pledgor
as provided in Section 20 below, at least five (5) days before the time of
the sale or disposition. Any other requirement of notice, demand or
advertisement for sale is, to the extent permitted by law, waived. The
Pledgee may, in its own name or in the name of a designee or nominee, buy
any of the Pledged Collateral at any public sale and, if permitted by
applicable law, at any private sale. All expenses (including court costs
and reasonable attorneys' fees and expenses) of, or incident to, the
enforcement of any of the provisions hereof shall be recoverable from the
proceeds of the sale or other disposition of Pledged Collateral. In view
of the fact that federal and state securities laws may impose certain
restrictions on the method by which a sale of the Pledged Collateral may
be effected after an Event of Default, the Pledgor agrees that upon the
occurrence or existence of any Event of Default, the Pledgee may, from
time to time, attempt to sell all or any part of the Pledged Collateral by
means of a private placement, restricting the prospective purchasers to
those who can make the representations and agreements required of
purchasers of securities in private placements. In so doing, the Pledgee
may solicit offers to buy the Pledged Collateral, or any part of it, for
cash, from a limited number of investors deemed by the Pledgee in its
judgment, to be responsible parties who might be interested in purchasing
the Pledged Collateral, and if the Pledgee solicits such offers from not
less than two (2) such investors, then the acceptance by the Pledgee of
the highest offer obtained therefrom shall be deemed to be a commercially
reasonable method of disposition of the Pledged Collateral.
In addition, upon the occurrence (and during the continuance) of an
Event of Default, all rights of the Pledgor to exercise the voting and
other rights which it would otherwise be entitled to exercise and to
receive cash dividends and interest payments, shall cease, and all such
rights shall thereupon become vested in the Pledgee as provided in Section
6.
14. SECURITIES LAWS. Pledgor hereby acknowledges and confirms that Pledgee
may be unable to effect a public sale of any or all of the Pledged Collateral by
reason of certain prohibitions contained in the Securities Act and applicable
state securities laws and may be compelled to resort to one or more private
sales thereof to a restricted group of purchasers who will be obligated to
agree, among other things, to acquire any of the Pledged Collateral for their
own respective accounts for investment and not with the view to the distribution
or resale thereof. Pledgor further acknowledges and confirms that any such
private sale may result in prices or other terms less favorable to the seller
than if such sale were a public sale and, notwithstanding such circumstances,
agrees that any such private sale shall be deemed to have been made in a
commercially reasonable manner, and the Pledgee shall be under no obligation to
take any steps in order to permit the Pledged Collateral to be sold at a public
sale. The Pledgee shall be under no obligation to delay a sale of any of the
Pledged Collateral for any period of time necessary to permit any issuer thereof
to register such Pledged Collateral for public sale under the Securities Act or
under applicable state securities laws.
15. AUTHORITY OF THE PLEDGEE. The Pledgee shall have and be entitled to
exercise all such powers hereunder as are specifically delegated to the Pledgee
by the terms hereof, together with such powers as are incidental thereto. The
Pledgee may execute any of its duties hereunder by or through agents or
employees. Neither the Pledgee, nor any director, officer, agent or employee of
the Pledgee, shall be liable for any action taken or omitted to be taken by it
or them hereunder or in connection herewith, except for its or their own gross
negligence or willful misconduct. The Pledgor hereby agrees to indemnify and
hold harmless the Pledgee and/or any such director, officer, agent or employee
from and against any and all liability incurred by any of them, hereunder or in
connection herewith, unless such liability shall be due to its or their own
gross negligence or willful misconduct.
16. TERMINATION. This Agreement shall terminate after the time when all
the Obligations have been fully paid and performed, at which time the Pledgee
shall reassign and redeliver (or cause to be reassigned and redelivered) to the
Pledgor, or to such person or persons as the Pledgor shall designate, against
receipt, such of the Pledged Collateral
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(if any) as shall not have been sold or otherwise applied by the Pledgee
pursuant to the terms hereof and shall still be held by it hereunder, together
with appropriate instruments of reassignment and release. Any such reassignment
shall be without recourse upon or warranty by the Pledgee and at the expense of
the Pledgor.
17. EXPENSES. The Pledgor agrees to reimburse the Pledgee promptly after
demand for any and all reasonable expenses, including the reasonable fees and
expenses of its counsel and of any experts and agents, which the Pledgee may
incur in connection with (i) the administration of this Agreement, (ii) the
custody or preservation of, or the registration of the Pledged Collateral, (iii)
the exercise or enforcement of any of the rights of the Pledgee hereunder, or
(iv) the failure by the Pledgor to perform or observe any of the provisions
hereof.
18. SECURITY INTEREST ABSOLUTE. All rights of the Pledgee and security
interests hereunder, and all obligations of the Pledgor hereunder, shall be
absolute and unconditional irrespective of:
(i) any lack of validity or enforceability of the Note or
any other agreement or instrument relating thereto;
(ii) any change in the time, manner or place of payment of, or
in any other term of, all or any of the Obligations, or any other
amendment or waiver of or any consent to any departure from the Note
or any other Loan Document;
(iii) any exchange, surrender, release or non-perfection of
any other collateral, or any release or amendment or waiver of or
consent to departure from any guaranty, for all or any of the
Obligations; or
(iv) any other circumstance which might otherwise constitute a
defense available to, or a discharge of, the Pledgor in respect of
the Obligations or of this Agreement.
19. AMENDMENTS, WAIVERS AND CONSENTS. No amendment or waiver of any
provision of this Agreement nor consent to any departure by the Pledgor
herefrom, shall in any event be effective unless the same shall be in writing
and signed by the Pledgee, and then such amendment, waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.
20. NOTICES. Any notice required or desired to be served, given or
delivered hereunder shall be in writing (including facsimile transmission), and
shall be deemed to have been validly served, given or delivered upon the earlier
of (a) personal delivery to the address set forth below (b) in the case of
mailed notice, two (2) days after deposit in the United States mails, with
proper postage for certified mail, return receipt requested, prepaid, or in the
case of notice by Federal Express or other reputable overnight courier service,
one (1) day after delivery to such courier service, and (c) in the case of
facsimile transmission, upon transmission with confirmation of receipt,
addressed to the party to be notified as follows:
If to the Pledgor: c/o The Prime Group, Inc.
77 West Wacker Drive
Suite 4200
Attn: Michael W. Reschke
Facsimile Number: (312) 917-1511
With copies to: The Prime Group, Inc.
77 West Wacker Drive
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Suite 4200
Attn: Robert J. Rudnik, Esq.
Facsimile Number: (312) 917-8442
If to the Pledgee: Horizon Group Properties, L.P.
77 West Wacker Drive
Suite 4200
Attention: Gary J. Skoien
Facsimile Number: (312) 917-0911
With a copy to: Horizon Group Properties, L.P.
77 West Wacker Drive
Suite 4200
Attention: David Tinkham
Facsimile Number: (312) 917-8440
or to such other address as any of the parties may hereafter designate for
itself by written notice to the other parties in the manner herein prescribed.
21. CONTINUING SECURITY INTEREST. This Agreement shall create a continuing
security interest in the Pledged Collateral and shall (i) be binding upon the
Pledgor, its successors and assigns, and (ii) inure to the benefit of the
Pledgee and its successors, transferees and assigns.
22. WAIVERS. To the extent permitted by applicable law, the Pledgor waives
presentment and demand for payment of any of the Obligations, protest and notice
of dishonor or default with respect to any of the Obligations, and all other
notices to which the Pledgor might otherwise be entitled, except as otherwise
expressly provided herein or in the Note.
23. WAIVER OF JURY TRIAL. The Pledgor and the Pledgee each hereby waive
any right to a trial by jury in any action or proceeding to enforce or defend
any rights under this Agreement or any amendment, instrument, document or
agreement delivered or which may in the future be delivered in connection
herewith or arising from any banking relationship existing in connection with
this Agreement, and agrees that any such action or proceeding shall be tried
before a court and not before a jury.
24. GOVERNING LAW; TERMS. This Agreement shall be governed by and
construed in accordance with the internal laws (as opposed to conflict of laws
provisions) and decisions of the State of Illinois. Unless otherwise defined
herein, terms defined in Articles 3, 8 and 9 of the Code are used herein as
therein defined. Whenever 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 interpreted in such manner as
to be ineffective or invalid under applicable law, such provisions shall be
ineffective or invalid only to the extent of such prohibition or invalidity,
without invalidating the remainder of such provision or the remaining provisions
of this Agreement.
25. DEFINITIONS. The singular shall include the plural and vice versa and
any gender shall include any other gender as the text shall indicate.
26. SECTION HEADINGS. The section headings herein are for convenience of
reference only, and shall not affect in any way the interpretation of any of the
provisions hereof.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURE PAGE FOLLOWS.]
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IN WITNESS WHEREOF, the Pledgor and the Pledgee have each caused this
Pledge Agreement to be duly executed and delivered by its officer, if any,
thereunto duly authorized as of the date first above written.
PRIME GROUP LIMITED PARTNERSHIP, an
Illinois limited partnership
By: /s/ Michael W. Reschke
------------------------------------
Michael W. Reschke
Managing General Partner
PRIME GROUP II, L.P., an Illinois limited
partnership
By: PGLP, Inc.,
Managing General Partner
By: /s/ Michael W. Reschke
--------------------------------------
Its: PRESIDENT
--------------------------------------
PRIME GROUP III, L.P., an Illinois limited
partnership
By: PGLP, Inc.,
Managing General Partner
By: /s/ Michael W. Reschke
--------------------------------------
Its: PRESIDENT
--------------------------------------
PRIME GROUP IV, L.P., an Illinois limited
partnership
By: PGLP, Inc.,
Managing General Partner
By: /s/ Michael W. Reschke
--------------------------------------
Its: President
--------------------------------------
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PRIME GROUP V, L.P., an Illinois limited
partnership
By: PGLP, Inc.,
Managing General Partner
By: /s/ MICHAEL W. RESCHKE
--------------------------------------
Its: PRESIDENT
--------------------------------------
PRIME FINANCING LIMITED PARTNERSHIP, an
Illinois limited partnership
By: Prime Finance, Inc.
Managing General Partner
By: /s/ MICHAEL W. RESCHKE
--------------------------------------
Its: PRESIDENT
--------------------------------------
HORIZON GROUP PROPERTIES, L.P., a Delaware
limited partnership
By: Horizon Group Properties, Inc., a
Maryland corporation, its Managing General
Partner
By: /s/ David R. Tinkham
--------------------------------------
Its: CFO
--------------------------------------
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SCHEDULE I
DESCRIPTION OF PLEDGED COLLATERAL
PLEDGED UNITS
277,850 units of limited partnership interests in Horizon Group
Properties, L.P., a Delaware limited partnership, in the name of Prime
Financing Limited Partnership as evidenced by certificate number 0101
2,150 units of limited partnership interests in Horizon Group
Properties, L.P., a Delaware limited partnership, in the name of Prime
Group Limited Partnership as evidenced by certificate number 0096*
36,363 units of limited partnership interests in Horizon Group
Properties, L.P., a Delaware limited partnership, in the name of Prime
Group Limited Partnership as evidenced by certificate number 0121*
42,281 units of limited partnership interests in Horizon Group
Properties, L.P., a Delaware limited partnership, in the name of Prime
Group II, L.P. as evidenced by certificate number 0097
3,081 units of limited partnership interests in Horizon Group
Properties, L.P., a Delaware limited partnership, in the name of Prime
Group III, L.P. as evidenced by certificate number 0098
6,818 units of limited partnership interests in Horizon Group
Properties, L.P., a Delaware limited partnership, in the name of Prime
Group IV, L.P. as evidenced by certificate number 0099
5,133 units of limited partnership interests in Horizon Group
Properties, L.P., a Delaware limited partnership, in the name of Prime
Group V, L.P. as evidenced by certificate number 0120
*37,107 units, although purchased by Prime Group Limited
Partnership, have not been transferred in the records of Horizon Group
Properties, L.P. Upon receipt by Prime Group Limited Partnership of
certificates representing these units, such certificates shall be
delivered to Horizon Group Properties, L.P.
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SCHEDULE II
OTHER AGREEMENTS
1. Registration Rights Agreement dated as of
_________________ by and among Horizon Group
Properties, Inc., Horizon Group Properties, L.P.,
_____________________________________and the other
investors named therein.
2. Agreement of Limited Partnership of Horizon Group
Properties, L.P.
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<PAGE>
EXHIBIT 10.30
COLLATERAL ASSIGNMENT
OF MEMBERSHIP INTEREST
THIS COLLATERAL ASSIGNMENT OF MEMBERSHIP INTEREST (this "Assignment"),
dated as of the 18th day of April, 2000, between THE PRIME GROUP, INC., an
Illinois corporation ("Assignor"), and HORIZON GROUP PROPERTIES, L.P.
("Assignee").
R E C I T A L S:
A. Assignor is the sole member of Prime Outdoor Group, LLC, a
Delaware limited liability company (the "Borrower");
B. Assignee has agreed to make a loan to Borrower of One Million Five
Hundred Thousand Dollars ($1,500,000) (the "Loan");
C. The Loan is evidenced by that certain Promissory Note in the
principal amount of the Loan (the "Note") of even date herewith, made by
Borrower to the order of Assignee; and
D. It is a condition to the making of the Loan that Assignor execute and
deliver this Assignment; and, as the sole member of Borrower and as owner of
100% of the Membership Interest (defined below), Assignor has a financial
interest in Borrower and in the making of the Loan and is willing to execute and
deliver this Assignment;
NOW, THEREFORE, with reference to the above recitals, and in reliance
thereon, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. ASSIGNMENT. For value received, including, without limitation,
Assignee's agreement to make the Loan, Assignor does hereby grant a security
interest in, sell, assign, transfer, set over, pledge and deliver unto Assignee
and unto its successors and assigns, all of the right, title and interest of
Assignor in and to (i) the membership interest in Borrower whether now owned or
hereafter acquired ("Membership Interest"), and (ii) any and all proceeds or
avails of the foregoing, including, without limitation, all distributions of
Borrower (whether in cash or in kind) which are allocable to the holder of the
Membership Interest (herein collectively referred to as the "Collateral"), to
secure the due and punctual payment and performance of the Liabilities (as
hereinafter defined).
TO HAVE AND TO HOLD the Collateral, together with all rights, titles,
interests, privileges and preferences appertaining, incidental or appurtenant
thereto, unto the Assignee, its successors and assigns; subject, however, to the
terms, covenants and conditions hereafter set forth.
The term "Liabilities," as used herein, shall mean all obligations of
Borrower to Assignee under the Note and the Loan Documents (as defined in the
Note) and all other indebtedness, obligations and liabilities of Borrower,
Assignor or their successors and assigns, to Assignee under the Loan, whether
for payment of money or performance of obligations, however created, arising or
evidenced, whether direct or indirect, absolute or contingent, or now or
hereafter existing, or due or to become due.
2. WARRANTIES, REPRESENTATIONS AND COVENANTS OF ASSIGNOR. Assignor hereby
warrants, represents, and covenants to and with Assignee as follows:
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(a) The terms and provisions of the aforestated Recitals are hereby
incorporated into this Assignment as representations and warranties of
Assignor with the same effect as though such recitals had been set out in
full in this Section 2;
(b) Assignor presently has full unencumbered title to the Collateral
and hereafter, so long as any portion of the Liabilities is outstanding,
shall maintain the Collateral free of all liens and claims whatsoever,
other than the interest granted hereunder or under any other instrument
given to secure the Liabilities or any part thereof;
(c) No financing statement (other than a financing statement in
favor of Assignee), covering any of the Collateral is or will be on file
in any public office; and Assignor agrees to execute, from time to time
hereafter on request of Assignee, such financing statements and other
documents (and pay the cost of filing or recording the same in all public
offices deemed necessary by Assignee) and do such other acts and things,
all as Assignee may reasonably request to establish and maintain a valid
security interest in the Collateral free of all other liens and claims
whatsoever, to secure the payment and performance of the Liabilities,
including, without limitation, providing notice to Assignee in the event
that any Assignor moves its domicile to another state any time while the
Liabilities are outstanding;
(d) So long as any portion of the Liabilities is outstanding,
Assignor shall:
(i) refrain from electing to dissolve Borrower;
(ii) refrain from the sale, further encumbrance or other
disposition of all or any portion of or interest in the
Membership Interest without the prior written consent of
Assignee; and
(iii) do, execute, acknowledge and deliver every and all
further acts, conveyances, assignments, transfers and
assurances necessary or proper, in the reasonable
judgment of Assignee, for the better assuring,
conveying, assigning and confirming unto Assignee all
property encumbered hereby or property intended so to
be; whether now owned by Assignor or hereafter acquired;
(e) Assignor has full power and authority to make the assignment
herein provided for, and this Assignment is fully enforceable under
applicable law. All consents, if any, required for the execution of this
Assignment and the enforcement of the remedies hereunder have been
obtained prior to the making of this Assignment;
(f) Except as disclosed in writing to Assignee, no litigation or
other proceedings are pending or, to the best of Assignor's knowledge, are
threatened which could materially adversely affect either the validity or
priority of the lien or other interest of Assignee in the Collateral or
the financial condition of Assignor;
(g) The execution and delivery of this Assignment, the consummation
of the transactions contemplated hereby, and the fulfillment of and
compliance with the terms and conditions hereof, do not and will not
conflict with or result in a breach of any of the terms, conditions or
provisions of any agreement or instrument to which Assignor or Borrower is
a party or by which either of them is bound, constitute a default under
any of the foregoing, or result in the creation of a lien, claim, charge
or encumbrance other than the interests granted to Assignee by this
Assignment;
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<PAGE>
(h) Assignor, at its own expense, will defend Assignee's right,
title, and security interest in and to the Collateral against the claims
of any person, firm, corporation or other entity;
(i) Assignor will promptly deliver to Assignee all written notices
received with respect to the Collateral and will promptly give Assignee
written notice of any other notices received with respect to the
Collateral;
(j) Assignor, at any time, and from time to time, upon the written
request of Assignee shall execute and deliver such further documents and
do such further acts and things as Assignee may reasonably request to
effect the purposes of this Assignment. Assignor hereby appoints Assignee
as its true and lawful attorney in fact, such appointment being
irrevocable and coupled with an interest, to execute and deliver such
further documents and do such further acts and things on Assignor's
behalf, as Assignee may reasonably deem necessary or expedient to
effectuate the purposes of this Assignment; provided, however, that
Assignee shall not exercise such appointment unless Assignor fails to
comply with any such request of Assignee within two (2) business days,
unless Assignor's interest in the Collateral would be impaired during such
period;
(k) The Collateral is and shall at all times be assignable to
Assignee without restriction and free of any options, first offer or
refusal or other rights on the part of any person;
(l) Upon any assignment of the Collateral to Lender pursuant to
foreclosure, private or public sale or by virtue of any other means,
Assignee shall be entitled to be a member of the Borrower and be entitled
to all rights and benefits that Assignor is entitled to by virtue of its
ownership of the Collateral;
(m) Assignor will not adopt or amend any governing instrument or
agreement or take or permit to be taken any action that would in any
manner result in Assignor owning less than 75% of the interests in the
profits of the Borrower or in Assignor being unable to control the
management of the Borrower (either as a member-managed company or through
designation of the managers); and
(n) Nothing contained in this Assignment or any Loan Document or in
any governing instrument or agreement affecting the rights and obligations
of members of the Borrower imposes or will impose upon any assignee of the
Collateral any liability as or of a member without such assignee's prior
written agreement to assume such liability. Nothing contained herein shall
be construed to constitute such a consent.
3. CARE OF COLLATERAL. Assignee shall be deemed to have exercised
reasonable care with respect to the interest of Assignor in the custody and
preservation of the Collateral if it takes such action for that purpose as
Assignor shall reasonably request in writing, but failure of Assignee to comply
with any such request shall not of itself be deemed a failure to exercise
reasonable care, and no failure of Assignee to preserve or protect any rights
with respect to the Collateral against prior parties, or to do any act with
respect to preservation of the Collateral not so requested by Assignor, shall be
deemed a failure to exercise reasonable care in the custody or preservation of
the Collateral.
4. CERTAIN RIGHTS REGARDING COLLATERAL AND LIABILITIES.
(a) Assignee from time to time, after occurrence and during the
continuance of an Event of Event of Default (as hereinafter defined), may
take all or any of the following actions: (i) notify the parties obligated
on any of the Collateral to make payment to Assignee of any amounts due or
to become due thereunder; (ii) enforce collection of any of the Collateral
by suit or otherwise; (iii) take control of any proceeds of the
Collateral; and (iv) resort to the Collateral for payment of any of the
Liabilities whether or
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<PAGE>
not it shall have resorted to any other property securing the Liabilities
or shall have proceeded against any party primarily or secondarily liable
on any of the Liabilities.
(b) Assignee from time to time, whether before or after the
occurrence of an Event of Default and without notice to Assignor, may take
all or any of the following actions: (i) retain or obtain a security
interest in any property in addition to the Collateral to secure any of
the Liabilities; (ii) retain or obtain the primary or secondary liability
of any party, including Assignor, with respect to any of the Liabilities;
(iii) extend or renew for any period any of the Liabilities or release or
compromise any obligation of any nature of any party with respect thereto;
and (iv) surrender, release or exchange all or any part of any property,
including the Collateral, securing any of the Liabilities, or compromise
or extend or renew for any period any obligations of any party with
respect to any such property.
(c) At any time, Assignee at its option may surrender or assign
without recourse the Collateral to Assignor, and Assignor hereby agrees to
accept surrender or assignment, and, in such event, agrees to execute such
documents and instruments and take such actions as Borrower may reasonably
require to implement the foregoing. Assignor hereby appoints Assignee as
its true and lawful attorney in fact, such appointment being irrevocable
and coupled with an interest, to execute such documents and instruments
and take such actions as Borrower may require in implementing the
foregoing; provided, however, that Assignee shall not exercise such
appointment unless Assignor fails to comply with any such request of
Assignee within two (2) business days following such Lender's request,
unless Assignee's interest in the Collateral would be impaired during such
period. Such surrender or assignment shall be effective upon Assignee's
transmission to Assignor, as set forth in Section 10 hereof, of the
following: (i) any Collateral (as defined herein only) then in Assignee's
possession; (ii) written notice of Assignee's exercise of the option
granted by this subsection (c); and (iii) such other instruments and
assignments, if any, as Assignee may reasonably deem to be sufficient as
against Assignee to terminate any interest of Assignee in the Collateral.
Any such surrender or reassignment shall be without recourse upon or
warranty by Assignee and shall be made at the expense of Assignor.
(d) Until occurrence of an Event of Default, Assignor may exercise
any of its rights with respect to the Membership Interest except as may be
prohibited by this Agreement and (upon the occurrence and during the
continuation of an Event of Default) except as Assignee may elect to
exercise such rights, if Assignee is entitled to do so pursuant to this
Assignment.
5. DISTRIBUTIONS. Any and all cash and distributions in property or other
distributions made on or in respect of the Membership Interest
("Distributions"), and any and all cash and other property received at any time
in exchange for any Collateral shall be and become part of the Collateral
pledged hereunder and, if received by Assignor while an Event of Default exists,
shall forthwith be delivered to Assignee or its designated nominee to be held
subject to the terms of this Assignment. In the event no Event of Default exists
when a Distribution is made, Assignor may receive such Distribution. The rights
of Assignor to receive any such cash and Distributions shall be subject and
subordinate in all respects to the rights of Assignee under this Assignment and
under the other documents and instruments evidencing and securing the Loan.
6. EVENT OF DEFAULT.
(a) The occurrence of any Event of Default under the Note or other
Loan Documents, a misrepresentation or breach of warranty by Assignor
hereunder, or the default of Assignor in any agreement contained herein
shall constitute an Event of Default hereunder. Upon such Event of
Default: (i) Assignee may exercise from time to time any rights and
remedies available to it under the Uniform Commercial Code as in effect
from time to time in the State of Illinois or otherwise available to it;
(ii) Assignee, without demand or notice of any kind, may appropriate and
apply toward the payment of such of the Liabilities, and in such order or
application, as Assignee may elect from time to time, any balances,
credits, deposits,
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accounts or monies of Assignor held, in any capacity, by, or in transit
to, Assignee; and (iii) Assignee may transfer all or any part of the
Collateral into the name of Assignee or its nominee, with or without
disclosing that such Collateral is subject to the lien and security
interest hereunder. If any notification of intended disposition of any of
the Collateral is required by law, such notification, if mailed, shall be
deemed reasonably and properly given if mailed at least ten (10) business
days before such disposition, postage prepaid, addressed to Assignor, at
the address of Assignor hereinafter set forth.
(b) Upon the occurrence of any Event of Default, Assignee may sell
the Collateral at public or private sale for cash, upon credit or for
future delivery, and at such price or prices as Assignee may deem
satisfactory, and Assignee may be the purchaser of the Collateral and it
or any purchaser of the Collateral upon any such sale shall thereafter
hold the same, absolutely, free from any claim or right of any kind,
including any equity or right of redemption of Assignor who hereby
specifically waives all rights of redemption, stay or appraisal which it
has or may have under any rule of law or statute now existing or hereafter
adopted. Assignee shall give ten (10) business days' written notice of
intention to make any such public or private sale, which notice shall
state the time and place fixed for such sale. Any sale shall be held at
such time or times within the ordinary business hours and at such place or
places as Assignee may reasonably fix in the notice of such sale; provided
that Assignee shall not be obligated to make any sale pursuant to any such
notice. Assignee, without notice or publication, may adjourn any sale or
cause the same to be adjourned from time to time by announcement at the
time or place fixed for the sale, and such sale may be made at any time or
place to which the same may be so adjourned. In case of any sale of the
Collateral on credit or for future delivery, the Collateral may be
retained by Assignee until the selling price is paid by the purchaser
thereof, but Assignee shall not incur any liability in case of the failure
of such purchaser to take up and pay for the Collateral and, in case of
any such failure, the Collateral may again be sold upon like notice. In
lieu of exercising the power of sale herein conferred upon it, Assignee
may proceed by a suit or suits at law or in equity to foreclose the
security interest assigned hereby and sell the Collateral. Assignor agrees
that Assignee shall have the right to continue to retain the Collateral
until such time as Assignee in its sole judgment believes that an
advantageous price can be secured for the Collateral, and Assignee shall
not be liable to Assignor for any loss in the value of the Collateral by
reason of any delay in the sale thereof. Assignor agrees to immediately
pay, and acknowledges its liability for, any deficiency between the
outstanding amount of the Liabilities, and the net amount realized by
Assignee by the sale of the Collateral, provided, however, that the
liability for such deficiency shall not exceed Assignor's liability to pay
the principal amount of the Loan under that certain Guaranty of even date
executed and delivered by Assignor.
(c) Assignor agrees that, in any sale of any of the Collateral,
Assignee is hereby authorized to comply with any limitation or restriction
in connection with such sale as it may be advised by counsel is necessary
in order to avoid any violation of applicable law (including, without
limitation, compliance with such procedures as may restrict the number of
prospective bidders and purchasers, require that such prospective bidders
and purchasers have certain qualifications, and restrict such prospective
bidders and purchasers to persons who will represent and agree that they
are purchasing for their own account for investment and not with a view to
the distribution or resale of such Collateral), or in order to obtain any
required approval of the sale or of the purchase by any governmental
regulatory authority or official. Assignor further agrees that such
compliance shall not result in such sale being considered or deemed not to
have been made in a commercially reasonable manner, nor shall Assignee be
liable or accountable to Assignor for any discount allowed by the reason
of the fact that such Collateral is sold in compliance with any such
limitation or restriction.
(d) In executing this Agreement, Assignor hereby constitutes and
appoints Assignee, with full power of substitution, its true and lawful
attorney-in-fact, in its name, place and stead to make, execute, sign,
acknowledge, swear to, record or file, on behalf of Assignee, certificates
of organization, if applicable,
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<PAGE>
and other documents required to reflect the foreclosure sale of the
Collateral. The foregoing grant of authority is a power of attorney
coupled with an interest, is irrevocable and shall survive the death or
incapacity of Assignor.
(e) Assignor agrees to pay to Assignee, on demand, all costs
expended for collection of any payments due under the Note and all
reasonable costs, including reasonable attorneys' fees and expenses,
incurred by Assignee in connection with a suit at law or in equity to
foreclose the security interest assigned hereby and sell the Collateral,
whether or not such suit shall ever have been filed or have proceeded to
judgment, together with interest thereon at the Event of Default Rate, as
defined in the Note, and such costs shall be deemed to be part of the
Liabilities and entitled to the benefit of the Collateral.
(f) All rights and remedies of Assignee expressed hereunder are in
addition to all other rights and remedies possessed by it, including those
under any other agreement or instrument relating to any of the Liabilities
or security therefor. No delay on the part of Assignee in the exercise of
any right or remedy shall operate as a waiver thereof, and no single or
partial exercise by Assignee of any right or remedy shall preclude other
or further exercise thereof or the exercise of any other right or remedy.
No action of Assignee permitted hereunder shall impair or affect the
rights of Assignee in and to the Collateral.
7. APPLICATION OF PROCEEDS OF SALE OR CASH HELD AS COLLATERAL. Upon
occurrence of any Event of Default, proceeds of sale of Collateral sold pursuant
to Section 6 hereof and the cash held as Collateral hereunder, shall be applied
by Assignee as follows:
FIRST: to payment of the reasonable costs and expenses of such sale,
including the expenses of Assignee and the reasonable fees and expenses of
counsel employed in connection therewith, and to the payment of all
advances made by Assignee for the account of Assignor hereunder and the
payment of all reasonable costs and expenses incurred by Assignee in
connection with the administration and enforcement of this Assignment, to
the extent that such advances, costs and expenses shall not have been
theretofore reimbursed to Assignee;
SECOND: to the payment of the remainder of the Liabilities in such
order as Assignee shall determine;
THIRD: to the payment of any other amounts required by applicable
law, including, without limitation, Section 9-504(1) of the Uniform
Commercial Code; and
FOURTH: the balance, if any, of such proceeds shall be paid to
Assignor, its successors and assigns, or as a court of competent
jurisdiction may direct.
8. AUTHORITY OF ASSIGNEE. Assignee shall have and be entitled to exercise
all such powers hereunder as are specifically delegated to Assignee by the terms
hereof, together with such powers as are incidental thereto. Assignee may
execute any of its duties hereunder by or through agents or employees and shall
be entitled to retain counsel and to act in reliance upon the advice of such
counsel concerning all matters pertaining to its duties hereunder. Neither
Assignee, nor any director, officer or employee of Assignee, shall be liable for
any action taken or omitted to be taken by it or them hereunder or in connection
therewith, except for its own gross negligence or willful misconduct. Assignor
hereby agrees to reimburse Assignee, on demand, for all reasonable expenses
incurred by Assignee in connection with the administration and enforcement of
this Assignment (including reasonable expenses incurred by any agent or
sub-agent employed by Assignee, and the reasonable fees and expenses of any
attorneys employed by Assignee or by any such agent or sub-agent) and agrees to
indemnify and hold harmless Assignee and/or any such agent or sub-agent from and
against any and all liability incurred by Assignee (or such agent or sub-agent)
hereunder or in connection herewith, unless such liability shall be due to
willful misconduct or gross negligence on the part of Assignee or such agent or
sub-agent.
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9. RELEASE AND TERMINATION. This Assignment shall terminate when all the
Liabilities and all obligations of Assignor hereunder have been fully paid and
performed, at which time Assignee shall reassign and redeliver (or cause to be
reassigned and redelivered) to Assignor, or to such person or persons as
Assignor shall designate, against receipt, such of the Collateral (if any) as
shall not have been sold or otherwise applied by Assignee pursuant to the terms
hereof and shall still be held by it hereunder, together with appropriate
instruments of reassignment and release. Any such reassignment shall be without
recourse upon or warranty by Assignee and shall be made at the expense of
Assignor.
10. NOTICES. Any notice which any party hereto may desire or may be
required to give to any other party hereto shall be in writing, and shall be
given in accordance with the provisions of the Note or other Loan Documents.
Except as otherwise specifically required herein, notice of the exercise of any
right, option or power granted to Assignee by this Assignment is not required to
be given.
11. BINDING AGREEMENTS. This Assignment and all provisions hereof shall be
binding upon Assignor, its successors, assigns, executors, administrators and
legal representatives and all other persons or entities claiming under or
through Assignor, and the word "Assignor", when used herein, shall include all
such persons and entities and any others liable for the payment of the
indebtedness secured hereby or any part thereof, whether or not they have
executed the Note or this Assignment; Assignors shall not be permitted to assign
this Assignment or any interest herein or in the Collateral, or any part
thereof, or otherwise pledge, encumber or grant any option with respect to the
Collateral or any part thereof, or any interest therein, or any cash or property
held by Assignee as Collateral under this Assignment. The word "Assignee," when
used herein, shall include Assignee's successors, assigns and legal
representatives, including all other holders, from time to time, of the Note.
12. NO LIABILITY ON ASSIGNEE. Notwithstanding anything herein contained to
the contrary, (i) Assignor shall remain liable under any instrument which is a
part of the Collateral to perform all of its obligations thereunder, and (ii)
Assignee shall have no obligation or liability under the Collateral by reason of
or arising out of this Assignment, nor shall Assignee be required or obligated
in any manner to perform or fulfill any of the obligations of Assignor under or
pursuant to the Collateral, or to make any payment, to make any inquiry as to
the nature or sufficiency of any payment received by it, to present or file any
claim, or to take any action to collect or enforce the payment of any amounts
which may have been assigned to it or to which it may be entitled at any time or
times. The Collateral is assigned and transferred to Assignee by way of
collateral security only and, accordingly, Assignee by its acceptance hereof
shall not be deemed to have assumed or become liable for any of the obligations
or liabilities of Assignor or Borrower to the members or the creditors of
Borrower or to the creditors or beneficiaries of Assignor or of Borrower,
whether provided for by the terms of any agreements, arising by operation of law
or otherwise, Assignor hereby acknowledging and agreeing that, with respect to
all such liability, Assignor is and remains liable to the same extent as though
this Assignment had not been made.
13. RIGHTS AND REMEDIES. All rights and remedies set forth in this
Assignment are cumulative, and the holder of the Note and of every other
obligation secured hereby 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. Unless as expressly provided in this
Assignment to the contrary, no consent or waiver, express or implied, by any
interested party referred to herein, to or of any breach or default by any other
interested party referred to herein, in the performance by such other party of
any obligations contained herein shall be deemed a consent to or waiver of the
performance by such party of any other obligations hereunder or the performance
by any other interested party referred to herein of the same, or of any other,
obligations hereunder.
14. GOVERNING LAW; INTERPRETATION. This Assignment shall be construed and
interpreted with, and governed by, the internal laws of the State of Illinois.
Wherever possible each provision of this Assignment shall be
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interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Assignment shall be prohibited by or invalid under
such law, such provision shall be ineffective to the extent of such prohibition
or invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Assignment. Time is of the essence of this
Assignment.
15. MISCELLANEOUS. Neither this Assignment nor any provision hereof may be
amended, modified, waived, discharged or terminated orally nor may any of the
Collateral be released, except by an instrument in writing duly signed by or on
behalf of Assignee hereunder. The Section headings used herein are for
convenience of reference only and shall not define or limit the provisions of
this Assignment. As used in this Assignment, the singular shall include the
plural and the plural shall include the singular, and masculine, feminine and
neuter pronouns shall be fully interchangeable where the context so requires.
IN WITNESS WHEREOF, the parties hereto have caused this Assignment to be
duly executed as of the date first above written.
ASSIGNOR:
THE PRIME GROUP, INC.
By: /s/ Michael W. Reschke
--------------------------------------
Name: Michael W. Reschke
-------------------------------------
Title: President
------------------------------------
ASSIGNEE:
HORIZON GROUP PROPERTIES, L.P.
By: Horizon Group Properties, Inc.,
general partner
By: /s/ David R. Tinkham
--------------------------------------
Name: David R. Tinkham
-------------------------------------
Title: CFO
------------------------------------
8
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BORROWER'S AGREEMENT AND CONSENT TO ASSIGNMENT
The undersigned, PRIME OUTDOOR GROUP, LLC, a Delaware limited liability
company (the "Borrower"), hereby consents to the foregoing Collateral Assignment
of Membership Interest (the "Assignment" - all terms not otherwise defined
herein shall have the same meaning as set forth in the Assignment) by Assignor
and accepts the Assignment as valid and binding and pursuant to the terms of
this Agreement (the "Agreement"). In consideration of the agreement by Assignee
to accept the Note, and Ten Dollars ($10.00) and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,
accepted and agreed upon, Borrower further agrees and acknowledges as follows:
1. The Assignment is fully enforceable under applicable law and Borrower's
organizational documents. Specifically, all consents necessary for the
assignment and transfer thereunder to be a permitted assignment of Assignor's
membership interests have been obtained. Except as provided in this Agreement,
the Assignment does not cause or affect any modification, transfer, change or
diminution in the membership interest or rights of Assignor. All of the
conditions precedent to Assignor's assignment have been waived or satisfied.
2. Borrower hereby specifically acknowledges and agrees that the
assignment pursuant to the Assignment and any current or future transfers of
assets from Assignor to Assignee shall not of itself cause Borrower to cease to
exist, wind up or terminate. Borrower hereby expressly consents to the
assignment by Assignee of any or all of its interest in the Collateral.
3. Borrower hereby agrees to enter notice of the Assignment into the books
and records of Borrower and promptly after Assignee's reasonable request any and
all public documents or records required under applicable law and to update such
records from time to time as is necessary to protect and perfect Assignee's
interest in the Collateral of Assignor.
4. It is expressly understood by Borrower that Assignee neither assumes
nor has any obligation to Borrower to exercise its rights under the Assignment
or to declare a default thereunder, but that the option to exercise such rights
to declare a default rests in the sole and absolute discretion of Assignee. In
the event that Assignee exercises its rights under the Assignment, Borrower
agrees that Assignee shall have no personal obligations or liabilities incurred
by Borrower prior to the date of the successful exercise by Assignee of its
rights under the Assignment and the sole right and remedy of Borrower or any
creditors of Borrower for liabilities of Borrower incurred prior to the date of
the successful exercise by Assignee of its rights under the Assignment as
against Assignee shall be against the Membership Interest of each Assignor
assigned. In furtherance of the foregoing, Borrower agrees that from the time of
the successful exercise by Assignee of its rights under the Assignment,
notwithstanding any obligations to restore any negative capital accounts or
excess distributions or other amounts that may be due or otherwise attributed to
Assignee for Borrower's accounting or tax purposes, in no event shall Assignee
be obligated to restore such accounts, distributions or other amounts. It is
further agreed and acknowledged that until such time as Assignee exercises its
rights under the Assignment, Assignee shall not be and shall not be deemed to be
a member of Borrower.
5. Borrower agrees that it shall promptly supply Assignee with such
information concerning each Assignor's capital and loan accounts, as Assignee
may reasonably request from time to time hereafter.
6. Borrower agrees that without obtaining Assignee's prior consent, it
shall not consent to or effectuate any loan from Borrower to any Assignor or to
Borrower from any Assignor.
7. Borrower agrees that the delivery of the Assignment, the exercise of
Assignee's rights in the Assignment and the transfer of Assignee's interest in
the Collateral to entities affiliated with Assignee shall not trigger any
so-called "buy-sell" or similar rights or options.
8. Borrower acknowledges that the execution and delivery of this Agreement
is a material inducement to Assignee to accept the Note and without the
execution and delivery of this Agreement, Assignee will not take the foregoing
actions.
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9. As of the date hereof, Borrower represents it has no counterclaim,
right of setoff, security interest or like right or interest against Assignor or
the Membership Interest of Assignor, the Collateral or against Assignee.
Borrower further represents that as of the date hereof, all capital
contributions and other amounts due and owing by Assignor have been paid in
full.
10. Borrower covenants and agrees that, if requested by Assignee, upon the
exercise of its remedies following an Event of Default under the attached
Assignment whereby Assignee effectuates the transfer of the Membership Interest
pursuant thereto it will make a timely election under Section 754 of the
Internal Revenue Code of 1986, as amended ("Code"), for the taxable year during
which the transfer of the Membership Interest to Assignee occurs, to adjust the
basis of Borrower's property in the manner provided in Section 743 of the Code.
11. All representations and warranties contained in the Assignment are
true, correct and complete.
12. Borrower shall not issue or authorize the issuance of any membership
interests in Borrower other than the membership interests of the Assignor which
have been assigned to Assignee pursuant to the Assignment.
13. Borrower will not take any action, omit to take any action, or permit
any action or omission which would conflict with, constitute a breach of or
default under or result in the inaccuracy or incompleteness of any provision of
the Assignment.
Acknowledged and agreed to this 18th day of April, 2000.
PRIME OUTDOOR GROUP, LLC
By: /s/ Mark T. Harris
--------------------------------------
Name: Mark T. Harris
--------------------------------------
Title: President
--------------------------------------
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EXHIBIT 10.31
GUARANTY
In order to induce HORIZON GROUP PROPERTIES, L.P. ("Lender") to make a
loan (the "Loan") to PRIME OUTDOOR GROUP, LLC, a Delaware limited liability
company ("Borrower"), as evidenced by a Promissory Note dated as of April 18,
2000 (the "Note") in the principal amount of One Million Five Hundred Thousand
Dollars ($1,500,000) and in consideration of any loans, advances or financial
accommodations heretofore or hereafter made by Lender to or for the account of
Borrower, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the undersigned, THE PRIME GROUP,
INC., an Illinois corporation, Prime Group Limited Partnership, an Illinois
limited partnership, Prime Group II, L.P., an Illinois limited partnership,
Prime Group III, L.P., an Illinois limited partnership, Prime Group IV, L.P., an
Illinois limited partnership, Prime Group V, L.P., an Illinois limited
partnership, and Prime Financing Limited Partnership, an Illinois limited
partnership, each with its principal office located at 77 West Wacker Drive,
Suite 4200, Chicago, Illinois 60601 (each, individually, and together being
herein referred to jointly and severally, as "Guarantor"), hereby guarantees to
Lender the full and prompt payment to Lender of all money which may be presently
due and owing and all monies which shall in the future become due and owing from
Borrower to Lender under or by reason of said Note, or under or by reason of any
other agreement between Borrower and Lender, executed in connection with the
Note, or the assignees of Lender, including, but not limited to, any other loans
or advances, whether secured or unsecured, forbearances, extensions of time,
extensions of credit, sales or mortgages of personal property, notes, discounts,
bonds, debentures, checks, drafts, bills of exchange, trade acceptances, letters
of credit, trust receipts, assignments, transfers, conveyances, endorsements,
guaranties, pledges, collateral agreements, factors or other liens, financing
agreements, warehousing agreements, warehouse receipts, and security interests
of all kinds, and any agreements relating to the Loan. Guarantor further agrees
to pay all expenses (including, without limitation, attorneys' fees and legal
expenses) paid or incurred by Lender in endeavoring to collect the Note, or any
part thereof, and in enforcing this Guaranty. All amounts due under the Note,
including principal, interest, attorney's fees and legal expenses, and any other
amounts due thereunder are hereinafter referred to as the "Liabilities".
This Guaranty is and shall be construed to be an absolute, unlimited and
continuing guaranty of payment, and the liability of the Guarantor hereunder
shall not be affected, impaired, or discharged, in whole or in part, by reason
of (i) the dissolution of the Guarantor, or (ii) the fact that the money,
payment of which is guaranteed hereunder, may become due or payable under, or in
connection with, or by reason of, any agreement or other transaction which may
be illegal, invalid, irregular, or unenforceable for any other reason, or (iii)
the failure by Lender to take any steps to perfect and/or maintain perfected its
security interest in, or to preserve its rights to, any security or collateral
for the Liabilities, or (iv) Lender's election, in any proceeding instituted
under Chapter 11 of Title 11 of the United States Code (11 U.S.C. ss.101 et
seq.) (the "Bankruptcy Code"), of the application oF Section 1111(b)(2) of the
Bankruptcy Code, or (v) any borrowing or grant of a security interest under
Section 364 of the Bankruptcy Code, or (vi) the unenforceability of Borrower's
obligation to repay the Liabilities, or the invalidity or unenforceability of
the Note and related agreements, or (vii) any other circumstance which might
otherwise constitute a legal or equitable discharge or defense of a guarantor.
The liability of Guarantor hereunder shall not be reduced, affected, impaired or
discharged, in whole or in part, by any payment to Lender, from any source,
which Lender thereafter returns or refunds, in whole or in part, or by reason of
the assertion of any claim of any kind relating thereto, including, without
limitation, any claim of breach of contract, breach of warranty, preference,
illegality, invalidity, or fraud. Lender may defend, compromise or pay any such
claim as Lender in its sole discretion may elect. The liability of Guarantor
hereunder is direct and unconditional, and Lender shall have the right to
proceed against the Guarantor immediately upon any default by Borrower and shall
not be required to take any action or proceedings of any kind against Borrower
or any other party liable for Borrower's debts or obligations or any accounts,
collateral or security which Lender may have, either under the Note or
otherwise, before proceeding against the Guarantor hereunder. The books and
records of Lender showing the account between it and Borrower shall be
admissible in any action or proceeding, shall be binding upon Guarantor for the
purpose of establishing the items therein set forth, and shall constitute prima
facie proof thereof.
Guarantor has received no notice that it is in default of any obligations
under any financing arrangement,
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guaranty, or loan with any creditor.
Guarantor expressly and irrevocably waives, to the fullest extent possible
under applicable law, on behalf of Guarantor and Guarantor's heirs, executors,
administrators, successors and assigns (including any surety) and any other
person, any right of subrogation Guarantor has or may have against Borrower with
respect to Guarantor's obligations hereunder. In addition, Guarantor hereby
waives until the indefeasible payment in full of the Loan any right to proceed
against Borrower, now or hereafter, for contribution, indemnity, reimbursement,
and any other suretyship rights and claims, whether direct or indirect,
liquidated or contingent, whether arising under express or implied contract or
by operation of law, which Guarantor may now have or hereafter have against
Borrower with respect to Guarantor's obligations hereunder. Guarantor also
hereby waives until the indefeasible payment in full of the Loan any rights to
recourse to or with respect to any asset of Borrower. Guarantor agrees that in
light of the immediately foregoing waivers, the execution of this Guaranty shall
not be deemed to make Guarantor a "creditor" of Borrower, and that for purposes
of Sections 547 and 550 of the Bankruptcy Code, Guarantor shall not be deemed a
"creditor" of Borrower. Guarantor acknowledges and agrees that this waiver is
intended to benefit Lender and shall not limit or otherwise affect Guarantor's
liability hereunder or the enforceability of this Guaranty, and that Lender and
its successors and assigns are intended third party beneficiaries of the waivers
and agreements set forth in this paragraph and their rights under this paragraph
shall survive payment in full of the Liabilities.
In the event of any distribution, division or application, partial or
complete, voluntary or involuntary, by operation of law or otherwise, of all or
any part of the assets of Borrower or the proceeds thereof to the creditors of
Borrower, or upon any indebtedness of Borrower, by reason of dissolution,
liquidation or other winding up of Borrower or its business, or compromise or
settlement with its creditors, or any sale, receivership, insolvency, or
bankruptcy proceeding or assignment for the benefit of creditors, or any
proceedings by or against Borrower for any relief under any provisions of the
Bankruptcy Code, then and in any event, any payment or distribution of any kind
or character, which shall be payable or deliverable with respect to any and all
indebtedness due to Guarantor by Borrower, shall be paid or delivered directly
to Lender for application on any of the Liabilities, due or not due, until such
Liabilities shall have first and fully been paid and satisfied, and Guarantor
hereby sells, assigns, transfers and sets over to Lender all of its rights to
any and all such distributions.
Nothing shall discharge or satisfy the liability of Guarantor hereunder,
except the full payment and performance of the Liabilities. Any and all present
and future debts and obligations of Borrower to Guarantor are hereby waived and
postponed in favor of and subordinated to the full payment of all present and
future Liabilities of Borrower to Lender; and all sums at any time to the credit
of Guarantor and any of the property rights and interests and evidences thereof
of Guarantor now or at any time in Lender's possession, custody or control or
held for its account may be held by Lender as security, and Lender shall have
and is hereby granted a general and continuing lien upon and a right of set-off
against such sums, property rights and interests and evidences thereof, for any
and all obligations of Guarantor to Lender, no matter how or when arising,
whether absolute or contingent, whether due or to become due, and whether under
this Guaranty or otherwise.
Lender shall have the right, from time to time and at any time, in the
sole discretion of Lender and without any notice to or consent from Guarantor
and without affecting, impairing or discharging, in whole or in part, the
liability of Guarantor hereunder, to: (1) modify, change, supplement or amend in
any respect whatever the Note or any other agreement, document, instrument or
transaction between Borrower and Lender or any assignee of Lender, or any
portion or provisions thereof; (2) grant extensions of time and other
indulgences of any kind to Borrower, or with respect to any accounts or any
other collateral or security which Lender may have; (3) modify, compromise,
release, substitute, exercise, alter, enforce or fail or refuse to exercise or
enforce any claims, rights or remedies of any kind which Lender may have, at any
time, against Borrower, Guarantor, or any endorser, or other party liable for
the Borrower's indebtedness or obligations or any thereof, or with respect to
any accounts or other collateral or security of any kind Lender may have, at any
time, whether under the Note, or any other agreement, document, instrument, or
this Guaranty, or otherwise; and (4) release, substitute, or surrender and to
enforce, collect or liquidate or to fail or refuse to enforce, collect or
liquidate, any accounts, collateral or security of any kind Lender may have, at
any time, whether under this Guaranty or otherwise.
The term of this Guaranty shall commence on the date hereof and shall
continue until the indefeasible
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repayment of the Liabilities, together with any and all extensions, renewals,
supplements and modifications thereof and, in any event, shall not terminate
until Lender has been satisfied by the indefeasible repayment of the
Liabilities.
This Guaranty shall be binding upon the heirs, executors, administrators,
successors and assigns of Guarantor and shall inure to the benefit of Lender's
successors and assigns. Lender shall have the right to assign and transfer all
or part of this Guaranty to any assignee of any transaction or debt, or any
portion thereof. All references herein to Borrower shall be deemed to include
its successors and assigns, including, without limitation, any receiver, trustee
or debtor in possession of or for Borrower. This Guaranty cannot be changed or
terminated orally. The liabilities and obligations of each Guarantor hereunder
shall be joint and several with each other Guarantor.
Guarantor represents and warrants that it has a financial interest in the
Borrower, and will benefit from the making of the Loan by Lender to Borrower.
All representations and warranties made by Borrower in the Note and all related
agreements, documents and instruments are true, correct and complete.
THIS GUARANTY HAS BEEN DELIVERED AT AND SHALL BE DEEMED TO HAVE BEEN MADE
AT CHICAGO, ILLINOIS, AND SHALL BE INTERPRETED, AND THE RIGHTS AND OBLIGATIONS
OF THE PARTIES HERETO DETERMINED, IN ACCORDANCE WITH THE LAWS OF THE STATE OF
ILLINOIS APPLICABLE TO AGREEMENTS EXECUTED, DELIVERED AND PERFORMED WITHIN SUCH
STATE. AS PART OF THE CONSIDERATION FOR NEW VALUE THIS DAY RECEIVED, GUARANTOR
HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN
COOK COUNTY, ILLINOIS, AND WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON
GUARANTOR, AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE MADE BY REGISTERED
MAIL DIRECTED TO GUARANTOR AT THE ADDRESS STATED ON THE FIRST PAGE HEREOF AND
SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED FIVE (5) BUSINESS DAYS AFTER THE
SAME SHALL HAVE BEEN DEPOSITED IN THE UNITED STATES MAILS, POSTAGE PREPAID.
GUARANTOR WAIVES TRIAL BY JURY AND WAIVES ANY OBJECTION TO VENUE OF ANY ACTION
INSTITUTED HEREUNDER AND CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE
RELIEF AS IS DEEMED APPROPRIATE BY THE COURT.
Guarantor hereby waives: (1) notice of acceptance of this Guaranty; (2)
presentment and protest of any instrument and notice thereof; (3) notice of
default by Borrower; and (4) all other notices to which Guarantor might
otherwise be entitled.
GUARANTOR ACKNOWLEDGES THAT IT HAS BEEN ADVISED BY COUNSEL WITH RESPECT TO
THIS GUARANTY AND THE TRANSACTIONS EVIDENCED BY THIS GUARANTY, INCLUDING, BUT
NOT LIMITED TO, THE CONSENTS AND WAIVERS CONTAINED IN THE TWO IMMEDIATELY
PRECEDING PARAGRAPHS.
NOTHING CONTAINED IN THIS GUARANTY SHALL BE CONSTRUED AS CREATING ANY
PERSONAL LIABILITY ON THE GENERAL PARTNER OF PRIME GROUP LIMITED PARTNERSHIP
("PGLP") TO PAY ANY OF THE LIABILITIES OR PERFORM ANY OF PGLP's OBLIGATIONS
HEREUNDER, IT BEING UNDERSTOOD THAT LENDER SHALL HAVE NO RECOURSE AGAINST THE
GENERAL PARTNER OF PGLP.
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IN WITNESS WHEREOF, this Guaranty has been duly executed by Guarantor this
18th day of April, 2000.
GUARANTOR:
THE PRIME GROUP, INC.
By: /s/ Michael W. Reschke
---------------------------------
Name: Michael W. Reschke
---------------------------------
Title: President
---------------------------------
PRIME GROUP LIMITED PARTNERSHIP, an
Illinois limited partnership
By: /s/ MICHAEL W. RESCHKE
---------------------------------
Name: Michael W. Reschke
---------------------------------
Title: Managing General Partner
----------------------------------
PRIME GROUP II, L.P., an Illinois
limited partnership
By: PLGP, Inc.
Managing General Partner
By: /s/ Michael W. Reschke
---------------------------------
Name: Michael W. Reschke
---------------------------------
Title: President
---------------------------------
PRIME GROUP III, L.P., an Illinois
limited partnership
By: PLGP, Inc.
Managing General Partner
By: /s/ Michael W. Reschke
---------------------------------
Name: Michael W. Reschke
---------------------------------
Title: President
---------------------------------
PRIME GROUP IV, L.P., an Illinois
limited partnership
By: PLGP, Inc.
Managing General Partner
By: /s/ Michael W. Reschke
---------------------------------
Name: Michael W. Reschke
---------------------------------
Title: President
---------------------------------
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PRIME GROUP V, L.P., an Illinois
limited partnership
By: PLGP, Inc.
Managing General Partner
By: /s/ Michael W. Reschke
---------------------------------
Name: Michael W. Reschke
---------------------------------
Title: President
---------------------------------
PRIME FINANCING LIMITED PARTNERSHIP,
an Illinois limited partnership
By: Prime Finance, Inc.
Managing General Partner
By: /s/ Michael W. Reschke
---------------------------------
Name: Michael W. Reschke
---------------------------------
Title: President
---------------------------------
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EXHIBIT 10.32
April 18, 2000
HORIZON GROUP PROPERTIES, INC.
77 West Wacker Drive, Suite 4200
Chicago, Illinois 60601
Re: PRIME OUTDOOR GROUP
Gentlemen:
Reference is made to that certain Promissory Note to be dated the date
hereof (the "Promissory Note") and issued to Horizon Group Properties, L.P., a
Delaware limited partnership ("LP") and affiliate of Horizon Group Properties,
Inc., a Maryland corporation ("HGP"), to evidence a loan anticipated to be made
by LP to Prime Outdoor Group, L.L.C., a Delaware limited liability company (the
"Company") and affiliate of The Prime Group, Inc., an Illinois corporation
("Prime"), in the principal amount of $1,500,000, and the related Security
Agreement, Guaranty, Pledge Agreement and Collateral Assignment of Membership
Interest, each to be dated the date hereof and executed by the Company, Mark
Harris, Gina Crist, Prime and/or affiliates of Prime (collectively, the
"Security Agreements").
Reference is also made to certain preliminary discussions that have
occurred between HGP, Prime, the Company, Mr. Harris and Ms. Crist concerning a
possible acquisition by HGP (or an affiliate) from Prime of Prime's interest in
the Company (the "Acquisition Transaction"). The purchase price that has been
discussed to date with respect to a possible Acquisition Transaction, based upon
information furnished to date, is an amount equal to Prime's actual equity
investment in the Company, plus interest thereon from the date of any such
equity investment at an annual rate of ten percent (10%), but (i) excluding any
capital contributed other than in the form of equity, such as indebtedness (and
specifically excluding any payments by Prime or its affiliates of principal,
default rate interest, fees and costs of any nature in respect of the
indebtedness under the Promissory Note and/or the Security Agreements), and (ii)
reduced by any distributions from the Company to its equity holders.
Any such Acquisition Transaction would, however, only be made pursuant to
a definitive agreement containing such terms and provisions as may be mutually
agreed to by Prime and HGP and would also be subject to the satisfactory
completion by HGP, in its sole discretion, of legal, business and financial due
diligence, as well as to the availability of HGP of adequate financing in an
amount and on terms and in form satisfactory to HGP in its sole discretion and
to the approval of the terms of any Acquisition Transaction by HGP's board of
directors.
To induce HGP to accept the Promissory Note and the Security Agreements
and to make the loan evidenced thereby, and in consideration of the other
expenditures of time, effort and expense to be undertaken by HGP in connection
with discussions and investigation into the feasibility of the possible
Acquisition Transaction, each of the undersigned Prime, the Company, Mr. Harris
and Ms. Crist agrees that until the later to occur of (i) sixty (60) days
following the date of the Promissory Note and (ii) the repayment in full of the
Promissory Note, none of the undersigned will, directly of indirectly, through
any representative or otherwise, solicit or entertain offers from, negotiate
with or in any manner encourage, discuss, accept or consider any proposal of any
other person or entity for or relating to the acquisition of the Company or its
business or operations, in whole or in part (whether directly or indirectly,
through purchase of assets, interests or other securities, merger, consolidation
or otherwise), and that each of the undersigned will immediately notify HGP of
any contact from any other person or entity regarding any such offer, proposal
or inquiry and shall keep confidential and shall not disclose without the prior
written consent of HGP (except to the extent otherwise required by law) the
existence of or terms of any discussion as to a possible Acquisition
Transaction.
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The provisions of the immediately preceding paragraph of this letter are
intended to be the binding obligations of each of Prime, the Company, Mr. Harris
and Ms. Crist. It is acknowledged, however, by each of the undersigned that,
except as specifically provided in the preceding sentence, this letter is merely
an expression of the present discussions of the parties and is not intended as a
binding obligation of the parties, nor shall this letter or any past or future
actions, conduct, discussions or investigations of a possible Acquisition
Transaction by or among such persons, be construed to be a binding agreement or
obligation for an Acquisition Transaction; that such a binding agreement shall
only be created by the execution by Prime and HGP of a definitive agreement in
form and substance satisfactory to, and containing such terms as may be agreed
upon by, each of them, in their sole discretion; that it shall be and remain in
the sole discretion of each of Prime and HGP whether or not to enter into a
definitive agreement for an Acquisition Transaction; and that neither Prime nor
HGP is assuming any express or implied obligation to continue discussions or
negotiations of a possible Acquisition Transaction.
Each of the Company, Mr. Harris, Ms. Crist and Prime, for itself and its
affiliates, acknowledges that the Promissory Note and the Security Agreements,
if and when executed and delivered by the parties thereto, shall be valid,
binding and enforceable in accordance with their respective terms, regardless of
whether an Acquisition Transaction occurs.
[SIGNATURE PAGE FOLLOWS]
2
<PAGE>
Each of the undersigned has executed this letter as of the date hereof indicated
above.
THE PRIME GROUP, INC.
By: /s/ Michael W. Reschke
--------------------------------------
Its: President
---------------------------------
PRIME OUTDOOR GROUP, L.L.C.
By: /s/ Mark Harris
--------------------------------------
Its: President
---------------------------------
/s/ Mark Harris
-------------------------------------------
Mark Harris
/s/ Gina Crist
-------------------------------------------
Gina Crist
ACKNOWLEDGED:
HORIZON GROUP PROPERTIES, INC.
By: /s/ David Tinkham
-------------------------
Its: CFO
--------------------
3
<PAGE>
EXHIBIT 10.33
GARY J. SKOIEN
CHAIRMAN, PRESIDENT, AND
CHIEF EXECUTIVE OFFICER
April 11, 2000
Andrew F. Pelmoter
Horizon Group Properties, Inc.
77 West Wacker Drive, Suite 4200
Chicago, IL 60601
Dear Andrew:
As you are aware, Horizon Group Properties, Inc signed a sales contract
with Triple Net Properties, LLC on March 24, 2000, for the purchase of seven of
our properties (i.e., Laughlin, Medford, Warrenton, Lakeshore, Holland, Monroe
and Dry Ridge) for $93.5 Million.
Your 1999 employment letter provided for a Success Bonus if the sales
proceeds in excess of mortgage debt on the properties was at least $40 Million.
Since the sale to Triple Net failed to hit the $40 Million threshold as provided
under your 1999 employment letter, the amount, if any, payable to you was
discretionary. This letter supplements your 1999 employment letter by providing
you with a guaranteed Success Bonus if the Triple Net sales contract closes. In
determining the Success Bonus for this transaction, the company has taken into
consideration the fact that the contract was executed prior to March 31, 2000.
You will be paid a total Success Bonus of $50,000 within thirty (30) days
following the Triple Net transaction closing date if the transaction closes and
you have not resigned prior to the closing date.
Additionally, if some or all of the balance of the portfolio should be
sold on or before December 31, 2000, you have not resigned prior to that date,
and the total sales proceeds for all properties sold less the outstanding
mortgage debt on those properties should be greater than $40 Million, you will
receive the difference between the Success Bonus provided in you 1999 employment
letter and what you received as a Success Bonus on the closing of the Triple Net
transaction.
1
<PAGE>
April 11, 2000
Page 2
This letter supplements rather than replaces your 1999 employment letter.
The severance benefits provided in Section 3 of your employment letter shall be
paid to you if you are terminated for any reason other than cause on or before
December 31, 2000.
Finally, I want to thank you for your past and continuing efforts on
behalf of the company. Please sign and retain this original and return one copy
of this supplemental letter agreement to me.
Sincerely,
/s/ Gary J. Skoien
- ---------------------------
Gary J. Skoien
Chairman, CEO and President
APPROVED AND ACCEPTED BY:
/s/ Andrew F. Pelmoter
- ---------------------------
2
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<PAGE>
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<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 3,348
<SECURITIES> 0
<RECEIVABLES> 1,488
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<PP&E> 149,187
<DEPRECIATION> (8,421)
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0
0
<COMMON> 29
<OTHER-SE> 33,185
<TOTAL-LIABILITY-AND-EQUITY> 152,529
<SALES> 0
<TOTAL-REVENUES> 6,775
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 4,792
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<INCOME-PRETAX> 0
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<INCOME-CONTINUING> (373)
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<NET-INCOME> (373)
<EPS-BASIC> (0.13)
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